Convertibles sell off lightly; AMD, Intel, EMC a little weaker; Wesco exchange paper gains

By Rebecca Melvin

New York, Aug. 31 - Convertibles concluded the last day of August with a light sell-off on Monday, but considering weakness in stocks and commodities also in the session, it was not all that noteworthy, and generally quiet, market players said.

Many names in trade were a continuation of those trading last week - which had strengthened generally in that timeframe but were a little weaker on Monday.

Advanced Micro Devices Inc. convertibles, which were active in trade Friday and stronger, started Monday by continuing to move up, but they ended a little lower along with their underlying shares.

"AMDs continued to move," a New York-based sellsider said.

The AMD 6% convertibles due 2015 traded 0.25 point higher than Friday at 67.25, but then they traded well below that mark. Nevertheless, they still ended the session at 66.75 bid, 67.25 offered, the sellsider said.

Intel Corp.'s new 3.25% convertibles, which were also active on Friday after the chip maker raised its forecast, were also off on Monday by less than half a point.

EMC Corp., also active last week, saw continued trade of its two sister convertibles, with pricing off by between 0.5 point to 1.5 points.

Wesco International Inc., which concluded an exchange offer of two old convertible issues for one new issue, saw the new 6% paper trade between 109 and 110.75.

The old Wesco 2.625% convertibles due 2025, of which about 86% was tendered, also traded at 97, which was indicated about 0.5 point better than previous levels.

Primary quiet

The primary market was silent again, marking the continuation of a quiet period through much of the month.

During August only two issues priced, including Onyx Pharmaceuticals Inc., which sold a $230 million offering, and Rayonier TRS Holding (Rayonier Inc.), which priced $172.5 million in the primary market.

But there was other new paper in the market, however. E*Trade Financial Corp., which swapped straight debt maturing in 2011 and 2017 for 0% convertibles due 2019, saw its new convertibles in trade.

Because of the route by which the new E*Trade convertibles found their way to the secondary market, they were not considered a new issue by most.

"They didn't attract new funds; they just replaced straight paper," a New York-based sellside analyst said.

On Monday, the Dow Jones Industrial Average dropped 47.69 points, or 0.5%, to 9,496.28; while the S&P 500 shed 8.31 points, or 0.8%, to 1,020.63. The Nasdaq Stock Market fell a greater 19.71 points, or nearly 1%, to 2,009.06.

The month may have ended on a down beat, but the S&P 500 index was still up 3.4% for the month overall.

AMD, Intel a little weaker

AMD's 6% convertibles due 2015 managed to mostly hold onto their gains notched last week, ending the session at 66.75 bid, 67.25 offered, compared to 67 on Friday and 64 on Thursday.

AMD 5.75% convertibles due 2012 ended at 80.25, compared to 80 bid, 81 offered on Friday.

The paper trades mostly outright and is not compared to its share price. But its shares ended down 11 cents, or 2.5%, at $4.36.

The Semiconductor Industry Association reported that global chip sales fell 18% year over year in July but were up 5.3% from June.

"The fifth consecutive month of sequential increases in semiconductor sales reflects improving demand in the consumer sector," SIA president George Scalise said in a statement.

The latest price catalyst followed on the heels of Intel raising its third-quarter revenue and gross margin forecast, citing stronger-than-expected demand for microprocessors and chipsets, on Friday.

The new Intel 3.25% convertibles traded at 106 versus a share price of $20.20, compared to 106.25 versus a share price of $20.30 on Friday.

Shares of the Santa Clara, Calif.-based chip maker managed a 7-cent gain, or 0.35%, to $20.32.

Wesco trades near 110

Wesco's 6% convertibles due 2029 traded at 109.75 versus a share price of $24.00, according to a sellside desk analyst. Shares of the Pittsburgh-based distributor of electrical construction products and supplies settled down 93 cents, or 3.7%, at $24.03.

"These just came out," a sellsider said of the 6% paper. "Right after the exchange came out, I was fairly busy in it with the initial pop of 13 points. I was busy for about three days, and then it got quiet again."

Wesco said last week that it had received tenders for all of its $300 million of 1.75% convertible senior debentures due 2026 and $129 million, or 86%, of its 2.625% convertible senior debentures due 2025.

It accepted all of the 1.75% debentures and about $57.7 million of the 2.625% debentures, resulting in a proration factor of 44.7%.

In exchange for the tendered convertibles, Wesco issued $345 million principal amount of its new 6% convertible senior debentures due 2029. Holders also received accrued interest of $3.1 million in cash.

The company noted on Aug. 21 that the initial conversion price for its new 6% convertibles will be $28.8656, which is 125% of the average volume-weighted average price of the company's stock for the 10 trading days that ended Aug. 21.

The conversion ratio is 34.6433 shares per $1,000 principal amount of debentures.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

EMC Corp. NYSE: EMC

Intel Corp. Nasdaq: INTC

Wesco International Inc. NYSE: WCC

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