GMX gains on partial tender news; Ford preferreds add dollar neutral; Microsoft slips

By Rebecca Melvin

New York, Jan. 28 - GMX Resources Inc.'s 5% convertibles jumped about 3 points Friday after the Oklahoma City-based oil and gas company announced a partial tender offer for up to $50 million of its 5% convertibles due 2013.

Ford Motor Co.'s convertible preferred shares were also in trade and better by about 0.75 point on a dollar-neutral basis after the Dearborn, Mich.-based automaker reported earnings that disappointed on the bottom line.

Microsoft Corp.'s convertibles were not very active, but called lower on hedge by about 0.125 point, trading at 107.2 versus a share price of $27.50, after the software giant reported positive earnings amid investor worries about the trend in computing toward mobile devices and away from PCs.

Thoratec Corp. convertibles were sharply lower outright, but "in" less than a point on hedge after the Pleasanton, Calif.-based medical device maker reported disappointing earnings and forecast a weak 2011.

Meanwhile, Thoratec competitor Heartware International Inc. saw its convertibles up just slightly on hedge, according to a Connecticut-based sellside analyst.

Overall, the market was under pressure Friday, a New York-based sellsider said. But for the most part convertibles trades were sparked on company-specific news, especially earnings news.

GMX lifts on tender news

GMX's 5% convertibles due 2013 traded at 95 bid, 96 offered, which was up about 3 points outright on the day, after the company announced a tender offer for $50 million of the $122.75 million of the bonds outstanding.

GMX's sister convertible, a 4.5% convertible due 2015, was at 84.5 bid, 86 offered, a New York-based sellside trader said.

GMX, an oil and gas exploration and development company, also announced Friday plans to raise $300 million in shares and straight bond notes.

GMX shares were down 28 cents, or 5%, at $5.19 in late-afternoon trading Friday.

Holders of the GMX 5% convertibles who validly tender will receive $1,000 for each $1,000 principal amount of notes plus accrued and unpaid interest.

Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. Inc. are acting as the dealer managers for the tender offer, which expires Feb. 28.

"They are up a bunch because of the cash tender," a New York-based sellside trader said of the GMX 5s. "They are 95.5 middle market."

A second source said that with the GMX 5% trading at 95, that values the un-tendered portion of the issue at 92, which is up 2 points from where they were prior to the deal, "which seems about right," the New York-based sellside trader said.

Ford preferreds add on hedge

Ford Motor's 6.5% convertible trust preferreds due 2032 traded at 52.20 versus a share price of $16.25, according to a New York-based sellside desk analyst.

The Ford 4.25% convertible bonds, both the new and older issues, were not heard in trade.

The preferreds were said to be up 0.75 point on a dollar-neutral basis, "depending on delta and when you bought stock back," a New York-based sellsider said.

Shares of the automaker were down $2.25, or 12%, at $16.53 on Friday in heavy volume late in the session.

"The stock has gotten pounded," a New York-based sellsider said, adding that "a lot" of the Ford convertible preferreds were trading.

There is about $362 million of the Ford preferreds outstanding.

Ford reported net income of $190 million, or 5 cents a share, on revenue of $32.5 billion for its fourth quarter, which compares to $886 million, or 25 cents per share, on revenue of $30.9 billion for the same quarter last year.

The unexpected drop in fourth-quarter earnings, which Ford attributed to rising costs in North America, a loss in Europe and charges related to debt-reduction measures, sparked the sell-off in Ford stock.

Microsoft comes on hedge

Microsoft's 0% convertibles due 2013 traded at 107.2 versus a share price of $27.50 on Friday, which was lower on hedge by 0.125 point.

Shares of the Redmond, Wash.-based software company fell $1.27, or 4.4%, at $27.60 after the company reported fiscal second-quarter earnings that fell compared to a year earlier. But revenue rose 5% to nearly $20 billion.

Investors are concerned about how Microsoft is positioned to defend its dominant position as computing shifts more to mobile devices and away from PCs.

The Microsoft 0% convertibles were not a big trade of the day, however, sources said.

Thoratec down dollar neutral

Thoratec's 2.375% convertibles due 2034 traded at 68.5 on Friday, which was down from a trade of almost 86 on Jan. 12 but lower by less than a point on a dollar-neutral basis.

Thoratec's shares fell to a 52-week low during the session and ended down $3.00, or 11.5%, at $23.13 in heavy volume.

The maker of cardiac devices posted disappointing quarterly results late Thursday and said that it expected sales of its heart pump to grow 10% to 15% in 2011, while other product categories would fall 10%.

The company's implantable heart pumps will face competitive pressure from rival Heartware, which has filed an application with the U.S. Food and Drug Administration for its own heart pump.

Robert W Baird downgraded Thoratec shares to "neutral" from "outperform" and reduced the stock target price to $28.00 from $45.00.

Meanwhile, Heartware saw its shares up on the Thoratec earnings news in the pre-market, but later the Heartware shares dropped $9.00.

Heartware's 3.5% convertibles due 2017 were at 117.4 on Friday, compared to 116.174 on Jan. 25, and slightly higher on hedge, a Connecticut-based sellside analyst said.

Shares of Framingham, Mass.-based Heartware ended lower by $6.04, or 6%, at $91.09 in larger-than-average volume.

Mentioned in this article:

Ford Motor Co. NYSE: F

GMX Resources Inc. Nasdaq: GMXR

Heartware International Inc. Nasdaq: HTWR

Microsoft Corp. Nasdaq: MSFT

Thoratec Corp. Nasdaq: THOR

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