Sirius convertibles up on Ford news; Elan active, edges up on Biogen buzz; CNet gains

By Ronda Fears

Nashville, Oct. 18 - Sirius Satellite Radio Inc. convertibles picked up a couple more points Monday on news that Ford Motor Co. would put more of its equipment into new vehicles, and Ford's convertible also was higher but with light activity.

"It was sort of light all over today," said a sellside convertible trader. He said lots of the hedge fund players were busy as profit taking in oil futures escalated during the session. After oil topped $55 a barrel selling surged, he said, "so a lot of the hedge guys were frantic over that."

Crude oil settled at $53.67 a barrel, losing $1.26 from Friday.

Metals futures reacted similarly, along with the U.S. dollar, which also caused some angst among convertible arbitrageurs. One arb manager said, however, that a very quiet Treasury market was a positive offsetting factor, along with the modest gain in stocks.

Apex Silver Ltd. and several metal producers dropped on the pull back in silver and gold prices, though. New paper otherwise was mixed, with the Shanghai-based Shanda Interactive Entertainment Ltd.'s new "no-no" 0% gaining 1.5 points to 101 bid, 102 offered while Cell Genesys Inc.'s new 3.125% was pegged off 0.375 point to 98.375 bid.

Elan Corp. plc was another active biotech name, moving up on buzz from reports over the weekend that the Irish drugmaker was a takeover target by Biogen Idec, which is a partner in developing a new multiple sclerosis treatment.

CNet Networks Inc. was mentioned moving up Monday, too, still on its earnings news from last week.

Otherwise in secondary dealings, Delta Air Lines Inc. continued to decline on the heels of its earnings warning Friday, with the long-dated convertibles in the low 30s and the airline's short-dated junk bonds dipping to around 49 on Monday.

Traders were still reporting some buying interest on the recent cheapening in insurance paper from the kickback charges last week, though. Picks on Monday mentioned most by traders were Prudential Financial Inc., Chubb Corp., Hartford Financial Services Group Inc. and UnumProvident Corp.

Sirius 3.25s up 1.5 points

Ford said on Monday it would offer Sirius satellite radio in more vehicles, and the convertibles of both companies were pushed up.

Sirius' new 3.25% issue added 1.5 points to 105.25 bid, 105.75 offered and its old 2.5% convertible added 2 points on the day to 114.25 bid, 114.75 offered. The stock rose 11 cents, or 2.97%, to $3.81.

Ford's 6.5% convertible trust preferred was up 0.27 point, or 0.53%., to 50.79 on the New York Stock Exchange but with little volume. Ford shares rose 14 cents on the day, or 1.06%, to $13.39.

"Sirius keeps trying to make a push, and there are lots of believers - either they will make it or be a takeover target for their main competition [XM Satellite Radio Holdings Inc]," a sellside trader said.

XM Satellite has a 7.75% convertible due 2006 and an 8.25% convertible preferred outstanding, which are rarely seen in trade. XM shares ended Monday up 28 cents on the day, or 0.97%, to $29.27.

Sirius has about 600,000 subscribers, behind XM Satellite's 2.5 million.

Ford, the second U.S. automaker, is targeting up to 20 of its lines for factory installations of Sirius over the next two years and plans to expand the availability of Sirius as a dealer-installed option this fall, the companies announced.

Sirius is targeting 1 million subscribers by the end of 2004 and recently got a boost by signing on controversial shock jock Howard Stern who will begin broadcasting on Sirius Satellite in 2006. The new Sirius convertible was sold on the heels of announcing the Stern deal.

Apex Silver issues weaker

Apex Silver's new convertible, as well as its existing convertible, slipped Monday, however, as silver prices dropped with gold and crude oil.

The new 4% issue was off about a half-point, traders said, to 99.75 bid, 100.25 offered with the older 2.875% issue down about 0.375 point to 90.75 bid, 91.25 offered.

