Navistar improves as shares come in; LDK Solar in trade; Petrominerales' stock price eyed

By Rebecca Melvin

New York, Aug. 11 - The convertible bond market was languid on Wednesday as summer vacations continued to diminish trading and investing activity amid negative sentiment in the broader markets.

Among convertibles trading, Navistar International Inc.'s bonds improved as their underlying shares fell 6% and volatility rose amid the weaker broader markets.

LDK Solar Co. Inc.'s convertibles were among the day's most active issues and were indicated steady as the underlying American Depository Shares fell 7% despite the Chinese solar power company's strong second-quarter earnings report and improved guidance.

Meanwhile, Henry Schein Inc.'s 3% convertibles that have been called were mostly quiet with continuing uncertainty regarding the redemption's 20-day averaging period. Henry Schein didn't respond to phone calls and an e-mail from Prospect News regarding clarification of the averaging period.

Equities slumped a day after the Federal Open Market Committee downgraded its view of the pace of economic growth as it announced a decision to keep rates unchanged and use proceeds from its mortgage bond investments to buy government debt.

Also weighing on market sentiment was economic data out of China, which reported that industrial production had slowed in July.

As for indications of where the markets head from here, traders eyed Cisco Systems Inc.'s after-hours trading action, which was sharply lower, after the technology giant reported its fiscal fourth-quarter and 2010 earnings.

Petrominerales shares lower

In the primary market, no new U.S. issues launched Wednesday.

Petrominerales Ltd., which launched an upsized $550 million of convertibles Tuesday, was still seen pricing Thursday even though the volume weighted average price of its shares was down and being watched to determine if the 10% discount trigger might cause the deal to be pulled.

The fact that the shares have been trading down was "a concern," a syndicate source said; but unlikely to require the deal to be pulled.

In the last two days, 8.6 million shares of Petrominerales traded on the Toronto Stock Exchange, bringing the VWAP down. Nevertheless, another 8.6 million shares would have to trade below C$26.10 for the deal to be pulled, the syndicate source said.

Investors in the Petrominerales Regulation S and Rule 144A deal were mostly offshore participants, but they did include both outright and hedged and European as well as U.S. players, the syndicate source said.

Due to the fact that the deal is based on Petrominerales' shares listed in Toronto, liquidity among U.S. players was expected to be limited, however, a New York-based sellsider noted.

Also in the primary market, Bergen Group ASA said it planned to sell NOK 120 million of convertible bonds, or about $20 million, which can be converted into 10 million Bergen shares, at NOK 12 per share, after nine months, according to a news release.

The 10-month bond loan will be divided into three tranches of NOK 40 million each. The last tranche will close Sept. 20, the release stated.

Navistar improves

Navistar's 3% convertibles due 2014 were seen trading at 113.5 bid, 114.5 offered versus a share price of $45.55 on Wednesday, which was lower outright compared to previous levels but improved compared to weaker shares.

The convertibles traded at the offer price, a sellsider said of the name.

Shares of the Warrenville, Ill.-based truck and bus maker fell $2.94, or 6%, to $45.55 on Wednesday.

The decline was likely a function of the transport sector being down significantly and not due to anything specifically related to Navistar, the sellsider said.

Overall, "the market is pretty ugly, quiet, apathetic," the sellsider said. "But Navistar held in pretty well."

LDK Solar active after earnings

LDK's 4.75% convertibles due 2013 were indicated to close at 90.5 compared to a previous level of 88, according to a pricing source.

Shares of the Xinyu City, China-based company fell 52 cents, or 7%, to $6.95.

The bond was ranked as the fifth most active convertible trading, according to Trace data at mid-afternoon.

Ahead of it were the convertibles of EMC, Medtronic, Transocean and Teleflex.

LDK reported late Tuesday that it earned net income of $45 million, or 36 cents per American Depositary Share, in the quarter that ended June 30. That compared with a net loss of $216.9 million, or $2.03 per ADS, due to a large write-down on declining inventory value in the year-ago quarter.

Revenue jumped to $565.3 million from $228.3 million. LDK Solar said it shipped 510.5 megawatts of solar wafers and 73.9 megawatts of modules during the quarter.

For the third quarter, LDK Solar estimated revenue in a range of $570 million to $600 million. Solar wafer shipments were expected to range between 520 megawatts and 550 megawatts while module shipments were expected between 75 megawatts and 85 megawatts.

Its 2010 revenue forecast was between $1.95 billion and $2 billion, which compares to analysts' estimates of $1.59 billion for the full year.

The analysts' revenue estimate was $422 million for the third quarter.

Mentioned in this article:

Bergen Group ASA Oslo: BERGEN

Henry Schein Inc. Nasdaq: HSIC

LDK Solar Co. Inc. NYSE: ADRs: LDK

Navistar International Inc. NYSE: NAV

Petrominerales Ltd. Toronto: PMG

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