Countrywide continues slide; Thornburg up; ImClone drug sparks investor hopes; Nabi trades big, if not much

By Evan Weinberger

New York, Sept. 11 - Trading Tuesday focused on financials, specifically Countrywide Financial Corp. and Thornburg Mortgage Inc., and technology-related convertibles, with moves for ImClone Systems Inc., Nabi Biopharmaceuticals and Intel Corp. hogging the spotlight.

Convertibles trading volume picked up some Tuesday. That matched a more positive tone in the apparently manic depressive equity markets. Stocks broke into the open field with some positive economic news and the fervent belief that a Federal Reserve interest rate cut next week is a fait accompli. The Commerce Department reported a slight narrowing of the trade deficit in July, and OPEC said it would increase oil production.

The Dow Jones Industrial Average continued its extreme volatility, closing up 180.54 points, or 1.38%, for a close at 13,308.39.

The Nasdaq closed at 2,597.47, a gain of 38.36, or 1.50%. The Standard & Poor's 500 also had a strong day, adding 19.79 points, or 1.36%, Tuesday to close at 1,471.49.

But market watchers had no real sense why convertibles trading sped up Tuesday. "It's later in the week," one trader said. "You got the Jewish holidays coming up, maybe guys just wanted to get something done."

No new issues in the U.S. market were announced as of press time Tuesday, continuing what has been a blocked new issues market. But coming in from the sunny Iberian Peninsula, Banco Santander SA, based in Santander, Spain, appears to be ready to price its €5 billion in convertible bonds due 2012 in the coming days, according to a market source. The proceeds are set to be part of the competition for Dutch banking giant ABN Amro NV.

And from Canada, Sterling Shoes Income Fund priced C$25 million in convertible unsecured subordinated debentures due Oct. 31, 2012. The bought deal, with CIBC World Markets Inc. leading the bookrunning syndicate, carries a 6.5% coupon and a $21.15 conversion price, which works out to an approximately 17.8% initial conversion premium.

Sterling Shoes plans to use the proceeds to pay back existing debt, for store expansion and for general corporate purposes. The company is a Vancouver, B.C.-based shoe retailer.

Banco Santander readies financing

With new issuances slowing in recent weeks, only two types of companies have been bringing new issues to market: those that have a specific acquisition in mind and those in a heap of trouble. Europe's second-largest bank, Banco Santander, falls into the former category. A source close to the deal said Tuesday that the Spanish bank's €5 billion in convertible bonds due 2012 will price Wednesday and Thursday.

Banco Santander is part of a three-bank consortium, led by the Royal Bank of Scotland plc and including Fortis NV, which is attempting to purchase the Dutch bank ABN Amro for €71.7 billion. The proceeds from the convertibles offering will make up part of the financing for that deal.

The convertibles, which the bank's shareholders approved in June, are being talked at a 7.5% coupon for the first year, which will then move to a coupon of Euribor plus 275 basis points through their maturity. Talk has the initial conversion premium at 20%.

The source said that as of Tuesday morning the convertibles hadn't been registered with the appropriate stock market authority.

Banco Santander has committed to pony up €19.9 billion for its portion of the deal and will also sell assets and property to finance its portion.

According to Bloomberg, Santander will sell the convertibles to customers through its branches.

Countrywide, Thornburg active

Countrywide's convertibles are taking on water, even though trading hasn't been particularly heavy in the issues after the Calabasas, Calif.-based mortgage lender announced Friday night it was slashing up to 12,000 jobs. Reports surfaced Tuesday that America's largest home lender was looking for a similar financing arrangement to last month's $2 billion convertibles essentially private placement with Bank of America.

One trader called the talk a "major positive."

Other convertibles investors, on the other hand, were not quite as convinced. Countrywide's Libor minus 350 bps series A convertible senior debentures due April 15, 2037 closed Tuesday at 89.5 versus a closing stock price of $16.88. They closed Monday 89.75 versus a stock price of $17.21.

Countrywide's Libor minus 225 bps series B convertible senior debentures due April 15, 2037 closed Monday at 86.75 versus a stock price of $17.21.

Countrywide stock (NYSE: CFC) slipped a further 33 cents, or 1.92%, on Tuesday.

One recently battered mortgage company, Thornburg Mortgage, had some positive news Tuesday. UBS upgraded its rating on the Santa Fe, N.M.-based company to buy from neutral.

And that's just what investors did. Thornburg's 7.5% convertible redeemable preferred stock (NYSE: TMA-PD) climbed 85 cents, or 4.82%, to $18.50.

That was a little over Thornburg common stock's climb. The stock (NYSE: TMA) soared $1.08, or 8.79%, to $13.37 Tuesday.

Biotechs take a smooth ride up

ImClone Systems, the New York-based biopharmaceutical firm, announced that Erbitux, a colon cancer drug, was also successful treating lung cancer in a late-stage study.

That sent its stock and convertibles flying. ImClone's 1.375% convertible senior notes due May 15, 2024 closed at between 93.5 and 93.75 versus a closing stock price of $44.90.

A trader said the convertibles were up "a lot" on the day, although the trader couldn't spot an opening price on the Rule 144A convertibles.

ImClone stock (Nasdaq: IMCL) took a flying leap, gaining $6.97, or 18.38%.

Boca Raton, Fla.-based Nabi Biopharmaceutical also saw its convertibles make a rare move. But it was a big one. The company announced the sale of its Nabi Biologics division, which focuses on plasma protein production and blood plasma collection centers, to Biotest AG, a German firm, for $185 million before market open Tuesday.

Although Nabi's 2.875% convertible senior unsecured notes due April 15, 2025 didn't trade much, they did trade big. The convertibles closed at 84.084 versus a closing stock price of $4.23. They last traded Aug. 7, when they closed at 78.50 versus a stock price of $3.32.

Nabi stock (Nasdaq: NABI) gained 79 cents, or 22.97%, on Tuesday.

Finally, staying in the technology sector, at least tangentially, Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 closed at 104.625 versus a closing stock price of $25.66. They closed Monday at 103.625 versus a stock price of $25.35.

The Santa Clara, Calif.-based semiconductor producer saw its stock (Nasdaq: INTC) pick up 31 cents, or 1.22%, on Tuesday.

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