Lennar, Medtronic, Newmont gain with stocks; SanDisk stuck in negative; Transocean retreats

By Kenneth Lim

Boston, Aug. 25 - Lennar Corp. gained on Wednesday as its underlying stock rallied with the rest of the homebuilding sector.

SanDisk Corp.'s new convertibles remained active, but the ongoing weakness in its shares kept the recently minted issue languishing below par.

Transocean Ltd. slipped back after a rally on Tuesday, as the shadow of investigations into the Gulf of Mexico rig explosion maintained pressure on the name.

The convertible market in general was quiet on Wednesday, as the weekend and a typically quiet week ahead put a damper on most activity.

"It's late in August and everything kind of slows down," a sellside desk analyst said.

Trades continued to be dominated by the same few names.

Ford Motor Co.'s 4.25% convertibles due 2016 slipped about 3 points outright early on Wednesday to trade at 135.625 versus a common stock price of $11.10 per share.

The common stock managed to claw its way back later in the day, ending at $11.32 apiece, up by 0.69% or $0.08. Ford is a Dearborn, Mich.-based auto maker.

Medtronic, Inc.'s 1.625% convertible due 2013 added a touch to trade at 100 versus a common stock price of $31.20 per share. The shares rose 2.11%, or $0.66, on Wednesday to close at $31.87 apiece. Medtronic is a Minneapolis-based medical device maker.

Newmont Mining Corp.'s 3% convertibles due 2012 increased by 3 points, changing hands at 135.5 against a $58.50 stock price.

Shares of the Greenwood Village, Colo.-based gold mining company ended Wednesday at $58.74 per share, up by 2.84% or $1.62.

Lennar up with sector

Lennar's 2% convertible due 2020 was up by half a point to trade at 90 versus a common stock price of $13.10 as the shares followed the homebuilding sector higher.

Lennar is a Miami-based homebuilder.

"They were up with the stock," one sellside trader said. "The stock, in turn, was up because all the other builders were up after the Toll Brothers [Inc.] earnings came out."

Toll Brothers, a Horsham, Pa.-based homebuilder, on Wednesday reported its first quarterly profit in three years. The company earned $27.3 million, or 16 cents per share, in the quarter ended July.

The jump after the Toll Brothers results may have been more of a sigh of relief from the market, which had been expecting the worst amid weak economic data, the trader said.

"It's not as bad as people [thought] that it was," the trader said.

But the trader cautioned against being too optimistic.

"I wouldn't go as far as saying the market is upbeat about the sector," the trader said. "Housing sales just came out today and essentially it was another piece of bad news. In case you haven't been paying attention, the economy's not doing very well right now. It's more of relief buying than anything else."

SanDisk remains soft

SanDisk's new 1.5% convertible due 2017 remained under pressure on Wednesday, trading down by a point at 93.25 versus a common stock of $37.

The common stock slipped 1.33%, or $0.51, to close at $37.76 per share on Wednesday.

SanDisk is a Milpitas, Calif.-based flash memory chip company.

"The new SanDisks have been getting hammered from the start," the trader said. "It's tough."

The trader said the convertibles are holding up on a dollar-neutral basis, but outrights are lamenting the stock's persistent weakness.

"The stock hasn't done well ever since they sold the converts," the trader said. "The stock's lost about 10% since they priced. Talk about buying at the wrong time."

But the trader said the stock and the convertibles could still recover.

"One good thing is the credit's not really an issue here, so I think the outright guys aren't really too concerned about this five-day drop in the stock," the trader said. "Maybe the only concern for some of them is the month end's coming, and they'd really like this one to be up."

Transocean slips back

Transocean's convertibles followed their underlying stock lower on Wednesday as the company's outlook remained clouded by investigations into the Gulf of Mexico rig explosion.

The Transocean 1.5% series A convertible due 2037 eased a quarter-point to 99, while the 1.5% series C convertible due 2037 changed hands at 91.5 outright.

Transocean common stock was 1.87%, or $0.98, lower on the day for a $51.42 close.

Transocean is a Vernier, Switzerland-based offshore drilling contractor.

The company's stock rallied on Tuesday, and Wednesday's pullback was a sign of the market's unease over the investigations, a sellsider said.

"That's going to be a weight hanging over the name for a long time," the sellsider said. "There's potential liabilities, and no one knows how much they could be. What people know is that this administration wants to be very aggressive about the issue, which isn't good for RIG."

McMoRan quiet

McMoRan Exploration Co.'s 6.75% mandatory convertible preferred stock due November was seen trading around 98 on Wednesday, a desk analyst said.

The common stock closed at $13.27 on Wednesday, up by 6.93% or $0.86 after also climbing on Tuesday.

The analyst said that despite the sharp movements in the common stock, the convertible preferreds have relatively small floats, and market interest was limited.

"They're small and we don't really see them," the analyst said.

Mentioned in this article

Ford Motor Co. NYSE: F

Lennar Corp. NYSE: LEN

McMoRan Exploration Co. NYSE: MMR

Medtronic, Inc. NYSE: MDT

Newmont Mining Corp. NYSE: NEM

SanDisk Corp. Nasdaq: SNDK

Transocean Ltd. NYSE: RIG

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