Newmont, CVRD see gold rush; Allergan up but no one knows why; SunPower launches early

By Evan Weinberger

New York, July 19 - Continued volatility in the stock markets, highlighted by the major indexes posting strong gains after Wednesday's losses, led to an uneven but relatively uneventful trading day in the convertibles markets Thursday.

Several issues traded in the secondary markets, but with no new issues fueling the engine, much of the trading appeared to be haphazard.

"The new issues market has slowed down," one sellside analyst said. "An active new issues market tends to create more activity in the secondary market."

Other analysts characterized the trading day as pretty active to average.

One convertible that was active without any rhyme or reason was Allergan Inc.'s. The pharmaceutical company from Irvine, Calif., saw its 1.5% convertible senior notes jump a bit Thursday, closing at 109.513 versus a closing stock price of $60.81. The convertibles finished Wednesday at 107.25 versus a closing stock price of $58.82.

Allergan stock (NYSE: AGN) jumped $1.99, or 3.38% Thursday, and no analyst could really answer why. The company doesn't announce results until Aug. 1.

But Allergan was just one of many stocks that rose Thursday. The Dow Jones Industrial Average closed above 14,000 for the first time, finishing a fingernail over the historic mark at 14,000.01. That was a rise of 82.19 points, or 0.59%. The Nasdaq also saw a serious gain, finishing up 20.55 points, or 0.76%, at 2,720.04.

One longtime convertibles analyst threw a little cold water on the stock market's rally, however.

"Volatility comes about when the investment community is nervous about valuations, and hence prices respond more quickly and more sharply not only to news but to changes in sentiment," he said.

Two new issues on the way

SunPower Corp., a San Jose, Calif.-based solar energy components maker, announced that it would issue $175 million in convertible debentures, with talk pinpointing July 25 as a likely pricing date. The issue will come at the same time as an issue of 2.45 million shares of class A common stock and the establishment of a new credit facility by SunPower.

There is an over-allotment option on both the debentures and the stock, with $25 million in reserve for the convertibles and 367,500 extra shares available if needed.

Talk has the debentures at a coupon of 0.5% to 1% with an initial conversion premium of 22.5% to 27.5%. SunPower says that it is going to use the proceeds for general corporate purposes, including expanding its solar cell and panel production and for prepayments on raw materials.

Also coming across the wires today was an offering of convertible bonds from Hong Kong-based China Water Affairs Group Ltd. The water and sewage services provider priced HK$650 million in convertibles with a 5.45% yield and a 28.44% initial conversion premium July 16.

The proceeds will be used to expand its projects in mainland China.

Gold rush on Newmont, CVRD

Several old favorites did manage to move Thursday, especially in the mining sector.

One tranche of Newmont Mining Corp.'s $1 billion offering that priced on July 11 was active and finished up Thursday. The 1.25% tranche due 2014 closed at around 107.5 versus a closing stock price of $43.32. The bonds had been hovering around 105 Monday versus a closing stock price (NYSE: NEM) of $40.83.

Newmont, which is based in Denver, saw its stock close up 85 cents, or 2%, to $43.32 with gold being seen more valuable next to the tumbling dollar.

Also active in the mining sector was Companhia Vale do Rio Doce, with both of its convertibles moving Thursday. CVRD's 5.5% mandatory exchangeables were quoted by one sellside analyst at 54.5 versus $51.25. On Monday, they were at 53.75 versus 50.75.

The CVRD mandatories traded on the New York Stock Exchange (NYSE: RIO-P) closed 8 cents, or 0.18%, higher at $44.11.

Common stock of the Rio de Janeiro-based mining giant also finished up, closing at $51.81, a gain of 60 cents, or 1.17%.

"There's been a good run in gold," another sellside analyst said.

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