Vornado, Intel, Danaher all up slightly; Freeport-McMoRan, Newmont drill up; trading given up for the beach

By Evan Weinberger

New York, Aug. 31 - Convertibles issued by Vornado Realty Trust, Intel Corp. and Danaher Corp. highlighted trading activity on the last unofficial day of summer.

Among other issues that moved around were Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. convertibles.

Many market players took the day to enjoy that last blast of summer Friday, and that took a toll on trading volume. "I've sent out about as many markets as I can think of," one sellside trader said. "Bond brokers aren't even responding."

Trading volume was down in the equity markets Friday, but all three major indexes were up sharply on the day. Speeches by President George W. Bush and Federal Reserve chairman Ben Bernanke buoyed investors.

Bush announced a series of measures to aid homeowners caught up in the subprime mortgage storm, including making it easier for homeowners with good credit to refinance their mortgages through the Federal Housing Administration along with pressing Congress to modernize the FHA and make changes in the tax code to help homeowners.

Bernanke told the Fed's annual conference in Jackson Hole, Wyo., that the central bank would "act as needed" to prevent the credit crisis from infecting the broader economy.

Smelling a rate cut, investors drove the Dow Jones Industrial Average up 119.01 points, or 0.90%, to a close of 13,357.74, although the benchmark index had gone nearly 200 points higher earlier in the day and gave back some gains.

The Nasdaq gained 31.06 points, or 1.21%, for a close at 2,596.36. The Standard & Poor's 500 picked up 16.35 points, or 1.12%, for a close of 1,473.99.

One trader said the speeches led investors to have visions of multiple rate cuts dancing in their heads, "Which I don't think is going to happen," he added.

Who knows what the future holds?

With only light trading happening Friday, market watchers had a chance to think about what lies ahead once work resumes Tuesday. Will there be a rush of new issues coming to market? Will credit concerns and general skittishness slow down new issues and trading?

"All of the above," one sellside analyst said. "I think it'll be a little busier next week, but I think there's still a little bit of trepidation."

A sellside trader said that he expects paper without exposure to mortgages to move again once the action starts again. "Regular paper that doesn't have exposure to that stuff seems to be trading fairly well," he said.

The trader added multi-strategy funds will be eyeing convertibles especially hungrily. "They're going to raise cash in convertibles, which is still wonderfully liquid," he said.

The truth, however, is that no one is really sure what the coming days hold. Two reports released Friday provided very divergent views of what's to come.

A monthly wrap of the convertibles market for August from Lehman Brothers was bullish on the market's future. "Despite the current environment, we remain positive on the outlook for convertible new issuance as rising volatility and continuing uncertainty in the credit markets should provide incentives for issuers to tap the convert market as a source of capital," the analysts wrote.

Meanwhile, a Citigroup roundup for August was decidedly less positive. The report said that "concerns over availability of credit" has pushed up yields and dampened new issues. The analysts expect that trend to continue.

They did see the potential for some market growth, however, especially among companies desperate for funds. "We believe that through a combination of yield and option value convertibles will be able to help companies generate some of that necessary liquidity," the analysts said. "On the flip side, risk tolerant investors may step up to reap potentially big gains from investments in capital constrained corporations' converts."

Limited volume, limited changes

Although one trader referred to the activity Friday as a "big zero," there were some investors out there trying to make moves.

Vornado's 3.875% exchangeable senior debentures due April 15, 2025 closed Friday at 96.375 versus a closing stock price of $106.59. The debentures had finished trading Thursday at 96.25 versus a stock price of $104.68.

Stock in the New York-based real estate investment trust (NYSE: VNO) was up $1.91, or 1.82%.

Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 closed Friday at 102.875 versus a closing stock price of $25.75. The convertibles closed Thursday at 102.125 versus a closing stock price of $25.28.

Intel is a semiconductor manufacturer based in Santa Clara, Calif. Intel stock (Nasdaq: INTC) gained 47 cents, or 1.86%, on Friday.

Washington, D.C.-based consumer, industrial and medical products producer Danaher saw its 0% LYONs due Jan. 22, 2021 close Friday at 113 versus a closing stock price of $77.66. They finished trading Thursday at 111.375 versus a stock price of $76.67.

Danaher stock (NYSE: DHR) picked up 99 cents, or 1.29%, on Friday.

Phoenix-based mining concern Freeport-McMoRan saw its 6.75% mandatory convertible preferreds due May 1, 2010 close at around 132.5 versus a closing stock price of $87.42. They were last seen Wednesday at around 132 versus a closing stock price of $85.10.

Freeport-McMoRan stock (NYSE: FCX) gained $2.43, or 2.86%, on Friday.

Finally, Newmont Mining's 1.25% convertible senior notes due July 15, 2014 closed at around 108.5 versus a closing stock price of $42.26. They were last seen Wednesday at 106.26 versus a stock price of $41.68.

The Denver-based mining concern's 1.625% convertible senior notes due July 15, 2017 closed at around 108.375 versus a stock price of $42.26. They were last seen Wednesday at 107.5 versus a stock price of $41.68.

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