Convertibles mixed in quiet trade; Penske, Freeport-McMoRan higher; GM, Hologic lower; Medtronic flat

By Rebecca Melvin

New York, Feb. 19 - Despite jumps in copper and oil, and volatility in stocks, the convertibles market remained generally quiet Tuesday, following the long Presidents' Day weekend, market players said.

"Things were indicated better, but there was not a lot of flow," a New York-based sell-side trader said.

"It's a weird day," another convertibles player said, pointing to gains in copper, steel, gold, and oil, while stocks, meanwhile, started the day higher, but fell steadily from about 2 p.m. to end flat to slightly lower.

Crude-oil futures climbed to over $100 a barrel on the New York Mercantile Exchange, before closing slightly off that level at $99.94 a barrel, up $4.44 on the day.

Nevertheless, convertible trades were mixed and followed no sector trends.

Obviously, Freeport-McMoRan Copper & Gold Inc. was higher on a better than 5% gain in its stock, but it wasn't traded much, players said. Also higher were Penkse Automotive Group Inc. and Chesapeake Energy Corp. But General Motors Corp. and Hologic Inc. were lower, and Medtronic Inc. and Nuance Communications Inc. were flat.

Earnings, buyback boost Penske

The convertibles of Bloomfield Hills, Mich.-based Penske added about ½ point as its shares jumped 2.8% after the auto retailer reported earnings that beat expectations by a penny and announced a $150 million share repurchase program.

"While the new vehicle sales environment in the U.S. was challenging, the other areas of our business performed very well," chairman Roger Penske said in a news release. "In particular, we are pleased to see the continued growth of pre-owned vehicle sales and the sustained strength of our service and parts operations, which have served to partially offset the soft new vehicle sales market."

Same-store retail revenue increased 4%, including 10.5% growth in its international markets, he said.

The Penske 3.5% convertibles due April 1, 2026 closed at 101.3 Tuesday, versus a stock price of $18.50, compared with a Friday close of 100.6, versus a share price (NYSE: PAG) of $17.99 on Friday.

Mining, energy issues gain

Following their underlying shares higher were copper mining company Freeport-McMoRan and natural gas play Chesapeake Energy.

But volume was slim. "We didn't trade any today, which is strange because we usually do," a New York-based sell-side desk analyst said of Freeport-McMoRan.

Copper futures jumped more than 5% in New York amid undiminished demand for the commodity from China.

In addition, Moody's Investors Service upgraded the Phoenix-based mining company due to "very strong earnings and cash flow in the current elevated metals price environment and significant debt reduction in the fourth quarter of 2007." Its corporate family rating was raised to Ba1 from Ba2.

Also on Tuesday, Indonesian state miner PT Aneka Tambang Tbk said it may buy up to 18.8% of PT Freeport Indonesia, a unit of Freeport McMoRan.

Freeport's 6.75% mandatory convertible preferreds closed Tuesday at 143.5, versus a closing stock price of $97.94, compared to 137.68, versus a closing share price of $93.18 on Friday. Three months ago, on Nov. 15, the 6.75% mandatory convertible preferreds closed at 146.44 versus a closing stock price of $99.77.

Although many stocks erased much of the gains they saw early Tuesday, Freeport (NYSE: FCX) shares held on to much of their gains, ending the day up $4.76, or 5.11%, at $97.94 in heavy volume.

Natural gas futures in New York were also higher, helping support a two point climb of Oklahoma City-based Chesapeake Energy's 2.75% contingent convertible senior notes on a 1.4% gain in their underlying shares.

The 2.75s closed at 129.42 versus a stock price of $43.65, compared to 127.14 versus a stock price of $43.05 on Friday. Chesapeake Energy (NYSE:CHK) added $0.60, or 1.4%, to $43.65 on Friday.

GM slips amid low volume

The shares and convertible bonds of General Motors were mostly lower on weaker than average volume for the Detroit-based automaker. GM's 6.25% convertible senior debentures (NYSE: GPM) closed down 0.20, or 1%, to 20.29, versus a share price of $26. Earlier in the session the 6.25s traded at 20.5 compared to a price of $26.50, according to a New York-based sell-sider.

Meanwhile, the GM 1.5% convertible senior debentures closed Tuesday down 0.98, or 3.85%, at 25.40, while the 4.5% series A convertible notes closed unchanged at 18.70.

GM shares (NYSE:GM) closed down $0.13, or 0.5%, at $26.00.

Hologic down, Medtronic flat

Sun Trust Robinson Humphrey initiated coverage of Bedford, Mass.-based diagnostic and medical imaging company Hologic, but the promise of extra attention didn't prop up its shares or convertibles any. The convertibles were down a good 2 points on a 1.6% drop of the stock (Nasdaq: HOLX).

Hologic 2% convertible senior notes due 2037 closed Tuesday at 102.34, versus a stock price of $61.42, compared to 104.54 versus a stock price of $62.39 on Friday.

Another name in health care, Medtronic ended essentially flat after the medical Minneapolis-based device maker reported third-quarter earnings that tumbled 89% from a year ago, but still beat expectations.

The Medtronic 1.5% convertible senior notes due 2011 closed at 106.91, essentially unchanged from 106.897 on Friday, compared to a share price that slipped 3 cents, or 0.06%, to $49.15.

Medtronic's 1.625% convertible senior notes traded at 107.25, little changed from Friday, and the 1.25s due 2021 closed at 100.

Medtronic shares (NYSE: MDT) started higher Tuesday but retraced gains in the second half of the session. The shares closed on Friday at $49.12.

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