Micron trades actively on profit news; Interpublic, Northwest add; Trizetto reoffered at 98

By Rebecca Melvin

Princeton, N.J., Sept. 30 - The convertibles of Micron Technology Inc. traded actively Friday in line with its higher stock price after the computer memory chip maker posted an unexpected profit for its fiscal fourth quarter.

Micron's news helped spur convertibles trading in fellow semiconductor companies, including Advanced Micro Devices Inc., which was in line, and Cypress Semiconductor, which gained about 0.25 point to 0.50 point, traders said.

Interpublic Group of Cos. Inc. was another name actively traded Friday after the advertising holding company filed delayed earnings and restated past earnings going back to 2000 that cut those results by more than $500 million. But Interpublic stock and the bonds were higher.

In the primary market, The TriZetto Group Inc. priced $100 million of 20-year convertibles at the cheap end of talk; but that wasn't cheap enough apparently as bookrunners UBS and Banc of America Securities LLC reoffered the bonds Friday at 98.

Euronet Worldwide Inc.'s 3.5% convertibles, which had their debut on Thursday, were quiet. While Nektar Therapeutics Inc.'s 3.25% convertibles, which were well received when priced last week, continued to see trades in the 105.5 bid, 106 offered range, versus a stock price of $17, according to a trader.

The convertible bonds of Northwest Airlines Corp. traded higher Friday by about 0.5 point. But the airline's shares dropped 1.5% after the company mapped out for creditors plans that will hopefully allow the airline to emerge from Chapter 11 bankruptcy.

The move in Northwest's convertibles was unrelated to news, a Connecticut-based sellside trader said.

Otherwise it was quiet in the secondary market, convertibles players said, with activity dying out toward late morning like "a typical Friday."

But at Prospect News, month-end business included compiling data which revealed that Lehman Brothers holds the position as number one underwriter of convertibles for both the third quarter and the year to date, with 16.68% of the total $26.76 billion of issuance for the year to date.

Citigroup was the number one underwriter for September, due in large part to the $989 million SynDECs offering issued by Citigroup Funding Inc. and exchangeable for Genworth Financial Inc.

Total volume for September was $3.10 million, slightly above the $2.92 billion in September 2004 but down from $4.73 billion in August, a figure pushed up by the U.S. Bancorp $2.5 billion offering of convertible debentures, for which Lehman was bookrunner.

For the third quarter, issuance totaled $10.29 billion, ahead of the $7.38 billion for the same period in 2004.

TriZetto trades at 98.5

TriZetto, which derives its name from a music term in Italian related to three, priced $100 million 20-year convertibles at par to yield 2.75% with an initial conversion premium of 30%. The bonds were reoffered at 98, a syndicate source said, and they traded at 98.5, where they closed.

A Connecticut-based buyside source said on Thursday she traded the new issue of Euronet, but she didn't trade TriZetto on Friday.

The Rule 144A senior unsecured notes, sold via joint bookrunners UBS and Banc of America Securities, priced at the cheap end of talk, which was for a coupon of 2.25% to 2.75% and an initial conversion premium of 30% to 35%.

The issue has an over-allotment option of up to an additional $15 million of notes.

Newport Beach, Calif.-based TriZetto used proceeds to buy back 1 million shares of common stock and will use the remaining proceeds to fund acquisitions, working capital and other general corporate purposes.

TriZetto is a health care information services company.

Profit news boosts Micron

The 2.5% convertibles of Micron traded actively, mostly on swap, as its shares climbed 9.1% after the Boise, Idaho-based chip maker reported earnings that were lower compared to the same period last year but which beat Wall Street's estimates.

Net income shrank to $43.1 million, or 7 cents per share, for the quarter ended Sept. 1, down from $93.5 million, or 14 cents per share, a year earlier. The company paid off $100 million of debt during the period.

Revenue rose to $1.26 billion from $1.19 billion a year ago.

Analysts were expecting a loss of 8 cents a share on revenue of $1.17 billion.

Micron said that sales growth in the fourth quarter resulted from about a 15% increase in DRAM sales, a 40% increase in sales of CMOS image sensors and NAND Flash memory sales that were five times higher compared to the prior quarter.

But the company's overall average selling price in fiscal 2005 decreased about 25% compared to fiscal 2004, while the average selling price for DDR2 DRAM products decreased about 40%.

Micron's move helped the overall semiconductor sector, where Cypress Semiconductor Corp. saw its 1.25% convertibles trade up as much as 0.50 point to about 117.25. The San Jose, Calif.-based semiconductor's stock closed up 65 cents, or 4.5%, to $15.05.

Interpublic lifts after accounting news

The 5.375% mandatory convertibles of Interpublic Group gained 2.08%, its 4.5% convertibles also traded higher, and its stock rose 3.8% after the New York-based advertising group filed delayed earnings and a restatement that reduced past results.

The filing met a regulatory deadline and spurred a relief rally that signaled that investors were glad no new problems were revealed.

Later, Moody's Investors Service reduced its long-term debt rating on Interpublic to junk status, and S&P reduced its ratings further into junk territory.

S&P said the rating action follows the company's filing and S&P's examination of the nature and magnitude of Interpublic's financial restatement.

"Considerable cash outlays could be made over the next 24 months related to the larger than expected restatement, at the same time that substantial professional fees are significantly diminishing Interpublic's cash flow," S&P credit analyst Alyse Michaelson Kelly said in a news release.

Interpublic's 4.5% convertible traded at 119.5, versus a stock price of $12.00, compared to a trade of 114.5, versus a stock price of $11.13, on Tuesday.

Northwest gains in trade

The convertibles of Northwest Airlines gained about 0.5 point on Friday with both the 6.625% and the 7.625% convertibles quoted at 27.5. The bankrupt airline's stock headed in the opposite direction, down 1.48% to $0.665.

Northwest executives spelled out for creditors plans that will hopefully lift the fourth-largest U.S. airline out of bankruptcy, including cost savings of up to $2.5 billion, labor cuts and plans to open a subsidiary that would fly smaller planes.

The airline is counting on the cost savings to help it achieve at least a BB bond rating by the time it emerges from bankruptcy to make it easier to raise funds. Northwest, now in default on its debt, has a D rating.

"A double-B in this environment would be pretty good for an airline," said Gimme Credit senior credit analyst Evan Mann. He said BB would put Northwest debt just below investment grade - which isn't bad considering the airline industry's woes.

"Unless you have an exceptional balance sheet, it would be very hard for the investment industry to give you investment grade," he said.

The creditors were voting at the meeting on who would be named to a committee that would be their liaison with the airline, the bankruptcy court judge, the trustee and representatives of other creditor classes.

Northwest, which has headquarters in Eagan, Minn., filed for bankruptcy protection on Sept. 14.

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