Trico Marine down; BorgWarner little changed; Rite Aid adds outright; gold names head higher

By Rebecca Melvin

New York, Feb. 18 - Trico Marine Services Inc.'s 8.125% convertible issue was among the top volume names in trade on Thursday.

Trico Marine's paper moved lower in continuation of a recent downtrend. However, the convertibles didn't drop as hard as the underlying shares after earnings reflected soft oilfield market conditions.

BorgWarner Inc. was another active name, but its convertibles were little changed in line with underlying shares.

Rite Aid Corp.'s convertibles were higher outright, but looked weaker on a hedged basis, as shares jumped after an analyst suggested the retail drug store chain is a potential takeover target.

RadioShack Corp. marked a contraction on the day on a hedged basis.

Meanwhile, a few gold names were in trade. Barrick Gold Corp. gained after the Toronto-based gold mining company posted a better-than-expected profit for the fourth quarter amid higher gold prices.

Barrick saw its Placer Dome 2.75% convertibles due 2023 go out at 162 versus a closing share price of $39.23.

Meanwhile, Kinross Gold Corp.'s 1.75% convertibles due 2028 traded essentially flat at 103.5.

On the whole, convertibles did "OK," one New York-based sellside trader said. But volume has been anemic with a lot of dealer-related trading as opposed to strict buyside activity.

A lack of new paper and a lack of catalysts might be contributing to light buyside activity, but one sellsider said it was worth noting that for the year to date, eight equity deals have been scrapped and eight planned high-yield offerings have been cancelled, a trend which is also contributing to the doldrums.

Europe mostly flat

The European convertible market ended largely unchanged on Thursday, although south European names continued to see weakness, a London-based desk analyst said.

"The main one is [Espirito Santo Financial Group SA]," the analyst said. "It's the Portuguese bank, and it's trading quite weak at the moment. That's the main benchmark."

Espirito Santo and Portugal Telecom SGPS SA have underperformed the market because they are seen as possible victims if Greece's debt problems worsen, the analyst said. But the impact of Greece on the general European convertible market has been limited with only a handful of bonds that are seen to have significant exposure. Hedges have also been cheaper to set up.

"Last year the problem for the market was more related to the cost of the borrow of the stocks going up, so hedge funds were actually exposed to a lot of downside," the analyst said. "In this case it's quite insulated."

Trico Marine active, lower outright

Trico Marine's 8.125% convertibles due 2013 traded last at 77.5, which was down 2.8 points from 80 on Wednesday, a move that wasn't as sharp as a 19% slide in its underlying shares.

This paper was the third most active issue for the session after BorgWarner and Transocean.

Trico Marine's 3% convertibles due 2027, which are callable in 2012 and putable in 2014, fell 8 points to about 42.5, according to Trace data at around 4 p.m. ET.

One pricing source said he saw "significant trades" in the Trico 3% paper at around 40 after the 4 p.m. ET market close.

Shares of the Woodlands, Texas-based subsea services provider fell 74 cents, or 19%, to $3.08 on Thursday.

Trico Marine said it lost $129 million for the latest quarter, after a charge of $120 million relating to impairments and costs associated with early termination of a vessel contract.

Revenue for the fourth quarter was $150.8 million, which was down sequentially from $189.9 million in the third quarter due mostly to lower usage of subsea vessels, related to seasonality in the North Sea, and weak market conditions in the North Sea and Asia Pacific regions.

The company's outlook continues to reflect weakness in the North Sea and the Asia Pacific region, but "we are encouraged by certain recent developments which we anticipate will be reflected in our results commencing in the second quarter," chairman and CEO Joseph S. Compofelice said in a news release.

Trico Marine has about two-thirds of its 2010 expected revenue under contract with promising prospects for the rest.

As for Trico Marine's liquidity outlook, the company had $53 million in cash and $734 million in total debt, with $53 million in debt obligations in 2010.

The company is pursuing transactions to increase liquidity to levels sufficient to meet its commitments, including additional sales of non-core OSV assets.

Rite Aid, RadioShack weaker

Rite Aid's 8.5% convertibles due 2015 traded at 97.5 on Thursday compared to a level at about 94 on Wednesday.

"RAD did trade at 97.5, but that was an odd lot. And that was the only print on the day. The last round lot trade was yesterday, at $93.875 which looks closer to the proper level," a New York-based sellside analyst said.

According to another pricing source, the indicated level of the Rite Aid 8.5% convertibles should be about 100.

Shares of the Camp Hill, Pa.-based drugstore chain jumped 15 cents, or 11%, to $1.54 after a UBS analyst said the company might be an attractive takeover target for rivals like Walgreen Co., CVS Caremark Corp., or Wal-Mart Stores Inc.

The analyst said a deal of that nature would help those acquirers expand into new markets. His assessment followed Wednesday's news that Walgreen Co. agreed to buy New York-based Duane Reade Holdings for about $1.08 billion.

RadioShack's 2.5% convertibles due 2013 were quoted at about 114 versus a share price of $20.88 on Thursday, compared to 113.25 on Wednesday.

RadioShack "is actually coming in today," a New York-based sellside analyst said.

Mentioned in this article:

Barrick Gold Corp. NYSE: ABX

BorgWarner Inc. NYSE: BWA

Espirito Santo Financial Group SA Lisbon: ESF

Kinross Gold Corp. NYSE: KGC

Portugal Telecom SGPS SA NYSE: PT

RadioShack Corp. NYSE: RSH

Rite Aid Corp. NYSE: RAD

Trico Marine Services Inc. Nasdaq: TRMA

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