Patriot coal announces production cuts; coal sector suffers; Amgen 'big trading name'

By Stephanie N. Rotondo

Portland, Ore., Jan. 13 - The convertibles market was "better for sale" on Friday, a trader said.

While the trader noted that volume was "average at best," he also commented that of the things that traded, they "did not trade at a discount, which is a good sign in this environment."

"[The market] keeps creeping higher," said another trader. "That's certainly better than creeping lower."

Still, the trader also wondered if the upward momentum was "warranted," adding that the gains seemed to indicate "too many people involved and not enough product."

The coal space came under some pressure after Patriot Coal Corp. said that it was cutting back its coal production. Still, a trader said that coal convertibles "held up pretty well" - though were still weaker - but coal stocks got clobbered.

One of the most actively traded names of the day was Amgen Inc., according to another trader. He said that volume in the name accounted for at least 20% of total trading volume and that the convertibles were firming, even as the stock was declining.

Coal space pressured

Early in Friday's session, Patriot Coal announced that it was cutting production at its southern West Virginia plants in an effort to respond to lower demand and deal with higher production costs.

"That weighed on the entire coal space," a trader said.

The trader saw the 3.25% convertible notes due 2013 falling a point to 94 bid, 94.5 offered.

The company's stock, however, really took a hit, falling $1.15, or 12.75%, to $7.87.

Alpha Natural Resources Inc. was also feeling the pressure, the trader said.

The 2.375% convertibles notes due 2015 ended at 93.5 bid, 94 offered, down from trading levels around 95.25 on Thursday.

And, the 3.25% convertible notes due 2015 slipped to 92.25 bid, 92.75 offered, down from 93.25 bid, 93.5 offered previously.

The company's stock closed down $2.36, or 10.47%, to $20.19.

In its announcement, Patriot Coal said that it was idling one mine and two subsidiary-operated production units at its Rocklick complex, as well as two contractor-operated mines in its Wells complex.

"Metallurgical coal demand has trended steadily downward in recent weeks, most notably in the export market," said Richard Whiting, president and chief executive officer, in a statement. "These production cuts, in conjunction with other cost-reduction measures being implemented concurrently, are aimed at lowering our mining costs, aligning production with identified sales, and preserving high-quality reserves for a stronger market."

Amgen trades strong

A trader said Amgen was a "big trading name" Friday, with total volume in the credit accounting for about 20% of total volume.

"It continues to march higher in spite of the stock going lower," he said, adding that such disproportionate moves did not make much sense.

He said the 0.375% convertible notes due 2013 were trading "north of 102."

The stock managed to gain slightly, rising 6 cents to $67.60 on Friday.

Buyers seek Digital River

Digital River Inc.'s 2% convertible notes due 2030 were up "a good 5 or 6 points," according to a trader, though there was no fresh news out.

"There's just more buyers than sellers," he said.

But while the convertibles were climbing higher, the stock was dribbling down.

The stock fell 52 cents, or 3.45%, to $14.57 on Friday.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Amgen Inc. Nasdaq: AMGN

Digital River Inc. Nasdaq: DRIV

Patriot Coal Corp. NYSE: PCX

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