Vornado up; Intel regains footing; Countrywide, ADM slip, American Water set to issue equity; market slowing

By Evan Weinberger

New York, Aug. 29 - Vornado Realty Trust and Intel Corp. convertibles moved upward Wednesday, with Intel regaining its footing after a slide Tuesday. Countrywide Financial Corp. convertibles continued their slide and Archer-Daniels-Midland Co. convertibles also moved down. Newmont Mining Corp. was also active as rumors of a takeover swirled Wednesday.

Market activity began to slow as players began trickling out for the coming long weekend.

"I feel like it's getting a little slow," one analyst said. "It's slower than last week. I imagine tomorrow's going to be a little slower and Friday's just going to be one of those dead days."

While no new issues came to market Wednesday, two companies announced their intentions to issue new convertibles early in the day.

The more notable of the two was American Water Works Co. Inc., a Voorhees, N.J.-based water utility, which plans to price $500 million in equity units due 2012. The deal is part of a larger package linked to its spinoff from a German utility.

Coming in from Malaysia is YTL Cement Bhd., which is based in the country's capital, Kuala Lumpur. YTL plans to price $200 million in exchangeable bonds due 2012. There was no word on when they would price or talk of coupons or conversion premiums because the company is still choosing a bookrunner for the Regulation S transaction.

Trading in equities markets was up after word of a letter from Federal Reserve chairman Ben Bernanke to Sen. Charles Schumer (D-N.Y.) came out. In the letter, Bernanke says Fed policy makers are "prepared to act as needed" if stock market volatility continues. Market watchers and investors took the letter as a sign that the Fed will lower the benchmark federal funds rate at its next meeting on Sept. 18.

In response, the markets soared, albeit on low volume. Bargain hunters surfaced, perhaps hoping to buy while stock prices were low so they could be in on the ground floor of a rally if the federal funds rate is cut in the middle of next month.

The Dow Jones industrial average regained most of what it lost Tuesday, picking up 247.44 points, or 1.9%, to close at 13,289.29.

The Nasdaq was the big winner on the day, gaining 62.52 points, or 2.5%, with a close at 2,563.16. The Standard & Poor's 500 ticked up 31.40 points, or 2.19%, Wednesday.

Low volume, though, tends to exacerbate even the slightest moves, and market watchers weren't putting much into Wednesday's jump. "The market is so thin, with so many participants out or sitting on the sidelines that I don't think you can read very much into today's move," one analyst said.

American Water convertibles coming with IPO

As part of German utility giant RWE AG's move to divest itself of water operations in the United States and the United Kingdom, American Water Works, which provides water services in 32 states and one Canadian province, plans to issue $500 million in equity notes due 2012 as part of its initial public offering. RWE AG's move was announced in December 2006.

American Water did not announce when the equity units would price or when the shares of common stock set to be released at the same time as part of the IPO would be issued. The company announced that the proceeds would go toward repaying recent commercial paper borrowings. The balance of the net proceeds will be used for general corporate purposes.

Wednesday's winners

Three issues from New York-based real estate investment trust Vornado picked up some value Wednesday. The REIT's 3.875% exchangeable senior debentures due April 15, 2025 moved up to 123.625 versus a closing stock price of $103.65. They had finished Tuesday at 121.125 versus a stock price of $100.56.

Vornado's 2.85% convertible senior debentures due April 1, 2027 moved up to 92.375 versus a stock price of $103.65 on Wednesday. They had closed Tuesday at 90.875 versus a $100.56 share price.

And the REIT's 3.625% convertible senior debentures due Nov. 15, 2026 closed at 96.25 versus a share price of $103.65 on Wednesday. They closed Tuesday at 94.625 versus a stock price of $100.56.

Vornado stock (NYSE: VNO) stretched $3.09, or 3.07%, Wednesday.

Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 regained ground they lost Tuesday. The convertibles finished trading Wednesday at 101 versus a stock price of $25.09. They dropped to 98.5 versus a $23.96 share price on Tuesday.

Santa Clara, Calif.-based semiconductor producer Intel's stock (Nasdaq: INTC) gained a fat $1.13, or 4.72%, on Wednesday.

Countrywide, ADM headline downers

Calabasas, Calif.-based mega-mortgage lender Countrywide saw both of its existing convertibles continue to slip Wednesday as concerns persist over housing. Reports of Countrywide chief executive officer Angelo Mozilo cashing out his stock when the company was riding high also continued. And the previously mentioned Schumer called on Countrywide to halt some of its more aggressive lending practices.

All of this added up to Countrywide's Libor minus 350 basis point series A convertible senior debentures due April 15, 2037 slipping to 91 versus a closing stock price of $19.81. They were last seen Thursday at 93 versus a stock price of $22.02.

Countrywide's Libor minus 225 bps series B convertible senior debentures due April 15, 2037 closed Wednesday at 88.5 versus a stock price of $19.81. They were last seen Thursday at 91.5 versus a $22.02 share price.

Countrywide stock (NYSE: CFC) actually picked up 50 cents, or 2.59%, on Wednesday.

ADM saw its 0.875% convertible senior notes due Feb. 15, 2014 slip to 94 versus a share price of $32.91. The Decatur, Ill.-based agricultural behemoth saw its convertibles close at 94.625 versus a share price of $32.09 on Wednesday.

ADM stock (NYSE: ADM) moved up 82 cents, or 2.56%, Wednesday.

Newmont Mining's two tranches of convertibles were active Wednesday after Canada's Barrick Gold Corp. denied it was considering a takeover of the Denver-based gold miner. But the convertibles were still off from their highs of a couple of weeks ago.

The company's 1.25% convertible senior notes due July 15, 2014 closed at around 106.25 versus a closing stock price of $41.68. They had been trading as high as 107 in early August.

Newmont's 1.625% convertible senior notes due July 15, 2017 closed at around 107.5 versus stock price of $41.68.

Newmont stock (NYSE: NEM) picked up 61 cents, or 1.49%.

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