Selling hits convertibles: ON Semi drops, Micron, AMD weaker; Smithfield slips; Medtronic quiet

By Rebecca Melvin

New York, Feb. 17 - Selling hit the convertibles market - mostly in line with similar action in equities - making a more active than usual session for a Tuesday following a three-day holiday weekend, sources said.

Stock markets were indicated to open lower at the outset and they did, one sellside desk analyst noted, citing weakness in markets in Europe and Japan amid concerns of global economic slowing.

Later in the United States, the stock markets closed near their lows of the day after a brief bump up late in the afternoon during president Barack Obama's speech upon signing the sweeping $787 billion economic stimulus bill into law.

Obama said the recovery package was the product of broad consultation and support and that it would create or save 3.5 million jobs, including 400,000 jobs that would help rebuild American infrastructure.

"It's putting Americans to work doing the work that America needs done," Obama said during his speech in Colorado.

Meanwhile, financial sector names showed that a lack of faith in measures taken to stem the crisis continue to grip investors. Bank of America Corp. series L convertible preferreds fell to 320 from 350.

The S&P 500 index fell 37.67, or 4.56%, to 789.17 Tuesday, which was below 800 and viewed as a key technical level.

Crude oil prices fell, but gold rose.

A handful of tech names traded weaker. Advanced Micro Devices Inc. came off recent highs. Micron Technology Inc. continued to weaken from last week in line with its equities. And ON Semiconductor Inc. fell about 5 points to end at 63.5 from early trades at 69.

Smithfield Foods Inc. convertibles traded lower but held up better than their underlying shares after the nation's largest pork producer said that it would cut jobs and close plants as part of a restructuring to respond to slumping meat sales.

The company plans to combine seven of its independent operating companies into three main units and close six plants.

Sirius XM Radio Inc.'s convertibles jumped on news that Liberty Media Corp. will lend $530 million to the ailing satellite radio provider and block a bid for control from Dish Network Corp.

Medtronic Inc. was quiet despite better-than-expected earnings that boosted its shares, and automakers General Motors Corp. and Ford Motor Co. weren't heard in trade ahead of filing their recovery plans.

Tech names ease in trade

Convertibles players rediscovered a handful of technology names that hadn't been seen in trade for a while.

ON Semiconductor's 2.625% convertibles due 2026 traded at 69 versus a share price of $4.35 and were later seen closing at 63.5 versus a share price of $3.73.

Shares of the Phoenix-based semiconductor company fell 62 cents, or 14.25%.

Meanwhile, Boise, Idaho-based semiconductor company Micron Technology saw further weakness in its convertibles.

The Micron 1.875% convertibles due 2014 traded at 40 versus a stock price of $3.25, compared to 45 versus a share price of $4.00 last Monday. They were cited midweek last week in the 42.5 range.

Shares of the company lost 43 cents, or 11.5%, on Tuesday, settling at $3.30.

Last week there was news that the company was looking to consolidate with its DRAM competitors in Taiwan.

AMD, which has been on a tear upward of late, saw its 6% convertibles due May 2015 trade lower to 36.4 from 37.4. Shares of the Sunnyvale, Calif.-based company slipped 5 cents, or 2%, to $2.37 in average volume.

Smithfield eases on restructuring news

Smithfield Foods' 4% convertibles due 2013 traded at 68 versus a share price of $9.00 and were seen settling between 67.5 and 68, with the share price at $8.87. Shares of the Smithfield, Va.-based meat producer and packager ended down 70 cents, or 7.3%.

The company announced a restructuring plan for its pork group, which it said would result in about $125 million in annual cost savings by fiscal 2011. The initiative involves reducing its independent operating companies to three from seven.

The company expects the restructuring plan will result in cost savings of about $55 million in fiscal 2010 and $125 million by fiscal 2011.

Medtronic quiet

The Medtronic convertibles weren't seen in trade but were indicated at 95 versus a share price of $35.00 for Medtronic's 1.5% convertibles due April 2011 and at 90 versus a share price of $35.00 for the Medtronic 1.625% convertibles due April 2013, according to a New York-based sellside desk analyst.

Shares of the Minneapolis-based medical device maker gained $1.75, or 5.3%, on the day.

The company said its third-quarter earnings surged to $723 million compared with profit of $77 million in the year-earlier period when lawsuit charges and acquisition costs were a drag on results.

Revenue rose 3% to $3.49 billion from $3.41 billion amid a 10% jump in cardiovascular unit sales and a 4% drop in cardiac rhythm sales, the company said.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Bank of America Corp. NYSE: BAC

Ford Motor Co. NYSE: F

General Motors Corp. NYSE: GM

Medtronic Inc. NYSE: MDT

Micron Technology Inc. NYSE: MU

ON Semiconductor Inc. Nasdaq: ONNN

Smithfield Foods Inc. NYSE: SFD

Sirius XM Radio Inc. Nasdaq: SIRI

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