Intel, Medtronic convertibles top traders in quiet market; Electronic Arts trades in line

By Rebecca Melvin

New York, Nov. 6 - The convertible bond market was quiet Tuesday as equity markets surged with all eyes focused on the nail biter which is the U.S. presidential election, market players said.

Among names that traded were Intel Corp., Medtronic Inc. and Lam Research Corp., which are high-credit-quality names with liquid convertible issues that are typically traded on a daily basis. Overall, however, volume was light.

Electronic Arts Inc. was also trading and a little higher in line with the underlying shares of the Redwood City, Calif.-based videogame publisher. Those shares have been trending higher in recent sessions.

The Interpublic Group of Cos. Inc. was in trade and essentially flat as shares wavered but ended 1% higher on the day.

Walter Investment Management Corp.'s convertibles extended losses along with shares of the Tampa, Fla.-based asset manager and mortgage services and portfolio owner, which have dropped 15% in the past week.

Equities rallied on Election Day. When asked what was behind the rally, traders referred to rumors circulating that governor Mitt Romney was winning the presidential race underway.

"We are hearing different types of things. Some people are thinking Mitt Romney will win and end QE3," a New York-based trader said.

The Dow Jones industrial average rose 133.24 points, or 1%, to 13,245.24, the S&P 500 stock index gained 11.13 points, or 0.8%, to 1,428.39, and the Nasdaq composite stock index added 12.27 points, or 0.4%, to 3,011.93.

Electronic Arts up in line

Electronic Arts' 0.75% convertible notes due 2016 traded at 92 late in the session, while the underlying shares of the low-delta name added 56 cents, or 4.3%, to $13.76 in active trade.

The Electronic Arts convertibles had been trading at 91 bid, 92 offered, and they trade on about a 25% delta, a trader said.

"It looks in line to me," the trader said of pricing on those convertibles, adding that the company is a solid credit with plenty of free cash.

"They have $1.3 billion in cash and $550 million in debt. It's a boring name," the trader said.

A week ago, Electronic Arts reported fiscal second-quarter earnings excluding one-time items of 15 cents a share, which beat the 11 cent per share forecast.

Revenue was $711 million for the quarter ended Sept. 30, compared to $715 million in the same period a year earlier.

But the videogame publisher guided third-quarter earnings below expectations after one of its titles, "Medal of Honor: Warfighter," received a tepid response upon release.

The company's third-quarter earnings were seen in a range of 50 cents to 60 cents, which was lower than the 71 cents forecast by analysts.

Walter extends losses

Walter Investment's 4.5% convertibles due 2019 traded down to 103.855 on Tuesday, which was down from trades of more than 104 on Monday, according to Trace data.

Walter shares were down another $1.74, or 4%, to $40.98, after losing 7.4% on Monday.

"The market is giving a beating to this guy," a New York-based trader said referring to the underlying shares.

The bonds have a theoretical delta of 70%.

The $265 million issue of convertibles priced Oct. 18 and shot up on their debut to more than 104.

The company also priced a concurrent offering of common stock and said it has plans to offer $600 million of debt.

Mentioned in this article:

Electronic Arts Inc. NYSE: EA

Intel Corp. Nasdaq: INTC

Interpublic Group of Cos. Inc. NYSE: IGP

Lam Research Corp. Nasdaq: LRCX

Medtronic Inc. NYSE: MDT

Walter Investment Management Corp. NYSE: WAC

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