Central European Media drops as shares plunge; Teleflex edges up on hedge; Volcano steady

By Rebecca Melvin

New York, Oct. 30 - Central European Media Enterprises Ltd.'s 5% convertibles changed hands at a surprisingly resilient 88 and also a little bit lower on Wednesday despite a rattling regulatory filing in which the company said it will need additional capital sometime in the next 12 months to meet its debt service obligations and fund operations. The company also reported a disappointing quarterly loss. Shares plummeted 54%.

The company's convertibles traded at 88, and also lower at 86, on Wednesday compared to a trades around 90.5 and as high as 96 on Tuesday.

Convertibles players were also reacting to other earnings reports on Wednesday, with the Teleflex Inc. 3.875% convertibles due 2017 trading higher on both an outright and a dollar-neutral, or hedged, basis after the Limerick, Pa.-based medical device maker reported positive earnings that beat estimates.

Volcano Corp.'s convertibles were seen as steady, or flat on a dollar-neutral basis, a day after shares of the San Diego-based medical-device maker fell on the company's disappointing guidance update.

Elsewhere, AMR Corp.'s benchmark 6.25% convertible notes due 2014 rose to 125 on "jaw-boning" regarding a potential settlement with the Justice Department, which had previously filed an anti-trust lawsuit against the bankrupt airline and its merger partner, U.S. Airways.

The U.S. primary market was quiet for the third day this week.

The Federal Open Market Committee concluded a two-day policy meeting with a statement that it is holding steady on its $85 billion-a-month bond-buying program and leaving rates unchanged, as it revealed few new signals about when officials might be expected to taper the program or how they see the economic outlook changing.

In September, the Fed surprised the market by deciding to hold steady on its $85 billion per month in asset purchases despite months of discussion around a framework for starting to taper by the end of this year and concluding asset purchases around midyear 2014.

Equities were modestly lower, ending near their lows for the session. The Nasdaq stock market lost 21.72 points, or 0.6%, to 3,930.62; the S&P 500 stock index shed 8.64 points, or 0.5%, to 1,763.31; and the Dow Jones industrial average gave back 61.59 points, or 0.4%, to 15,618.76.

CEM drops

Central European Media's 5% convertibles due 2015 were initially quiet but changed hands at 88 on Wednesday, and also at 86. That compared to trades at 90.375 and 90.875 and as high as 96 on Tuesday.

The bonds "traded into a dealer bid at 96 yesterday," a New York-based trader said, adding that he was surprised the paper traded on Wednesday as high as 88. Before that print was seen, he said "I'd be shocked if they next traded over 80. I'm sure there are plenty of offers searching for bid."

Shares of the Hamilton, Bermuda-registered company fell $3.29, or 54%, to $2.82.

The trader said it was the regulatory filing of the company, which is partially owned by Time Warner Inc., that revealed the company needs new financing or will be unable to service its debt and pay for operations, that was the focus of market players.

"This isn't about a maturity. It's about paying interest," the trader said.

The central and eastern European TV broadcaster also reported a loss for its latest quarter and cut its 2013 outlook, citing a weak Czech Republic market.

The company said that its full-year outlook is for a loss of between $40 million and $30 million and it expects revenue for the year of between $640 million and $650 million. It expects negative free cash flow of about $140 million and forecasts a cash balance of about $60 million for the year.

Teleflex adds slightly

Teleflex's 3.875% convertibles due 2017 traded late in the session at 153.5 with the underlying shares up at about $91.35. The bonds also traded during the session at 152.5, 153 and 154. Previously, the bonds were seen around 147 to 147.875.

The bonds were seen up a small amount on a dollar-neutral, or hedged, basis, according to a trader. But the stock ended near its highs for the session, up $4.14, or 4.7%, to $91.54, so the hedged improvement would have been slight.

"TFX is up small on a nuke," the trader said.

Teleflex, with a market capitalization of $3.75 billion, said its third-quarter adjusted earnings were up 27% at a better-than-expected $1.33 per share, and that the company was raising its full-year earnings estimates to between $4.85 and $5.00 per share.

The company also revised its revenue outlook after third-quarter revenue came in below expectations due in part to weakness in sales of its OEM and respiratory therapy products. The company now expects continued weakness in the performance of those product lines in the fourth quarter as well slower revenue in Asia in the fourth period than previously anticipated due to the timing of certain distributor negotiations that are progressing at a slower than originally expected pace.

Volcano flat to better

Volcano's 1.75% convertible due 2017 traded flat on the day at around 97 to 98 and also higher to 101 and change. Volcano shares ended down 82 cents, or 3.9%, at $20.13.

A trader said they were "flat on a nuke."

The bonds fell from about 105 to 98 on Tuesday after the company updated its third-quarter, full-year and 2014 revenue guidance to below estimates.

Stephanie Rotondo contributed to this report

Mentioned in this article:

AMR Corp. Pink Sheets: AAMRQ

Central European Media Enterprises Ltd. Nasdaq: CETV

Teleflex Inc. NYSE: TFX

Rayonier Inc. NYSE: RYN

Volcano Corp. Nasdaq: VOLC

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