Market hunts for Thanksgiving deal, Ciber answers the call with small issue; trading flow low

By Ronda Fears

Nashville, Nov. 24 - There was some "trading around" taking place in convertibles Monday, dealers said, but nothing was really moving on trades. However, lots of paper was remarked at the end of the day as stocks gained nicely, also amid low volume.

"People are trading around because they have to do something," said a dealer.

"But it's the usual suspects and really we're all just killing time. It's a holiday week, it's going to be slow, so on a day-to-day basis it's impossible to really gauge the market. There's not going to be enough going on to do that."

Many players anticipated a "breakfast" deal would launch before Monday's open, but nothing emerged until after the closing bell rang.

"Typically there is always one deal on Thanksgiving week," said one hedge fund manager in New York.

After the close, Ciber Inc. launched $100 million of 20-year convertible notes talked to yield 2.875% to 3.25% with a 46% to 50% initial conversion premium. There will be a full day of marketing, though, with pricing set for after Tuesday's closing bell.

There could be another deal pop up before Wednesday, too, market watchers said.

Of course, it being Thanksgiving week, a new deal evokes plenty of puns. One email exchange with a sellside source went something like this (some messages were merged):

"I haven't heard anything today so far, but I'd guess that something does get announced before Wednesday. Just a hunch. A turkey, probably," the source said, shortly after the market open, when asked if a new convertible deal had hit the tape yet.

"But, they'll probably gobble it up!"

"Maybe," the source said.

"But six months later, it'll knock the stuffing out of their returns!"

There was no relationship to that exchange and the Ciber deal; in fact, there were no valuation sheets or comments made about the deal at all, mostly due to it being launched way after the market close while many players are slipping out of the office as soon as possible this week, if not early. Several buyside sources took the entire week off; many are not returning to the office Friday either on both the buyside and sellside of the market.

Several buyside sources complained that the last couple of new deals offered to convertible investors were not so palatable, but the bankers said the books showed there were plenty of takers for the new Yellow Corp. and Kulicke & Soffa Industries Inc. deals.

The last, from Kulicke & Soffa, was repriced below par - the first tough sell example in November but not so far away from the Northwest Airlines Corp. and United Rentals Inc. deals in late October, a market source pointed out. Sources near the Kulicke & Soffa deal said it was oversubscribed, mostly by outright convertible funds, at the reoffer price.

Kulicke & Soffa pulled off a major financing coup, by most onlookers' accounts, by issuing the new 0.5% convertible to redeem its 4.75% convertible.

The new Kulicke & Soffa on Monday was quoted up 1.75 points to 102.375 bid, 102.875 offered. The stock gained 81 cents, or 5.27%, to $16.17.

Most of the new deals - a slew from the first of the month - saw some activity Monday, traders said, as "they were easy targets to stay busy with; otherwise, there just aren't any offers out there."

The market was better bid overall, but, again, traders said there were no bonds being offered.

"Nobody wants to do anything to mess up their returns," a trader commented, echoing similar observations by traders in recent weeks.

Some players were trying to add on some yield, though.

Delta Air Lines Inc. was one target, but, alas, like elsewhere in the market, offers were not to be found.

"The [Delta] converts are better bid for, but I haven't seen any trades," said a dealer.

"That would be one that would be tough to get your hands on."

Another dealer added, "For a lot of the paper with big income, people have to pay up for it. The bid has to be a head-turner to get a bite," noting that to be the case for the market in general, not just Delta.

Delta's 8% convertible due 2023 was quoted up 1.375 points to 93 bid, 94 offered with the stock at $11.96. Delta shares ended up 82 cents, or 7.17%, to $12.25.

The airline's stock gained on the chief executive's departure, which hit the tape early Monday, and that drove the convertible up.

Because of the stagnation in the regular secondary market, with no one wanting to give up profitable positions and in other cases unable to unload losers, new issues often are a handy way to stay busy during the session.

"We've been lucky that there have been some good-sized deals recently, so there's something to trade," said a hedge fund trader in Connecticut.

But there wasn't a lot of price movement in most cases, he said.

American Express Co.'s new 1.85% due 2033 edged up 0.125 point to 101.875 bid, 102 offered, while the stock gained 25 cents, or 0.56%, to $45.15.

Elan Corp. plc was another name mentioned. The new Elan 6.5% convertible due 2008 was quoted at 111.75 bid, 112 offered, with the stock ending up 1 cent, or 0.2%, to $5.11.

There was no news on Elan, but a trader noted that there was lots of attention on the drug and healthcare industries as the Medicare reform bill sluggishly moves through Capitol Hill. There also was news on the tape about ImClone Systems Inc. and Bristol-Myers Squibb Co. filing for new drug approval in Canada for their erbitux cancer treatment.

Converts from ImClone and Bristol-Myers were not mentioned, but a trader said Guilford Pharmaceuticals Inc. was said to be lower, by as much as 4 points, while Invitrogen Inc.'s convertibles gained 2 to 3 points.

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