Convertibles quiet as holiday season ebbs; International Game slips outright; Micron weak

By Rebecca Melvin

New York, Jan. 3 - U.S. convertibles remained in a holding pattern on Friday as market players eyed the start of earnings season and market ramp-up next week following two mid-week holiday closures that marked the year-end. A major snowstorm that snarled transportation in New York and other parts of the Northeast also contributed to market inactivity on Friday, sources said.

"We didn't really do anything. We're waiting for earnings next week," a New York-based trader said.

Among convertible issuers set to report earnings next week are RPM International Inc., Greenbrier Cos. Inc. and Alcoa Inc.

Back in Friday's action, International Game Technology was one of the most active names in a thinly traded market, with the company's 3.25% convertibles, which mature May 1, 2014, looking to be slightly weaker. Trace prints were seen at 105.375 and 105.5, compared to recent trades at 105.625 and 106. Shares of the Las Vegas-based gaming equipment company were also lower.

Micron Technology Inc. was also mentioned as a name in trade, with the underlying shares of the Boise, Idaho-based chip maker also weak. Micron's 3% convertibles due 2043 printed at 97.375, according to Trace data.

Airlines were also getting a look from investors as airline shares jumped in enthusiasm over Delta Air Lines' better-than-expected December revenue. Delta also reported that its fuel price for the month was 3 cents cheaper than it had forecast.

United Continental Holdings Inc.'s 4.5% convertibles due 2015 traded at 207.726, which was up nearly 5 points on the day, according to Trace data, against UAL shares, which were up 6%.

In the broader markets, U.S. equities whipsawed in light volume and ended mixed after a higher start. The S&P 500 stock index ended little changed, or down 0.61 point to 1,831.37; the Dow Jones industrial average added 28.64 points, or 0.2%, to 16,469.99; and the Nasdaq stock market lost 11.16 points, or 0.3%, to 4,131.91.

U.S. Treasuries were weak, but gold prices extended gains after a surprising rebound on the first day of trade for the new year on Thursday.

International Game slips

International Game's 3.25% convertibles due May 1, 2014 traded at 105.375 and 105.5, which was flat to lower compared to recent levels.

International Game shares were down 24 cents, or 1.4%, to $17.48, albeit in light volume.

The International Game bonds appeared to be trading on an outright basis and "seem to be 'in' a touch," a New York-based trader said, noting that the underlying shares of the company were soft as well.

Micron weaker

Micron's 3% convertibles due 2043, of which about $1.02 billion priced in November in an exchange deal involving three existing convertibles series, traded at 97.375, according to Trace data.

Micron's 1.875% convertibles due June 1, 2014, of which about $140 million remain outstanding, traded down 3.3 points to 147.230.

Micron shares were off 69 cents, or 3.2%, to $20.97 in light volume.

The chip maker was downgraded to "sector perform" from "outperform" by RBC Capital, which kept its price target of $19.00 per share on the name. The bank cited lower chip prices in 2014 for its downgrade and said Micron's DRAM segment is susceptible to an Apple Inc. reduction.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Greenbrier Cos. Inc. NYSE: GBX

International Game Technology NYSE: IGT

Micron Technology Inc. NYSE: MU

RPM International Inc. NYSE: RPM

United Continental Holdings Inc. NYSE: UAL

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