UAL adds amid quiet trading; AMD gains; Medtronic up in solid volume; trading breadth narrow

By Rebecca Melvin

New York, Oct. 5 - UAL Corp.'s 6% convertibles due 2029, which debuted in the secondary market on Friday, gained Monday amid decent volume in what looked to be hedge activity in the name.

Separately, Advanced Micro Devices Inc. improved following recent weakness, helped by a credit upgrade, according to a New York-based sellside desk analyst.

Medtronic Inc., one of the large, liquid names that have dominated activity in the convertibles market recently, was better, perhaps helped by word that the medical device maker has been granted global distribution and marketing rights of the PEAK PlasmaBlade TnA (Tonsil and Adenoid) tissue dissection device for the ear, nose and throat market.

Recent new issues such as Gaylord Entertainment Co., which priced $300 million on Sept. 23, PHH Corp., which priced an upsized $220 million on Sept. 23, and Incyte Corp., which priced $350 million of convertibles on Sept. 24, were mentioned in trade; but, most of the trading activity was among large, liquid issues including Intel Corp., Amgen Inc. and Vornado Realty Trust.

"It's the usual suspects," a New York-based sellside analyst said. "The top 10 volume movers are contributing over 30% of the volume. It's very narrow breadth, and that tells me people are sticking to the big, liquid names, not taking too much risk."

Perhaps they are waiting out the year, the analyst said, agreeing with another sellsider, who said portfolio managers who have notched big returns so far this year are unlikely to take major risks at this point in the year.

"They may wait out the year, or they may wait for some kind of confirmation in third quarter results," the sellsider said.

There is not a lot of volume in the smaller, less liquid names, and until there is it will be difficult to determine where the market is headed.

"When you see good volume on second-tier names, that will determine what the portfolio managers are thinking," the sellsider said.

UAL adds about 1.25 points

UAL's 6% convertibles traded up to 104 on Monday but ended around 103 versus a closing stock price of $7.30, which was up about 1.25 points from Friday's ending level around 101.75 bid, 102.25 offered versus a $7.30 share price, market players said.

"There's a lot of hedge stuff going on. It only makes sense for hedge funds," a sellsider said of the UAL convertible.

Chicago-based UAL, the holding company for United Air Lines Inc., priced an upsized $300 million of 20-year convertibles after the close of markets Thursday at par to yield 6% with an initial conversion premium of 20%.

AMD adds

AMD's 5.75% convertibles due 2012 traded at about 83.4, which was about a point higher than Friday's level.

The AMD 6% paper stood at about 73.375 at the end of the session, which was up a little less than a point from Friday.

Shares of the Sunnyvale, Calif.-based chip maker gained 23 cents, or 4.3%, to $5.54.

The bonds, which weren't trading in strong volume, have pulled back in the last couple of weeks. The AMD 6% paper had been as high as 77 bid, 78 offered, and now they off about 5 points from that level.

"The market stopped and rolled over starting about Sept. 22 or Sept. 25. It was the same for all asset classes - converts, high yield and high grade. So those bonds [AMD] have gone down; they hit a pause," a sellsider said.

Medtronic edges higher

Medtronic's 1.625% convertibles were seen at about 99 at the close, which was up from 98.5 in the previous session.

The convertible traded in heavy volume, but the shares of the Minneapolis-based medical device maker were not much of a mover, ending down a penny at $36.45.

PEAK Surgical and Medtronic announced an agreement that grants the surgical technologies business at Medtronic exclusive rights for global distribution and marketing of the PEAK PlasmaBlade TnA (Tonsil and Adenoid) tissue dissection device for the ear, nose and throat market.

The company said it was an important step to capturing market share.

"Maybe if you hold it up to the light, and turn it sideways, the distribution agreement boosted the convertibles," a sellsider said. "It was far and away the biggest volume name."

Intel, Amgen and Vornado were also among high-volume names, and other than that not much was going on, sources said.

"People are waiting. It's listless," a New York-based sellsider said of market activity.

As for PHH 4% convertibles due 2014, which traded at 102.625 versus a share price of $19.25 on Monday, there was not much volume.

"Nothing is happening in that name. People put them away, and nothing more will go on with them," the sellsider said.

"Unless it's a big liquid issue, or unless there's some event, things aren't trading," the sellsider said.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Gaylord Entertainment Co. NYSE: GET

Incyte Corp. Nasdaq: INCY

Medtronic Inc. NYSE: MTD

PHH Corp. NYSE: PHH

UAL Corp. Nasdaq: UAUA

Vornado Realty Trust NYSE: VNO

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