MGM better on outright demand; Janus adds on investment stake; Hornbeck trades up, in line

By Rebecca Melvin

New York, Aug. 10 - MGM Resorts International was mentioned as a name in trade on Friday, with the convertibles a little higher in fairly active trade in an otherwise mostly quiet session.

Outright buying interest amid no particular news was cited as the catalyst for the MGM trade.

"They had had earnings earlier this week; maybe someone took some time to look at them and started buying them," a New York-based trader said.

Janus Capital Group Inc. gained along with the underlying shares on news that Japanese insurer Dai-ichi Life Insurance Co. plans to take a 15% to 20% stake in the Denver-based asset management company.

Meanwhile, ATP Oil & Gas Corp.'s 8% convertible preferred shares dropped to 3 from 10 amid reports that the Houston-based oil and natural gas company was lining up debtor-in-possession financing ahead of a likely bankruptcy filing. ATP shares fell 73%.

Of the week's new deals, Hornbeck Offshore Services Inc.'s 1.5% convertibles due 2019 looked to be tracking higher in line with the underlying shares, trading at 105.5 bid, 106 offered versus an underlying share price of $42.15, which was even dollar neutral compared to 104.25 bid 105.25 offered versus Thursday's $41.61 close.

There didn't appear to be any particular catalyst to the Hornbeck shares creeping higher, a New York-based trader said. He was tracking the bonds on a 67% delta.

Otherwise, Exelixis Inc.'s new 4.25% convertibles due 2019 looked a little weaker, although up a point to 105 outright, compared to a 3% gain in the underlying shares to $4.48.

The week's new issuance, also including Prospect Capital Corp.'s $200 million of convertibles and Isis Pharmaceuticals Inc.'s $201.25 million, didn't seem to boost the secondary market as much as may have been anticipated.

Instead, the nearly $1 billion in new paper seemed like a drop in the bucket compared to what's needed to get the market healthy again due to a prolonged period of weak issuance.

"It didn't seem like anyone was selling stuff to make room for the new paper," a New York-based trader said.

Meanwhile, on Friday, it appeared many market players were beating a hasty retreat from their desks in anticipation of a summer weekend.

"It's quiet; although the sellside is still trying to keep the new deals active," a West Coast-based trader said.

"Nobody is here," a New York-based sellsider said.

But another name getting a look from market players was Amarin Corp. plc, the convertibles of which improved on a dollar-neutral, or hedged, basis Thursday as the underlying shares spiked on expectations the company will get word next week on its exclusivity period for its recently FDA-approved Vascepa drug.

In addition, traders were buying yield names, which have gapped higher in recent sessions. Hologic Inc.'s new C convertibles "keep getting better as the stock approaches $20," a New York-based trader said.

Other names improving included General Cable Corp., Digital River Inc., L-3 Communications Holdings Inc. and Rovi Corp.

"As the straight debt has improved, buyers have pushed these back to more reasonable valuations, but they still look somewhat cheap to me," the trader said.

In the meantime, balanced names like Covanta Holding Corp. and Chemed Corp. have been better to buy, or the bid has been stronger, in recent sessions.

On Friday, Covanta's 3.25% convertibles due 2014 traded at 118, which was down 0.5 point, according to Trace data.

MGM active, better

MGM's 4.25% convertibles due 2015 traded at 100.8 versus an underlying share price of $9.565, which was up nearly 0.5 point on the day.

The bonds have a 95% premium and are held pretty much outright, so it seemed that a large outright buyer was in the market bidding up the paper.

Shares of the Las Vegas-based casino operator swung from gains to losses and back again during the session, ending up 5 cents, or 0.5%, to $9.67.

A good amount of bonds traded, sources said, and the trades were credited to a large outright buyer in the name, with no particular news spurring the action.

Earlier in the week, MGM reported a second-quarter loss of $145.5 million, or 30 cents a share, compared with a year-earlier profit of $3.44 billion, or $6.22 a share.

The result was lower by 13 cents due to a tax adjustment, while the year-earlier period included a gain of $6.30 a share related to a change in the ownership structure of its Macau casino.

Janis stock up, bonds up

Janus Capital's 3.25% convertibles due 2014 moved up to 102.75 bid, 103.75 offered Friday, compared to around 101 coming in to the day.

Janus shares jumped 78 cents, or 10%, to $8.47 in heavy volume.

The Janus bonds are held on a pretty light delta, a New York-based trader said, "so on not much of a delta they're coming in with a 1- to 2-point mark up."

The companies announced that Dai-ichi Life will buy up to 20% of Janus Capital's outstanding common shares through open-market purchases and potentially through the exercise of conditional options issued to Dai-ichi Life.

As part of this alliance, Dai-ichi will support Janus Capital's distribution initiatives in Japan and plans to invest $2 billion of its general account assets with Janus Capital, including seed capital for Janus Capital investment strategies.

Following Dai-ichi Life's accumulation of at least 15% of Janus Capital's common shares outstanding, it is expected that an individual designated by Dai-ichi Life will be appointed to the Janus board.

Mentioned in this article:

Amarin Corp. plc Nasdaq: AMRN

ATP Oil & Gas Corp. Nasdaq: ATPG

Chemed Corp. NYSE: CHE

Convanta Holding Corp. NYSE: CVA

Digital River Inc. Nasdaq: DRIV

Exelixis Inc. Nasdaq: EXEL

General Cable Corp. NYSE: BGC

Hologic Inc. Nasdaq: HOLX

Hornbeck Offshore Services Inc. NYSE: HOS

Janus Capital Group Inc. NYSE: JNS

L-3 Communications Holdings Inc. NYSE: LLL

MGM Resorts International NYSE: MGM

Rovi Corp. Nasdaq: ROVI

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