AMR convertible bonds, stock rise on Justice Department settlement; Hologic paper busy

By Stephanie N. Rotondo

Phoenix, Nov. 12 - AMR Corp.'s convertible bonds popped following news that the bankrupt airline and its merger partner, U.S. Airways, had reached a settlement with the Justice Department.

The 6.25% convertible notes due 2014 were pegged in a 135.5 to 136 range by a market source shortly before noon. That compared to previous trades with a 134 handle.

By day's end, the source saw the issue at 142 bid, 142.5 offered.

AMR's stock was meantime up as much as 33% in early trading in well-above-average trading volume. The equity finished the day up $2.48, or 26.05%, at $12.00.

Trading in U.S. Airways' stock was halted.

In August, the Justice Department filed an anti-trust lawsuit against AMR and U.S. Airways over their plan to merge - a key component to AMR's bankruptcy plan. Chatter has been going on for weeks that the parties would come to some sort of settlement, which was expected to include giving up slots at Reagan National Airport in Washington, D.C.

Under the terms of the settlement, the airlines will give up 104 flight slots at Reagan and another 34 at LaGuardia Airport in New York. Slots will be lost - though not in such high a quantity - at five other airports as well.

"We have doubted ever since [Justice initially filed the lawsuit on Aug. 13] that the case would even go to trial given our view that Justice will struggle to produce arguments sufficient to convince a judge, especially given that AMR and U.S. Airways offer far less competitive overlap versus all three previous airline mergers that Justice approved," wrote Gimme Credit LLC analyst Vicky Bryan in a report released Tuesday afternoon.

"Moreover, we have argued that blocking the merger is actually harmful - to AMR's bankruptcy progress, its employees, creditors and other stakeholders, and [sic] well as consumers and the airline industry - and that Justice's efforts to block this seemingly less conflicted merger versus the previous mergers it supported could arguably be anti-competitive."

Hologic active

A trader said that Hologic Inc.'s 2% convertible notes due 2037 had decent trading during the day's session.

"For a name that typically doesn't trade a lot, it was pretty active," he said.

He pegged the issue in a range of par to 100.32.

The stock meantime fell $2.39, or 10.43%, to $20.51.

The trader noted that the issue is putable next month. The put comes on Dec. 13, and the company can then redeem the bonds on Dec. 18.

The women's health company reported earnings late Monday, showing sales of $622.1 million for the fiscal fourth quarter ended Sept. 28. That was a 6% increase year over year.

Profit increased to 39 cents per share.

However, Hologic also said that it expected its fiscal 2014 revenue to decline by 1% to 3% to $2.425 billion to $2.475 billion. Earnings per share forecast came in at $1.32 to $1.38.

After the numbers, the company saw its stock downgraded to hold by William Blair, Craig-Hallum, Canaccord and RBC Capital Markets.

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