Amgen trades mixed after lawsuit news; Kodak quiet but still losing ground; AMR extends slide

By Rebecca Melvin

New York, Oct. 30 - Convertibles players sold a bit of paper Friday before turning out their office lights to head out on the last day of the week, the last day of the trading month and the day before Halloween. It was also a day in which equities took a steep tumble that surprised some.

"I'm surprised it's going down this much after the GDP data yesterday," a New York-based sellside trader said of the equity markets.

Another sellsider said, "People are kind of paralyzed given this move down in the market. There were some decent sellers, but once the bids evaporated, everybody just sort of went home."

Stocks slid Friday after the Labor Department said that personal spending fell 0.5% in September, the largest drop in nine months - although it was in line with forecasts - and following a 1.3% jump in August.

On Thursday, equities had rallied after a surprisingly strong reading of 3.5% growth for third-quarter U.S. gross domestic product.

The Dow Jones Industrial Average slumped 250 points, or 2.5%, to 9,712.73; the S&P 500 index lost 30 points, or 2.8%, to 1,036.18; and the Nasdaq Stock index was down 52 points, or 2.5%, to 2,045.11.

Amgen Inc.'s two large, liquid convertible bond issues were mixed after news that the biotechnology giant is being sued by more than a dozen states, led by New York attorney general Andrew Cuomo.

Cuomo's office is alleging that Amgen gave kickbacks to medical providers to help boost sales of its Aranesp anemia drug, bribing doctors to bill Medicaid for free samples to encourage prescriptions and take sales away from competing drugs.

Eastman Kodak Co. bonds were mostly quiet at lower levels despite an unexplained pop in their underlying shares.

AMR Corp., which has been hit this week along with nearly all other transportation names this week, saw its 6.25% convertibles trade at 83 versus a share price of $5.50, which compared to 84 versus a share price of $5.60 on Thursday, and to 94.75 versus a share price of $6.70 last Wednesday.

Navistar International Corp.'s 3% convertibles, which debuted in the secondary market a week ago, were 94.375 bid in the market Friday, according to a sellsider.

Following Navistar and four other deals that priced in the convert market the week of Oct. 19, there was no issuance this past week.

"For the calendar, pretty much everyone was shooting for last week; and there were no issues this week. People are digesting those new issues," a New York-based sellside analyst said.

Amgen mixed

Amgen's 0.125% convertibles due 2011 traded last at 98.546, which was down 0.5 point to almost a point from previous levels, versus a share price of $53.62, which was down 1.2%.

Amgen's 0.375% convertibles due 2013 were last at 99.5, which was up about 0.5 point from previous levels.

The New York attorney general's office alleges that the Thousand Oaks, Calif.-based biotech encouraged medical providers to bill third parties, including Medicaid, for Aranesp. The lawsuit also alleges that Amgen conspired to offer kickbacks, including nonexistent consultancy deals to boost prescriptions of the drug.

An Amgen spokesman told Prospect News said the company believes the allegations are without merit. "We look forward to the opportunity to examine these matters with the states before the court," the spokesman said via e-mail.

"Because this lawsuit is now in litigation, we are limited in our remarks about matters pending before the court. Amgen has a solid compliance program and Code of Conduct called 'Do the Right Thing,' and we expect that all of our employees follow it at all times," the spokesman said.

Kodak quiet, still losing ground

Kodak's 7% convertibles due 2017 were seen at 79 bid, 80 offered Friday after they changed hands Thursday at 80 versus a share price of $3.50, which was unchanged from Wednesday but sharply lower from last week, when the bonds traded at 91 versus a share price of $4.15. A month ago, those bonds traded over par.

Shares of the Rochester, N.Y.-based photography and printing company surged 28 cents, or 8%, to $3.75.

A sellsider who deals in the name said he had no idea why the shares gained on Friday.

"Honestly it doesn't make any sense," he said.

Given where the stock was trading late Friday, it would mean the bonds should be at 83.5 bid, 84.5 offered, the sellsider said. But they hadn't climbed up with the shares.

Last week, the bonds slid with the shares after the company posted a third-quarter loss on declining sales.

Kodak said it expects its 2009 revenue decline to be closer to 18% but still in a range of 12% to 18%.

Its third-quarter net loss was $111 million, or 41 cents a share, compared with a year-earlier profit of $101 million, or 35 cents a share.

Excluding special items such as restructuring costs, the loss was 23 cents a share, missing analysts' expectations of a loss of 19 cents a share.

Revenue fell 26% to $1.78 billion, also falling short of analysts' estimates of $1.89 billion. The Rochester, N.Y.-based photography and printing company said revenue in its commercial printing group fell 18% to $674 million.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

AMR Corp. NYSE: AMR

Eastman Kodak Co. NYSE: EK

Navistar International Corp. NYSE: NAV

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