Holidays, vacations result in subdued marketplace; Suntech notes jump in late-day trading

By Stephanie N. Rotondo

Phoenix, March 25 - Convertible bond traders lamented a lack of activity on Monday, which was blamed on Passover, Easter and Spring Break.

"A lot of people just aren't in this week," one trader said. He also noted that the equity markets remained busy, "but bonds aren't trading at all."

"I just feel like people are sort of unengaged," another trader said.

Suntech Power Holdings Co. Ltd. was gyrating throughout the session. Just after midday, a trader said the recently bankrupt company's convertibles were down from Friday. But by the end of the day, the issue had ticked up.

Meanwhile, United Therapeutics Corp.'s bonds came under pressure - as did the company's stock - as the Food and Drug Administration failed to approve an oral hypertension drug - again.

Suntech gets late-day boost

A trader said there was "some reasonable size lots" trading in Suntech Power's 3% convertible notes due 2013.

Shortly after midday, the trader saw the issue falling from Friday levels to trade with a 27-handle.

"It's slowly drifting lower," he said. "I think people just don't know what is going to happen there, and lower is the path of least resistance."

However, by the end of business, another trader said the issue had ticked up as high as 281/2.

The stock meantime closed at 45 cents, up 2.75 cents, or 6.51%.

The Chinese solar company filed for bankruptcy on Wednesday. Eight of the company's Chinese lenders were behind the filing, as they had sought court approval the previous Monday to deem the main operating subsidiary insolvent.

Suntech had also failed to make a coupon payment on the convertible notes on March 15. The missed payment was deemed a default and therefore triggered defaults on other outstanding debt.

United Therapeutics weakens

United Therapeutics' 1% convertible notes due 2016 were being pressured Monday as the FDA rejected the company's oral hypertension drug for a second time.

Just before the market closed, a trader saw the issue trading at 135¾ versus a share price of $60.00 on an 80% delta.

After the bell, a trader pegged the issue at 135.18 bid, 135.66 offered versus a share price of $59.67.

The stock closed at $59.62, down $1.33, or 2.18%. Trading was well above average.

The company had resubmitted its application for treprostinil diolamine last month after failing to get approval in October. The first rejection was due to a failure to show significant results in patients taking a six-minute walking test during clinical trials.

United has a similar drug available via injection or inhaler. The latest rejection of the oral drug could result in a delay of up to four years while new trials are conducted.

Capstead preferreds rise

Among convertible preferreds, Capstead Mortgage Corp.'s $1.26 series B cumulative convertible preferred stock traded up 8 cents to $15.52 on Monday.

The straight equity ended the day at $13.09, down 2 cents.

The convertible preferreds go ex-dividend at the end of the month.

Mentioned in this article:

Suntech Power Holdings Co. Ltd. NYSE: STP

United Therapeutics Corp. Nasdaq: UTHR

Capstead Mortgage Corp. NYSE: CMO

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