Six Flags higher on Gates, Redskins owner play; IMC Global rises; Albertson's off

By Ronda Fears

Nashville, Aug. 31 - Six Flags Inc. got a lot of play, and moved sharply higher, Tuesday as pressure to the amusement park management for better results was exerted by Microsoft Corp. chairman Bill Gates, who owns an 11.5% equity stake in the company. News that Washington Redskins owner Daniel Snyder had taken a big equity stake in Six Flags and also planned to tackle management also moved it higher.

Gates provided some muscle to back the Snyder move, although many onlookers were impressed with both pressure points - together or separate - and just glad to see something move Six Flags up.

Investors "involved with Snyder Communications made money long ago," said a convertible fund manager on the West Coast, referring to Snyder's sale of the advertising company to Havas SA in 2000 for $2 billion. "I hear the Redskins are one of most profitable NFL franchises - remember him charging people to come watch practices? This guy made money in advertising, so it seems like Six Flags is a natural fit. At least there is a catalyst."

Credit plays, particularly in the biotech field, were still seeing some action, too.

Ford Motor Co. and General Motors Corp., however, were just puttering in lackluster volume ahead of August sales figures Wednesday.

"The [auto sales] figures are not expected to show any improvement, really, which in and of itself is sort of a disappointment," said a sellside convertible dealer. "Pretty much, that's priced in" the stock and converts of Ford and GM.

Ford's 6.5% convertible trust preferred edged about a quarter-point higher and GM's convertible bonds were similarly higher, traders said, with those stocks ending the session up slightly.

Several other preferreds and mandatories were active Tuesday, as well.

"It's really dead here," said a convertible fund manager in California. "I've been involved in [IMC Global's] preferreds and moving around some [Albertson's] mandatories, otherwise catching up on a ton of reading. I think you could paint the tape anyway you like today."

IMC Global Inc. shot up as the U.S. Department of Justice finally gave a nod to the merger with Cargill Inc.'s fertilizer business into a new public company - The Mosaic Co. - which was first announced back in January.

Albertson's Corp. was sacked, though, with its mandatory off on disappointing earnings. Yet, there were some traders with an appetite for the 7.25% dividend, buying on the slippage, so the early session decline of 0.75 point was trimmed to 0.5 point by day's end.

"You know I'm contrary. Manhattan is quite pleasant with many fewer humans and world-class security. Even the Secret Service was guarding me on the subway this morning," said a convertible fund manager in New York. "I thought this would be a nice time to work - and so far I've been right.

"Working in Manhattan this week is a bit like buying out-of-favor securities and enjoying a high return," the fund manager added. "We're seeing action in lots of crap shots."

Six Flags convertible up 1.5 points

Battered Six Flags was batted up as traders perceived that pressure from the likes of Gates and Snyder would propel management at the Oklahoma City-based theme park to score better bottom-line results.

The Six Flags 7.25% convertible preferred shot up a half-point to 19.5 early in the day on the late Monday news about Snyder's play. It gained throughout the session, traders said, but took another big jump on the Gates news as it emerged Tuesday in a Securities and Exchange Commission filing.

Six Flags' convertible ended Tuesday 1.55 points higher at 20.55 with 276,400 units changing hands on the New York Stock Exchange, versus the three-month running average of 38.564 for the issue.

Six Flags junk bonds rose, too, by as much as 4.5 points.

Six Flags shares climbed $1.11 on the day, or 24.89%, to $5.57.

"Anyone old enough to remember the late Al Capp's 'Li'l Abner' cartoon will recall 'Joe Btfsplk,' who walked around with a rain cloud over his head. Wherever Joe went, it was always raining - just like at Six Flags," said a Six Flags convertible holder.

"The sun might shine on a different management," he said, but added, "meanwhile, the company has no near-term maturities; it's money [is] good for a few years even if the company's fortunes continue to flag."

The downside, said another convertible fund manager, is that there may be a poison put for current Six Flags management.

Six Flags results taken to task

Gates in his SEC filing Tuesday said he plans to press Six Flags management for answers on their decision-making process and company finances and may seek to have another person placed on the board of directors.

Snyder disclosed Monday that he bought 8.1 million shares of Six Flags in August, making him the third-largest shareholder, and he, too, plans to pressure management to find ways to improve operations. Snyder indicated also that he may try to get a seat on the board of directors and/or seek a sale or merger.

"The company's management has failed to implement measures to increase revenues and decrease expenses, and its failure to do so has caused the company to be continuously outperformed by its peers in the amusement, recreation and leisure industry," Snyder's filing said.

The Wall Street Journal reported Tuesday that Snyder wants to revamp Six Flags through marketing techniques that he used to make the Redskins one of the most valuable teams in professional sports, such as increased outdoor advertising and perhaps even try to get the NFL Super Bowl most valuable player to become a pitchman for Six Flags rather than DisneyWorld.

Snyder bought the Redskins in 1999 from Jack Kent Cooke for $800 million. In 2000, he sold Snyder Communications to the French ad agency Havas for $2 billion.

