Convertibles quiet; Massey lower, but better dollar neutral; Micron, Navistar extend gains

By Rebecca Melvin

New York, Dec. 24 - The convertible bond market was mostly quiet again on Thursday as thinly staffed trading desks shut early on Christmas Eve in tandem with other financial markets. Markets will remain closed on Friday for Christmas.

The week's volumes in convertibles started out thin and tapered further as the holiday drew closer.

"There's nothing trading today except in odd lots," a Connecticut-based sellside analyst said Thursday.

Some of the less somnolent names included Massey Energy Co., which saw its convertibles a little lower, but better on a dollar neutral basis.

There was also some follow-through trading from earlier in the week. Micron Technology Inc. and Navistar International Corp. were in trade at higher levels along with their shares after both companies posted earnings that beat estimates this week.

Also continuing in trade were Amylin Pharmaceuticals Inc. convertibles, which remained steady on Thursday. Earlier in the week, the underlying shares took a hit related to a Citigroup analyst saying the Food and Drug Administration is requiring more studies on Amylin's Byetta diabetes drug for use as a stand-alone therapy.

Nortel Networks Corp. convertibles were also in trade, adding 6 to 8 points, on news that the bankrupt Toronto-based telecommunications equipment manufacturer settled a U.S. tax bill on favorable terms of less than 2 cents on the dollar. Nortel also announced another asset sale, as well as a funding agreement for intercompany claims among Nortel and its subsidiaries.

Generally, convertibles have been following stocks higher during the week. The equity markets have been notching steady gains throughout the four days, albeit in light volume.

A chart of the Dow Jones Industrial Average was "a ski slope. It went straight up," a sellsider said.

On Friday, the Dow rose 53.66, or 0.5%, to 10,520.10. The Standard & Poor's 500 index rose 5.89, or 0.5%, to 1,126.38, and the Nasdaq composite index rose 16.05, or 0.7%, to 2,285.69.

The markets closed at 1 p.m. ET Thursday and were to remain closed Friday. Trading has been light throughout the week heading into the holiday, which can exaggerate swings in stock prices.

Massey adds dollar neutral

Massey's 3.25% convertibles due 2015 traded on Thursday at 87.5 versus a share price of $43.85. Trace data later had the paper last at 86.897, which was down 3 points.

But the convertibles were up about a point dollar neutral, a Connecticut-based sellside analyst said.

"We had them last marked on the 21st at an ask of 85.75 versus $41.34. That nukes a little lower at 86 versus the $43.85," the sellsider said.

Shares of the Richmond, Va.-based coal producer slipped 8 cents to $43.76 in extremely light volume on Thursday. But the shares in general had been gently riding up in the past week along with the broader market.

Massey's 2.25% convertibles due 2024, which are callable/putable in a little over a year in April 2011, traded at 75 on Thursday.

Micron edging higher

Micron's 4.25% convertibles extended gains above double par to trade at 211 Thursday, compared to 207 on Wednesday and 196.5 on Tuesday on earnings.

The Micron 1.85% convertibles due 2014 were up another point at 95.113 from 94.2, according to Trace data.

Shares of the Boise, Idaho-based maker of DRAM and NAND flash memory gained another 1.7%, or 17 cents, to $10.16, another 52-week high, after jumping 6% on Wednesday.

Micron reported a fiscal first-quarter profit of $204 million, or 23 cents a share, compared with a loss of $718 million, or 93 cents a share, in the year-earlier period.

Revenue was up 23% to $1.74 billion from $1.40 billion as improving demand and rising prices for memory chips helped the company post its first quarterly profit in more than two years.

Analysts had expected Micron to report earnings of 6 cents a share on revenue of $1.6 billion.

Navistar climbs

Navistar's 3% convertibles due 2014 traded at 106.74 on Thursday, which was up more than a point from 105 on Wednesday.

On Wednesday, the convertibles traded at 104 versus a share price of $38.50, and on Dec. 14, Navistar converts traded at 100 versus a share price of $36.01 on a 70% delta.

Shares of the automotive manufacturer on Thursday were up another 53 cents, or 1.3%, to $40.62, which was up $5 from Monday's close.

The company reported earnings and revenue on Monday that beat analysts' expectations, with fiscal fourth-quarter profit rising to $86 million, or $1.19 a share, which compares to a loss of $343 million, or $4.81 a share, during the fourth-quarter last year.

Revenue slid 15% to $3.29 billion.

Adjusted earnings per share came to $1.99, beating analyst expectations for earnings of $1.52 a share on revenue of $3.09 billion.

Mentioned in this article:

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

Massey Energy Co. NYSE: MEE

Micron Technology Inc. NYSE: MU

Navistar International Corp. NYSE: NAV

Nortel Networks Corp. NYSE: NT

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