GM, Ford lower despite higher stocks; Coal names in trade; Molson Coors, Virgin Media down

By Rebecca Melvin

New York, June 24 - The convertible bond market was lower Tuesday after the market received weaker-than-expected housing data and a report that revealed tumbling consumer confidence.

"I kept my head under the desk all day. I didn't trade anything. I just marked a little and traded a little stock. But I didn't even mark on stuff that people were sending me because it was sloppy," a West Coast-based convertibles buyside trader said.

Housing data showed that home prices in 20 U.S. metropolitan areas sank 15.2% in April from a year earlier, the biggest drop on record, according to a Standard & Poor's/Case-Shiller report.

The Conference Board's confidence index fell to 50.4, the lowest level since 1992, from a revised 58.1 in May.

Treasury two-year note yields fell, straightening the yield curve, "which was bad for high yield," the buysider said.

Sources said that things were offered with no bid and that volume was thinner than on Monday.

General Motors Corp.'s convertible bonds extended losses even as their underlying shares bounced off historic lows on Tuesday.

Of the four GM convertibles issues, the 6.25% bonds and the 5.25% bonds moved down in tandem by 1% to 1.5%, while the 3.5% bonds sank by a larger 5% in light volume and the 1.5% convertibles slipped 0.5 point, also in light volume.

The convertible bonds of Ford Motor Co. were also lower as their underlying shares remained nearly unchanged in heavy trading on the New York Stock Exchange.

Among coal names in trade, Alpha Natural Resources Inc. and Patriot Coal Corp. were lower in line with their shares. But Peabody Energy Corp. was a little higher along with its equities, which squeaked out a gain after larger early gains were pared.

In the oil space, Pioneer Natural Resources Co. closed mostly unchanged on lower shares despite an upgrade to "outperform" from "market perform" by BMO Capital Markets.

Meanwhile, Virgin Media Inc. lost about 3 points on a 3.3% drop in its underlying shares, and Molson Coors Brewing Co. shed 2 points on a $1 drop in shares.

In the primary market, Evergreen Solar Inc. announced after the close that it plans to price $300 million of five-year senior convertible notes, which were talked to yield 3.5% to 4% with an initial conversion premium of 27.5% to 32.5%.

Massachusetts-based Evergreen Solar makes solar panels.

Also in the primary market and also in the solar space, the timing of pricing of China Sunergy Co. Ltd.'s $45 million of five-year convertible senior notes is late Wednesday.

The Rule 144A deal being sold via Credit Suisse was announced Monday, but timing information couldn't be obtained at that point.

GM, Ford extend losses

The GM and Ford convertibles ground lower on Tuesday even as their stocks gained a little - after each reached historic lows in the last few days. The onslaught of negative news, including the June consumer confidence index and data that showed U.S. home prices extended their record slide in April, also included chemical giant Dow Chemical Co.'s news that it will raise its prices by as much as 25%, as well as institute freight surcharges and cut output of some products because of soaring energy prices.

The price hikes came on the heels of last month's across-the-board 20% increase by Dow Chemical. Also United Parcel Service Inc. warned late Monday that second-quarter earnings would be below expectations due to high fuel prices and the sluggish U.S. economy. These last two bits of news didn't affect the debt markets as much as the first two.

Convertibles were "marked down," according to the buysider. "Some stuff was marked up too, but it was a guess where the bid would come off."

GM's 5.25% series B convertibles due March 2032 (NYSE: GBM) closed at 14.40, down 1.24%, in heavy volume, versus a closing stock price of $13.19. That compared with a close of 14.54 on Monday versus a share price of $12.91.

GM's 6.25% convertibles due July 2033 (NYSE: GPM) closed at 14.46, down 0.6%, on Tuesday versus the $13.19 close, compared with a Monday close of 14.54 versus a share price of $12.91.

Both the 5.25s and the 6.25s traded in heavy volume.

The GM 1.5% convertibles due May 2009 (NYSE: GRM) closed at 22.09, which was down 0.41%, in lighter-than-average volume. The GM 4.5% series A convertibles due March 2032 (NYSE: GXM) closed at 16.20, down 5.5% in lighter-than-average volume.

The Detroit-based automaker's stock (NYSE: GM), which was at $36 last year, has suffered its most recent tumble on news of further production cuts, rising vehicle prices and the launch of new incentives to spur demand.

Ford's 4.25% convertibles due December 2036 traded toward the end of the session at 78.04 versus a stock of about $5.25, which compared with trades late Monday at 80.45 versus about the same stock price.

Shares of the Dearborn, Mich.-based automaker closed up 4 cents, or 0.76%, at $5.32.

Coal names trade mixed

Alpha Natural's 2.375% convertibles due April 2015 closed at 188.676 versus a share price of $92.65, compared to 198.25 versus a share price of $96.07 on Monday.

Shares of the Abingdon, Va.-based coal producer (NYSE: ANR) fell $3.42, or 3.4%, to $92.65, paring a larger earlier loss.

Patriot Coal's 3.25% convertibles due May 2013 were also lower, closing at about 131.265 versus a share price of $140.58. That compared with 134.649 versus a share price of $145.99 on Monday.

Shares of St Louis-based Patriot Coal (NYSE: PCX) sank $5.41, or 3.7%.

But Peabody Energy's 4.75% convertibles due 2066 added about a point to 162.369 versus a share price of $85.53. That compared to 160.9 versus a share price of $84.76 on Monday.

Shares of St. Louis-based Peabody (NYSE: BTU) added 40 cents, or 0.44%.

Oil and gas exploration company Pioneer Natural Resources saw its convertibles close steady at 155.9 versus a stock price that slipped 1.2% to $78.28.

Shares of the Irving, Texas-based company (NYSE: PXD) closed down 95 cents at $78.28.

Molson, Virgin lower

Molson Coors' 2.5% issue due 2013, which has been active in trade in recent sessions, traded 2 points lower at 123 versus a stock price of $55.50. Shares of the Denver beer maker closed only slightly lower after an earlier drop at $55.84, down 18 cents, or 0.32%.

The catalyst for trade has been the InBev bid for Anheuser-Busch, according to a sellside analyst.

Meanwhile, Virgin Media dropped 3 points in trade to 105 from 108 on a 50 cent drop in its shares. Shares of the New York-based broadband and telephone services company closed at $13.80, down 48 cents, or 3.4%.

Evergreen Solar offering emerges

Evergreen Solar plans to price $300 million of five-year senior convertible notes after the close of the markets Thursday. The offering was talked with a coupon of 3.5% to 4% and with an initial conversion premium of 27.5% to 32.5%.

The five-year bullets are being offered under a shelf registration via bookrunner Lehman Brothers Inc.

Proceeds are expected to be used to complete the construction and equipping of its fully integrated solar panel manufacturing facility located in Devens, Mass., to begin construction of a manufacturing facility that will produce heat-resistant string to be used in the manufacturing of Evergreen Solar's wafers and for general corporate purposes, including purchases of or prepayments for polysilicon and other raw materials, and working capital.

Marlboro, Mass.-based Evergreen Solar makes solar power panels.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.