Convertibles quiet; Regeneron slips; Auxilium, Chesapeake preferreds gain; Chiquita steady

By Rebecca Melvin

New York, May 6 - The convertible bond market was "relatively quiet" on Monday, in keeping with an ongoing trend of modest action that typically marks the beginning of the week. Trading that occurred was spread among a range of names in low volumes, market players said.

"There was not one name that stands out today," a New York-based trader said.

A New York-based analyst called it "a relatively quiet Monday."

Regeneron Pharmaceuticals Inc. "came in a touch" on a hedged basis with shares of the Tarrytown, N.Y.-based biotechnology company slipping 1% on Monday, a source said. The securities had gapped higher last week after earnings and after Allergan Inc. said it is halting a trial of a potential competitor to Regeneron's Eylea macular degeneration drug.

Auxilium Pharmaceuticals Inc.'s convertibles were noted as a name doing better on Monday. On a dollar-neutral, or hedged, basis, the convertibles of the Malvern, Pa.-based specialty pharmaceutical company were up about 0.375 point, a New York-based convertibles analyst said. The company remains in focus following lowered forward guidance and a disappointing quarterly report a week ago.

Chesapeake Energy Corp.'s 5.75% convertible preferreds were seen up about 2.5 points amid no particular news. They were seen at 104.5 bid, 105.5 offered versus an underlying share price for the Oklahoma-based natural gas company of $19.75.

Chiquita Brands International Inc.'s 4.25% convertibles due 2016 traded little changed on the day ahead of the Cincinnati-based produce company's earnings report expected to be released early Tuesday.

Elsewhere among distressed convertibles, Eastman Kodak Co.'s 7% convertibles climbed another point plus to 24.5 bid, a New York-based trader said.

The Kodak convertibles have been "climbing a point or two every day" since news of a reorganization plan last week. The new plan to emerge from bankruptcy would put ownership of the company in the hands of its bondholders and unsecured creditors. The company plans to exit bankruptcy as soon as July.

Stocks traded mostly sideways on Monday following Friday's rally in which the Dow Jones industrial average exceeded 15,000 for the first time and the S&P 500 stock index also hit an intraday record high after a better-than-expected April jobs report.

On Monday, the S&P 500 edged up only another 3 points, but closed at another record high of 1,617.50. The Dow Jones industrial average slipped 5 points to 14,968.89, and the Nasdaq stock market added another 14 points, or 0.4% to 3,392.97.

Regeneron slips

Regeneron's 1.875% convertibles due 2016 were seen at 311, down 4 points outright on Monday, compared to 15.75 bid late in the session Thursday.

Regeneron shares slipped $3.53, or 1.3%, to $262.63.

It slipped a bit, a trader said, noting that Regeneron remained one of the few in-the-money names that was holding up well.

The trader suggested that the resilience was "probably because it is a biotech, and investors always think that is an outcome that can really make the stock move, which we saw a week or so ago when Regeneron stock rocketed up 35 bucks."

"It's still holding up well compared to all of the other in-the-money names. A tiny is nothing compared to what we have witnessed the past few months in other in-the-money names," the trader said.

That level was seen as parity plus 0.50 point, which was steady to lower compared to parity to 0.75 point on Wednesday.

The convertibles are seen as being held on a 100% delta.

Shares of the company jumped $17.53, or 7%, to $266.16. On Wednesday, the shares surged 10%.

Late Thursday, Regeneron posted a net profit of $99 million, or 90 cents per share, which was up from $12 million, or 11 cents per share, in the year-earlier period.

Excluding one-time items, the company earned $1.78 per share, which was well above the consensus estimate of 98 cents per share.

Revenue rose 90% to $40 million, which was better than the $428.3 million analysts' estimated.

On Wednesday, Regeneron securities surged when Allergan, a former convertible bond issuer, announced a setback for its DARP in-eye drug during an earnings conference call, when it said that results of a mid-stage trial did not justify moving the drug into late-stage testing immediately.

Auxilium adds on hedge

Auxilium's 1.5% convertibles due 2018 traded at 94 bid, 94.75 offered versus an underlying share price of $14.98, which was better by about 0.375 point on a dollar-neutral basis, a New York-based trader said.

The bonds traded at 91.625 bid, 92.875 offered versus an underlying share price of $14.25 a week ago, when the shares tumbled 13% and the convertibles dropped 5 points on a disappointing quarterly loss.

"Auxilium has been a more active name for us recently," a sellsider said.

Auxilium shares added 24 cents, or 1.7%, to $15.23 in active trade.

Chiquita little changed

Chiquita's 4.25% convertibles due 2016 traded essentially unchanged from last week at 93.25 bid, 93.50 offered, sources said.

The bond trades on an outright basis.

"It traded small," a New York-based trader said, referring to trades of low-dollar amounts.

Chiquita shares ended higher by 17 cents, or nearly 2%, at $8.80 in thin volume.

The Cincinnati-based produce company was due to report earnings before the market open on Tuesday.

Of Chiquita's three divisions, bananas, salads and healthy snacks, only bananas generated a profit in 2012.

Mentioned in this article

Auxilium Pharmaceuticals Inc. Nasdaq: AUXL

Chesapeake Energy Corp. NYSE: CHK

Chiquita Brands International Inc. NYSE: CQB

Eastman Kodak Co. Pink Sheets: EKDKQ

Regeneron Pharmaceuticals Inc. Nasdaq: REGN

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