Morning Commentary: MGM Resorts extends gains as maturity looms; coal convertibles trade lower

By Rebecca Melvin

New York, March 18 – MGM Resorts International’s convertibles continued to trade up early Wednesday, extending Tuesday’s surge amid chatter that activist Land and Buildings is pushing the Las Vegas-based casino operator to convert to a real estate investment trust and spin off its real estate assets.

MGM’s 4.25% convertibles due April 15, 2015 moved up to 119.5 on Wednesday, which was up from 116 late Tuesday, according to Trace data. The 3-point-plus gain came in tandem with a 6% rise in shares and is on top of a 9-point increase on Tuesday.

The bonds mature in less than a month but still have some gamma, a New York-based trader said.

A pair of coal names were also seeing some trading action early Wednesday, and those issues were lower.

Alpha Natural Resources Inc.’s 4.875% convertibles due 2020 changed hands at 18.5, which was down 1.5 points on the day, according to Trace data. But shares of the Bristol, Va.-based coal producer jumped 6 cents, or 7.5%, to $0.8698.

Peabody Energy Corp.’s 4.75% convertibles due 2066 traded at 36 early Wednesday, which was down a point or more from Tuesday. Shares of the St. Louis-based coal producer were down 9 cents, or 1.5%, to $5.70.

Equities were lower ahead of a policy statement and news conference expected from the Federal Reserve Wednesday afternoon. All eyes are on the U.S. central bank to see if it will provide more clarity on when it will make its first rate hike since taking rates down to near zero in response to the financial crisis of 2008.

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