Anthracite opens quietly, doesn't provide good test; Ford, Intel, Yahoo!, Peabody up; Amgen nudges down

By Evan Weinberger

New York, Aug. 24 - Ford Motor Co., Intel Corp., Yahoo! Inc. and Peabody Energy Corp. convertibles edged upward Friday. Amgen Inc. convertibles nudged downward slightly. But there wasn't much pattern to trading on a day when equity markets took big steps forward on two bits of good news that hit early in the morning.

One new issue did come to market, and a few analysts thought it would be an interesting test of the market's willingness to handle convertibles issued by a real estate investment trust. If Anthracite Capital, Inc.'s offering of convertible senior notes, which priced Friday before markets opened, was a reliable test, then it doesn't appear that investors are in any mood for new issues from REITs, even if they are more squarely focused, like Anthracite, on the commercial realm.

The company not only downsized the offering and greenshoe, but priced it at the very cheapest end. The New York-based REIT and subsidiary of BlackRock, Inc. only offered $60 million in convertible senior notes after announcing Wednesday evening an offering of $100 million. The greenshoe was lowered to $20 million from $25 million.

The coupon came in at 11.75% while the initial conversion premium priced at 17.5%. The convertibles had been talked at a coupon of 10.75% to 11.75% and an initial conversion premium of 17.5% to 22.5%.

The big story on the day came from unexpected and encouraging news from the housing and durable goods sectors Friday morning. Market players were greeted by word that new home sales were up 2.8% in July, according to the Commerce Department, and orders for durable goods were up 5.9% for the month. New home sales were expected to be lower for the month, and durable goods orders were only expected to rise 1%. Sales of new homes in June were down 4%, and durable goods orders saw the largest increase in 10 months.

But the news was tempered by worries that the credit crunch, which gained steam as July progressed, could pull back sales of new homes. Mortgage lenders like Calabasas, Calif.-based Countrywide Financial Corp., the largest home loan issuer in the United States, have tightened their lending standards, which may also dampen home sales.

The major indexes took the good news and ran with it. The Dow Jones industrial average gained 142.99 points, or 1.08%, to close at 13,378.87.

The Nasdaq picked up 34.99 points, or 1.38%, for a closing level of 2,576.69. The Standard & Poor's 500 ended the day at 1,479.37, an upswing of 16.87 points, or 1.15%.

Bad timing, bad market for Anthracite

The Anthracite Capital offering that priced Friday may well have been "just doomed from the beginning," according to one analyst.

"All in all, this was a case - at the least - of terrible timing. It was the wrong size (too small, even at $100 million), the wrong time of the year (a week before Labor Day, when new issues rarely come), the wrong industry, and probably the wrong seller (BlackRock. I think it's made even harder when the seller is perceived to be a shrewd investor.)," the analyst said in an e-mail earlier in the day.

Analysts said Thursday that Anthracite might provide a good test case for REIT-issued convertibles. But, according to market watchers contacted Friday, even if the deal had come through at the originally announced $100 million, not the actual downsized $60 million, it was too small to provide a good sample.

Anthracite's small market capitalization and the stock's dismal performance for the year - it has lost 25% of its value so far in 2007 - also make it a less-than-perfect test case. "You need a larger issue to really know," the analyst said.

The issue came and went without much of a peep, according to market players. "As I said it would only sell to those who already knew [and] liked [the] name," one trader said in an e-mail. "[I] don't know where it was priced, haven't seen it trade."

Anthracite stock (NYSE: AHR) finished Friday up 7 cents, or 0.76%, at $9.25.

Limited activity in markets

A few minor moves up and down happened Friday, but nothing market shattering.

Ford's 4.25% convertible senior notes due Dec. 15, 2036 finished Friday at 109.125 versus a closing stock price of $7.90. The Dearborn, Mich.-based auto giant's convertibles closed Thursday at 107.5 versus a stock price of $7.75.

Ford stock (NYSE: F) gained 15 cents, or 1.94%, on Friday.

Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 finished trading Friday at 100.75 versus a closing stock price of $24.79. The convertibles issued by the Santa Clara, Calif.-based computer chip producer closed Thursday at 99.825 versus a $24.23 share price.

Intel stock (Nasdaq: INTC) picked up 56 cents, or 2.31%, Friday.

One other computer-related gainer was Yahoo! The Sunnyvale, Calif.-based internet service provider saw its zero-coupon convertible senior notes due April 1, 2008 end Friday at 120.5 versus a closing stock price of $23.59. They closed Thursday at 118.25 versus a stock price of $23.13.

Yahoo! (Nasdaq: YHOO) stock gained 46 cents, or 1.99%, on Friday.

Peabody Energy's 4.75% convertible junior subordinated debentures due Dec. 15, 2066 moved to 97.75 versus a closing stock price $42.60 Friday. They closed Thursday at 97.625 versus a $42.55 share price.

Stock in the St. Louis-based coal miner (NYSE: BTU) gained 5 cents, or 0.12%, on Friday.

On the down side of the ledger, both tranches of Amgen's convertibles slipped Friday.

The Thousand Oaks, Calif.-based biotech saw its 0.125% convertible senior notes due Feb. 1, 2011 close at 88.825 versus a closing stock price of $50.27. They finished Thursday at 89 versus a share price of $50.25.

Amgen's 0.375% convertible senior notes due Feb. 1, 2013 finished trading Friday at 85.825 versus a $50.27 share price, slipping from Thursday's close of 86 versus a stock price of $50.25.

Amgen stock (Nasdaq: AMGN) gained 2 cents, or 0.04%, on Friday.

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