Smithfield expands on secondary offering; oil and gas names active; Best Buy flat to lower

By Rebecca Melvin

New York, Sept. 15 - Although a number of convertible bonds moved higher in trade on Tuesday, and oil and gas names were among the more active amid a rise in the price of crude, the market still crawled at a summer-like pace, market sellsiders said.

"It seemed very slow today," a New York-based sellside desk analyst said via e-mail.

What may be contributing to the doldrums is a light new issue calendar and the fact that many of the yield plays that encouraged activity earlier in the year have dried up, sources suggested.

"Nothing is cheap anymore. There's no yield left. That game is over, and it's surprising how fast it went," a Connecticut-based sellside analyst said, referring to a swift rise in pricing from low levels caused by the market meltdown last autumn.

Trading strong was Smithfield Foods Inc., which jumped from the high 80s last week into the 91 bid, 92 offered range Tuesday after the company announced a $250 million secondary offering of equity, which caused a director to resign in protest and the stock to drop 4%.

Several oil names were also in trade, including Nabors Industries Ltd., Cameron International Corp., Bill Barrett Corp. and St. Mary Land & Exploration Co. amid a $2 climb in crude oil prices to nearly $71 a barrel.

Higher gold prices encouraged trading of gold mining concerns such as Newmont Mining Corp., which also had news about a senior straight note offering to be used for working capital and debt repayment.

Best Buy Co. Inc. traded flat to lower amid a 5% drop in its shares due to an earnings disappointment. And BioMarin Pharmaceutical Inc. convertibles traded a little lower, but in line with their underlying shares.

Smithfield gains on secondary offering

Smithfield 4% convertibles due 2013 traded at 91.75 versus a share price of $13.75 during the session, which was up compared to 87.5 versus a share price of $13.00 a week ago and up from 86.5 versus a share price of $12.25 at the beginning of the month.

Shares of the Smithfield, Va.-based pork company ended Wednesday down 4.3%, or 61 cents, at $13.69.

The pork-products producer announced that it has begun a secondary offering of $250 million of common stock with a 15% greenshoe via Morgan Stanley & Co. Inc., Goldman, Sachs & Co., Barclays Capital Inc. and J.P. Morgan Securities Inc. as joint bookrunners.

The offering, made under an automatic shelf registration filed June 14, was controversial and caused director Paul Fribourg to resign.

Fribourg is president and chief executive of Continental Grain Co., which owns 8.8% of Smithfield's common stock.

He didn't believe that the offering was necessary given the company's outlook for improving performance. The offering follows on the heels of an offering of straight notes and a new $1 billion credit facility undertaken by the company early in the summer.

Oil names active, mixed

Nabors Industries' 0.94% convertibles due 2011 traded at 97 and were later seen at 96.25. The Hamilton, Bermuda-based land drilling contractor's common stock closed at $20.10, which was up 3% or 60 cents.

St. Mary Land & Exploration's 4.5% convertibles due 2027 traded at 96.75, up from 96.25, versus a stock that gained $2.00 per share, or 6.5%, to $32.05.

St. Mary is a Denver-based oil and natural gas exploration company.

"It was all over the place," a sellside analyst said of the oil name prices. He quoted Bill Barrett a little higher to mostly flattish in fairly active trade.

Bill Barrett's 5% convertibles due 2028 traded at 96.5, which was up 3 points, according to Trace data, versus a share price that gained $1.16, or nearly 4%, to $33.56.

Bill Barrett also is a Denver-based oil and natural gas exploration company.

Best Buy, BioMarin flat to weaker

Best Buy's 2.25% convertibles due 2022 were quoted at 103 bid, 104 offered from about 104 recently, and compared to 103.5 versus a share price of $39.75 on Sept. 4, according to a sellsider.

A late print showed up on Trace at 94, which represented a 10-point drop on the day versus shares of the Richfield, Minn.-based consumer electronics retail chain that fell $2.09, or 5.2%, to $38.82.

The company reported second-quarter profit down to $158 million, or 37 cents a share, from $202 million, or 48 cents a share, a year earlier.

Revenue rose to $11 billion from $9.8 billion.

Analysts had expected Best Buy would earn 41 cents a share on sales of $10.81 billion.

But Best Buy also raised the bottom end of its full-year forecast to profit excluding items of $2.70 to $3.00 a share.

BioMarin's 1.875% convertible senior subordinated notes due 2017 traded at 102.25 versus a share price of $17.50 on Tuesday, compared to 103.75 versus a share price of $18.00 last Thursday.

The Novato, Calif.-based biopharmaceutical firm, which makes treatments for rare disorders, saw its shares hug the flat line in trade, ending up 2 cents at $17.56, after slipping into negative territory early in the session.

Mentioned in this article:

Cameron International Corp. NYSE: CAM

Best Buy Co. NYSE: BBY

Bill Barrett Corp. NYSE: BBG

BioMarin Pharmaceuticals Inc. Nasdaq: BMRN

Newmont Mining Corp. NYSE: NEM

Nabors Industries Ltd. NYSE: NBR

Smithfield Foods Inc. NYSE: SFD

St. Mary Land & Exploration Co. NYSE: SM

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