Intel, Newmont up; CVRD down; Health Care, KKR Financial deals coming; trading quiet on earnings

By Evan Weinberger

New York, July 16 - Convertibles from Intel Corp. were the big movers on a day when uncertainty linked to the earnings announcements coming this week and the usual calm of a summer Monday produced what one sellside trader called an "exceptionally quiet day."

Following last week's rally in the equity markets, convertibles investors took the day to see where the market really stood as they waited for 11 of the Dow Jones Industrial Average's 30 components to report their second-quarter earnings, including Merrill Lynch, Yahoo and the aforementioned Intel, all scheduled for Tuesday after market close.

"We're at the beginning of earnings season," another sellside trader said. "Right now we're in a holding pattern. Nobody knows what to expect from the stock market, nobody knows what to do with the bond market."

In the secondary market, investors continued to get in on Newmont Mining Corp.'s convertible because, as noted in this space before, mining is where the action is.

The Denver-based gold miner's 1.25% convertibles due 2014 were last seen Monday at 105, up 0.75 points, versus a closing stock price of $41.11. The company's 1.675s finished Monday's session at 104.875, up 0.625 point, at the same stock price. Overall, Newmont stock (NYSE: NEM) was down $0.30, or 0.72%, Monday.

While mining is hot, Companhia Vale do Rio Doce had a rare off day. Its 5.5% mandatory exchangeable was last seen at 53.75, off a half point, versus a stock price of $50.75 Monday. Meanwhile, the 5.5% mandatory exchangeables traded on the New York Stock Exchange (NYSE: RIO-P) followed suit, finishing Monday at $43.08, off $1.18, versus a closing stock price of $50.76. The common stock (NYSE: RIO) of the Rio de Janeiro-based mining concern finished down $1.18, or 2.27%, Monday.

Like gold and other minerals, investors continued to eye health care convertibles. Lifepoint Hospitals Inc.'s 3.25% convertible senior notes due 2025 finished at 93.7953, adding roughly a half point, versus a closing stock price of $40.23. Shares in the Brentwood, Tenn.-based suburban and rural hospital operator (Nasdaq: LPNT) traded up $0.65, or 1.64% Monday.

One other convertible of note Monday was Ford Motor Co.'s 6.5% convertible trust preferreds due 2032. With the deadline to accept a tender offer from the company looming on July 31 and news that the company may be looking to shed Swedish carmaker Volvo, the preferreds (NYSE: F-PS) finished down $0.31, or 0.79%, on the day to settle at $39.10. To top it all off, Ford is set to announce second quarter earnings Wednesday. Ford stock (NYSE: F) finished down $0.11, or 1.23%, at $8.86.

A sellside convertibles trader said that Ford investors need to be careful that the company isn't getting rid of the wrong subsidiary if it sells Volvo, a move that company officials deny pursuing. "Are they selling the goose that lays the golden egg?" he asked, referring to Volvo being profitable.

Overall, equity markets finished mixed Monday. The Dow finished up 43.73 points, or 0.31%, at 13,950.98, while the Nasdaq was down 9.67 point, or 0.36%, finishing at 2,697.33.

Do two REITs make right?

Two more real estate investment trusts are going to play the convertibles game this week. Health Care REIT, Inc. and KKR Financial Holdings LLC both announced plans to price convertible senior notes.

Health Care REIT, a Toledo, Ohio-based self-administered, equity real estate investment trust that specializes in senior housing and hospitals, announced that it would price $350 million in convertible senior notes due 2027.

The registered bonds are talked at a 4.75% coupon with an initial conversion premium talked at 23.76%. The bonds are talked to offer at par, but may be reoffered at 98.25% and there is a $52.5 million greenshoe. The trust intends to use the proceeds to invest in more health care and senior housing properties, and to repay debt under the company's unsecured line of credit arrangements.

Also set to price Tuesday, but after market close, are $300 million in convertible senior notes issued by KKR Financial, another real estate investment trust, this one from San Francisco. KKR also does specialty finance deals. The bonds are being talked at a coupon of 6.5% to 7% with an initial conversion premium of 30% to 35%.

The Rule 144A transaction is set to price Tuesday after market close.

Differing views on Live Nation

It's rare that the exercise of a greenshoe gets much notice. And for many, the greenshoe exercised Monday on Live Nation, Inc.'s 2.875% convertible senior notes due 2027 was a non-event. But the $20 million over-allotment option, which brought the total offering to $220 million, did bring about different reactions from analysts and traders.

"You never know," one sellside analyst, who was not enthused by the original offering, said. "Sometimes the underwriters just make a deal with the company to do that."

A sellside analyst at a different firm said "I think a lot of people like the convertible," noting that it had traded up to 105 versus a closing stock price of $22.21.

A sellside trader, who also was unconvinced by the initial offering, said that the news was "pretty positive" and noted that Monday was the first day he had seen much action on the Live Nation convertibles. The trader pointed out that on a dollar neutral basis, the bonds, which he quoted at 106.25 later in the day, were only at a 1.25 premium versus the stock.

After the bonds priced July 11, they were hovering around 101 and steadily moved up.

Stock in the Los Angeles-based concert promoter (NYSE: LYV) closed up $0.07, or 0.31%.

Intel preps for earnings

Among the most actively traded convertible bonds Monday were Intel's 2.95% bonds due 2035, which changed hands over 50 times, with several trades over $5 million on what was a slow day for the rest of the universe. The bonds were last seen at 100.625, better roughly by a half point, versus a closing stock price of $25.95.

The Santa Clara, Calif.-based chip maker has scheduled a conference call to announce second quarter earnings Tuesday after market close. The company has beaten analysts' earning forecasts for the last four quarters.

Its stock (Nasdaq: INTC) finished down $0.02, or 0.08%, Monday.

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