EMC, Mylan, Sprint, National Retail convertibles all lower; Teva flat; equities sink

By Rebecca Melvin

New York, Feb. 29 - Not surprisingly, it was difficult to find a bid on Friday in the convertibles market.

With U.S. stocks opening broadly lower and sinking further through the session and oil at $102 a barrel, "it was ugly," market participants agreed. A batch of sour economic news and persisting credit market worries led to the decline and kept many on the sidelines.

A bid for Symantec Corp. convertibles was seen early, and EMC Corp.'s B convertibles were for sale, trading about a point lower, sources said.

Sprint Nextel Corp. convertibles dipped a little further as their underlying shares extended a slide. The new 5.125% convertibles of National Retail Properties Inc. again edged down slightly, to close just under 99.

Nabors Industries Ltd. was off, as were the mandatory preferred shares of Mylan Inc.; but Teva Pharmaceuticals Inc.'s issues mostly held up.

"For the last hour, we just watched everything slide," said a New York-based sellside convertibles strategist.

Of the credit problems that were weighing on financial markets again after insurance giant American International Group reported earnings highlighting the size of the problems, a West Coast-based convertibles sellsider said, "One day everything's fine, and the next day they're back. It just keeps swinging back and forth."

"People looking to buy are not involved in banks or small caps," he said. Instead, they are interested in names in health care and technology, large caps, with strong balance sheets," he said.

Falling into that category are EMC, Teva, and Mylan, all names that have been active of late.

EMC gives back some gains

The EMC 1.75% B convertibles were for sale on Friday and traded around the 124 level. The B convertible senior notes due 2013 consistently trade about a point higher than its sister issue, the EMC 1.75% A convertible notes due 2011.

The difference in price is probably related to the maturity of the paper, as the B's with a longer maturity earn a little bit of an advantage, sources said.

Hopkinton, Mass.-based EMC is a computer storage gear maker, which announced an acquisition Feb. 21of a developer of software and services to sort and share data, called Pi Corp. EMC says it hopes to expand in the field of so-called cloud computing, which refers to technology that allows computers to work across large pools of shared systems.

The convertibles of EMC were higher for much of the week, with the Bs rising to about 126.4 at midweek, compared on 123.5 on Monday. The As were at 122.73 on Monday.

On Friday, the EMC B shares closed at 123.5 versus a share price of $15.54. That compared to 124.5 versus a share price of $15.73 on Thursday. The EMC convertible A bonds closed at 123.3 on Friday, compared to 124.2 on Thursday. The EMC shares (NYSE: EMC) closed down 1.21% on Friday.

Amid a lack of apparent news, the convertibles of Symantec were sought out early Friday. The Symantec 0.75% convertibles due 2011 closed at 109.43 versus a share price of $16.84. That compared to a close of 110.67 versus a share price of $17.09 on Thursday.

The Symantec 1% convertibles due 2013 closed at a level almost identical to the 0.75s, at 109.95, compared to 110.93 on Thursday.

Cupertino, Calif.-based Symantec is a security software producer. Its shares, which slipped 2.6% on Friday, trade under the symbol "SYMC" on the Nasdaq stock exchange.

Mylan weaker after earnings

The convertibles of Mylan continued to trade on Friday after the generic drug maker posted a quarterly loss on Thursday that caused its shares to fall 8.5%, a five-year low.

The Canonsburg, Pa.-based company attributed the loss to a $1.27 billion write-off for acquired research and development. Its adjusted results did beat expectations, and revenue nearly tripled to $1.16 billion from $401.8 million a year ago.

The Mylan 6.5% mandatory convertible preferred shares due 2010 closed at 893.5 versus a share price of $11.84 on Friday. That compared to 900.1 versus a share price of $12.03 on Thursday.

The Mylan 1.25% convertible senior notes due 2012 were unchanged at about 88.

Mylan shares (NYSE: MYL) were off another 1.6%.

Sprint edges lower, shares buffeted

The Sprint/Nextel 5.25% convertibles notes due 2010 closed down half a point to a point on Friday as its underlying shares dropped another 12% in heavy trading.

The No. 3 U.S. mobile phone service, based in Overland Park, Kan., posted a quarterly loss of almost $30 billion and gave a bleak forecast on Thursday.

A sellside convertible trader said that the company had drawn down $2.25 billion on its credit facility, stopped paying dividends and is closing stores. The company also took down first-quarter EBITDA guidance. The bad news was followed by ratings downgrades.

"Sprint is just stupid, where they are trading," the sellsider said, adding that there is no near-term positive catalyst to inspire confidence in the company. He said that early on the 5.25s were seen at 92.625 to 93.375.

Another source put the close at 94.5 versus a share price of $7.11, down from 95 versus a share price of $8.09 on Thursday.

Sprint shares trade under the ticker symbol "S" on the New York Stock Exchange.

National Retail edges below 99

A day after being released for secondary trading, the new 5.125% convertibles due 2028 closed at 98.99 versus a share price of $20.70. Its sister convertibles, the 3.95% notes due 2026, closed a smidge higher at 93.

The new issue had traded above par in early trading Thursday.

Orlando, Fla.-based National Retail is a real estate investment trust that says it is insulated from some of the real estate downturn due to its long-term leases and geographic diversity.

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