Amkor splits ways with defaults cured; New River quiet despite drug OK; General Motors gains with stock

By Kenneth Lim

The convertible bond market was quiet on Monday, with Amkor Technology Inc. making the most impact as the company filed its long-delayed financial reports and eased fears of a default.

New River Pharmaceuticals Inc.'s closely held convertibles shrugged off a sharp rally in the stock after the company's attention deficit disorder received a tentative approval from the U.S. Food and Drug Administration.

General Motors Corp. saw modest outright gains as speculation about a possible proxy fight by shareholder Kirk Kerkorian allayed concerns that the billionaire investor may be selling his stake in the auto maker.

The bond market was closed for Columbus Day on Monday, and the holiday was reflected in the slow convertibles activity.

"It awfully quiet," a sellside convertible bond trader said. "It's a bond holiday. The bond market's closed today, no one's doing anything."

Amkor files, cures defaults

Amkor's 5% convertible due March 2007 jumped more than 5 points to approach par after the company filed its delayed financial reports and cured its defaults on its various debts.

The convertible traded at 98.50 against a stock price of $6.75 on Monday, climbing back to levels from a fortnight ago when the company sweetened a consent solicitation offer to bond holders. Amkor stock (Nasdaq: AMKR) closed at $6.76, up by 33.86% or $1.71.

Amkor's 2.5% convertible due 2011 was mostly unchanged outright but weaker on a dollar-neutral basis at 83 against a stock price of $6.60 as the filings ended hopes of getting additional consent fees from the company.

Chandler, Ariz.-based Amkor on Oct. 6 filed its financial results as it announced the conclusion of its internal stock options probe. The company will add $106 million in executive compensation costs, and said it did not find any evidence that its current managers intentionally misdated stock options grants.

The filings came a day after Amkor extended the deadline for its consent solicitation offer to Oct. 10, from the previous Oct. 5 deadline. Amkor terminated the consent solicitation, saying that the filings cure the alleged defaults, rendering consents unnecessary.

"I think it was a bit of a surprise that they filed this stuff," a sellside convertible analyst said.

A buyside convertible bond trader said the filings eased concerns about the company's liquidity that had been plaguing the 5% convertibles, which are Amkor's earliest maturing debt securities.

"It seems that their problems have been solved," the buysider said.

A sellside convertible bond trader noted that the filings were slightly negative for Amkor's other bonds and the 2.5% convertible.

"Those were trading up because people were hoping to collect on the consent fees, so I wouldn't be surprised if some people get hurt," the trader said. "I think many people were surprised that they could file on Friday. They just extended the consent deadline on Thursday, so people thought it meant they still needed more time."

New River shrugs off drug OK

New River's recently issued 3.5% convertible due 2013 was not seen trading on Monday despite a sharp increase in the stock following the tentative approval of the company's attention deficit disorder drug.

"They just don't trade," a sellside convertible bond analyst said. "It's a pretty new deal, and it looks like they were sold and put away."

Radford, Va.-based New River, a drugmaker, said late Friday that the U.S. FDA issued an approvable letter for attention deficit drug NRP104 for children. The approval is contingent on appropriate scheduling by the U.S. Drug Enforcement Administration. NRP104 is seen as the successor to Adderall XR, the current attention deficit drug by Shire Plc., New River's partner on NRP104.

New River stock (Nasdaq: NRPH) rose 61.47% or $16.11 to finish the day at $42.32.

"This is obviously big for New River," a convertible bond analyst said. "This is the company's first drug, so it means the company's finally going to start making some revenue. ADHD is a sizable enough market, and Adderall is going to face generic competition in a few years, so there's also hope that Shire will aggressively market the new drug."

"Having said that, I don't know if most of the optimism is already in the stock today," the analyst said. "And I haven't seen the convertibles trade, although whoever bought it when it issued is probably going to be happy."

A buysider, who did not get involved in the convertibles when they were issued in July but said, "I wish I did," noted that the paper likely ended up with a small number of investors.

"They're put away in pretty secure hands," the buysider said.

General Motors gains with stock

General Motors' convertibles were slightly higher in line with the stock on Monday after reports emerged of a possible proxy fight to be waged by activist investor Kirk Kerkorian.

General Motors' 5.25% convertible due 2032 (NYSE: GBM) gained about 0.09 point to end at 19.50 against a $31.60 stock price. The 6.25% convertible due 2033 (NYSE: GPM) last traded at 22.20 versus a stock price of $31.50, up by 0.19 point. The General Motors 4.5% convertible due 2032 (NYSE: GXM), which may be put in March 2007, also improved slightly outright, ended at 24.75 against a $31.50 stock price.

General Motors stock (NYSE: GM) closed at $31.53, up by 1.55% or 48 cents.

"There's been some reports that Kerkorian may try to gain better control of GM's board," a sellside convertible bond trader said. "Last week some of the concern, for shareholders, was that he may want to sell his shares."

Kerkorian, whose investment firm Tracinda Corp. owns 9.9% of General Motors stock, said last week it no longer wishes to buy an additional 12 million shares after the Detroit auto maker's directors rejected a proposed three-way alliance with Renault-Nissan. Kerkorian had suggested the partnership earlier in the year. Kerkorian's nominee, Jerry York, also resigned from General Motors' board after alliance discussions ceased.

But several equity analysts on Monday suggested that Kerkorian will continue to take an interest in General Motors' affairs.

"We would not be surprised to see an eventual proxy fight and/or increased scrutiny of GM's future board decisions," Calyon Securities' Joseph Amaturo wrote in a note.

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