Six Flags convertible holders concur for the most part, but there was some selling into the strength.

"Agreed, Six Flags needs a managerial overhaul. If Dan Snyder fires the entire group, the ship could correct itself," one Six Flags holder said. "Smart money will be selling today's news, though, wait for the stock to settle and then purchase. There is a lot wrong here and will take more that an 8% stake by Snyder to correct the problems."

Six Flags has been having a miserable summer, blaming a slump in attendance and revenue on weather, and that has kept its numbers in the red.

On Snyder's mention of a sale and/or merger, conglomerates with good balance sheets that already own theme parks, such as The Walt Disney Co., were being bandied about as potential buyers for Six Flags. But a convertible desk analyst noted that frustrated stockholders of Disney following the failed takeover play by Comcast Corp. earlier this year might not be too keen on weaving another troubled name into their baskets.

Power names primarily plunge

You couldn't really say that the Albertson's mandatory was getting piled on, traders said, but there were volunteers to clip the roughly 6.8% current yield. Before the opening bell, Albertson's reported disappointing results, saying the continuing impact of a labor strike in California wiped out higher profits.

The Albertson's 7.25% mandatory was seeing good two-way action with a "fair amount" of buying on the weakness, a dealer said. The issue ended the day at 26.21, off by 0.47 point, or 1.76%, on the NYSE with 1.5 million units trading, versus the 612,976 average.

Albertson's stock lost 52 cents on the day, or 2.07%, to close at $24.58.

"I do worry that I am a little early," said one Albertson's mandatory holder who was involved in the trading action Tuesday. "The name is interesting. Albertson's did give up competing in a few areas versus Wal-Mart, but I think management might know what fights they can win. Earnings were on a shrinking store basis. There are reasons to be two-way in the name."

The grocery-store retailer said it earned 34 cents a share, down from 44 cents a share a year ago but slightly above the First Call analysts' consensus for 33 cents a share. Total sales rose to $10.2 billion from $9 billion, also in line with analysts' forecasts. Increased volume from the Shaw acquisition helped offset the residual negative affects of the Southern California labor dispute somewhat, Albertson's said, yet comparable-store sales fell 1.3%.

"Cash flow from operations continues to rise while capex continues to decline, and the company is achieving these favorable numbers during a weak retail environment with heavy competition from other food retailers, including Wal-Mart," said another convertible fund manager. "The reality of Albertson's looks better when one focuses on the true numbers than when one tries to decipher the confusing aspects of reported earnings, unlike some other companies that look worse the closer one looks."

Albertsons reaffirmed its fiscal 2005 earnings projection of $1.40 to $1.50 a share. The company expects to earn 31 to 35 cents a share in fiscal third quarter and 60 to 66 cents a share in fiscal fourth quarter.

IMC Global up on DOJ ruling

IMC Global finally got a U.S. government stamp of approval for its merger with Cargill's fertilizer business, and although it is still subject to approval by The Canadian Competition Bureau and a post closing review by the Brazilian government, as well as a stockholder vote, the sentiment was that it was on track to succeed.

IMC Global's 7.5% mandatory due 2006, which has a par of 50, on Tuesday added another 5 points, or 4.9%, to close at 107.8 on the NYSE, although dealers said it traded at 108 and maybe higher during the session. IMC Global common stock gained $1.06, or 7.12%, to $15.94.

IMC said a stockholder meeting is anticipated soon.

On the IMC Global merger, the distribution for new Mosaic securities will be 1-for-1 for both common stock and the convertible. IMC Global said earlier this week that stockholders of record as of Friday would be eligible to vote on the merger.

Back in January, when the IMC Global merger with Cargill was announced, the convertible shot up 11 points and the credit was put on positive watch by all three rating agencies.

Corixa, Guilford snapped up

Market sources say the biotech area is staying busy. Traders had been commenting about credit spreads beginning to widen last week, and there also is chatter about buybacks. In addition to Chiron Corp. and Ligand Pharmaceuticals Inc., there has been recent buying in Corixa Corp. and Guilford Pharmaceuticals Inc.

Ligand's recent earnings miss cracked the bonds, but traders noted the convertibles are hard to come by.

"We've been very active in Corixa [lately]. The bonds were offered without a bid two weeks ago at 79. All of a sudden on Thursday, everyone wanted them," said a sellside market source on the West Coast. "They were lifted at 83.25."

It was a similar situation with regard to Guilford.

"Guilford was offered at 55 two weeks ago, [then] lifted at 70 on Thursday," he said.

Durect Corp. and Biomarin Pharmaceutical Inc. also were seeing action.

"Seems like people making credit bets. Widening or tightening, my bet is still from the outright standpoint," the sellside market source said. "All I know on Corixa is that [Glaxo SmithKline plc] had the option to turn a note into hard cash but instead took it in stock, so that bodes well for Corixa in my mind."

Market sources were hearing about some buybacks taking place, too.

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