December silver closed at $6.987 an ounce, down 12.3 cents on the day. Traders said metals dropped on some concern about consolidation in the mining industry on news Monday of Harmony Gold Mining Ltd.'s $8.1 billion bid for Gold Fields Ltd. Gold futures fell $2.50 to close at $417.60 an ounce.

"There's not necessarily a big concern that Apex Silver is a [takeover] target," a sellside market source said. "It's just a reaction to the raw metals price."

Elan convertibles edge up

In response to a specific Irish Stock Exchange query on Monday, Elan said it is not in negotiations or discussions with Biogen Idec Inc. regarding any form of merger or business combination between the two companies.

But reports on the subject caused some optimistic speculation about Elan, particularly that any cash in the deal would result in a nice conversion ratio adjustment to the Elan convertibles, which are already deep in the money.

Ireland's Sunday Tribune newspaper reported that Biogen Idec is considering an all-share bid of more than €8.5 billion for Elan but also said a deal could be as far out as nine months.

"Right, but if any portion is cash, [it will be a] winner, winner," for Elan convertible holders because of the conversion ratio adjustment, said a sellside market source.

Elan shares shot up $1.29, or 6.07%, to close Monday at $22.55 on the headlines. The 6.5% convertibles due 2008 responded more modestly, ending at a bid of 18.5 points over parity, versus a bid of 18 points over parity on Friday, a sellside trader said.

Elan and Biogen Idec are jointly developing a MS treatment, Antegren, as well as any future marketing, of a new MS treatment, so market sources said the chatter made sense. Elan is also involved in areas of neurodegenerative diseases, autoimmune diseases and severe pain treatments.

Biogen Idec shares closed off 2 cents to $58, and the old Idec Pharmaceutical converts were described as "flattish," too.

CNet gains 1.5 points

After a weekend of pondering CNet's most recent results, and the possibility of a new capital-raising effort, traders said there was a buying spree in the online advertiser's convertibles.

"It's heading into the black again, and without the help of accounting for special charges. It's got the largest share of ad market in its sector and the percentages are growing," one buyside trader involved in the name said. "They've got the leading properties in the field and nobody even comes close to matching it."

The CNet 0.75% convertible, issued in April, gained about 1.5 points to 89 bid, 90 offered, he said, while the stock rose 32 cents, or 3.86%, to close Monday at $8.62.

On Friday, CNet securities fell sharply after the company trimmed its fourth-quarter sales outlook and said long-time chief financial officer Doug Woodrum would move to another role at the company.

The San Francisco-based company also filed to sell up to $300 million in securities and, that, the trader said, was the focal point of the market's positive take on CNet on Monday.

CNet posted third-quarter sales of $70.5 million, up from $57.7 million a year before, and forecast sales in fourth quarter would be $86 million to $89 million. CNet reported earnings of $1.1 million, or 1 cent a share, up from a net loss of $5.8 million, or 4 cents a share, a year earlier. The company is looking for fourth-quarter earnings of 7 cents to 9 cents per share.

For all of 2004, the company said earnings would be in a range of 9 cents to 10 cents a share on sales of $288 million to $291 million.

ViroPharma makes private deal

ViroPharma Inc. on Monday issued $62.5 million of one-year senior bridge notes plus warrants for 5 million shares of common stock in a private transaction with proceeds, plus $53.5 million of cash on hand, earmarked to finance a $116 million asset acquisition from Eli Lilly & Co.

The notes will pay 10% monthly until Feb. 18, 2005 and then step up by 2% monthly until maturity on Oct. 18, 2005. On closing of the acquisition, subject to stockholder approval, however, ViroPharma intends to swap the bridge notes for 6% convertible notes due 2009 with a 30% initial conversion premium.

On Monday, the existing ViroPharma 6% convertibles due 2007 were flat at 74.25, having traded at that level on Oct. 8, a sellside trader said. ViroPharma shares closed Monday up a penny to $2.08.

In the wake of pulling the exchange offer for those notes in June, the issue dropped about 6 points to be offered at 70 after having run up about that same amount on the restructuring effort.

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