Textron, International Game add; Transocean slips; Charming Shoppes gains in quiet tradee

By Rebecca Melvin

New York, Aug. 26 - Textron Inc. convertibles jumped nearly 4 points outright along with strength in the company's underlying shares Wednesday amid no particular news, market sources said.

International Game Technology Inc. also added in trade.

Liberty Media Corp./Time Warner Inc.'s 3.125% exchangeables extended Tuesday's gains, trading slightly better Wednesday at 96.125 bid, 96.375 offered, but the volume and strength wasn't as notable as on Tuesday.

Meanwhile, Transocean Inc., which trades in good volume on any given day due to liquidity in the name, was mixed, with the series A convertibles in trade at 97.25 versus $76.75, but later seen a little lower.

Charming Shoppes Inc. convertibles traded a couple points higher late in the day, although it had been mostly quiet during the session, after the Bensalem, Pa.-based women's apparel retailer reported quarterly results that swung to a profit but still missed estimates.

"They have definitely taken steps that are credit positive," a Connecticut-based sellside trader said.

Human Genome Sciences Inc. was indicated higher but remained mostly quiet after strength Tuesday on rumors that GlaxoSmithKline plc may acquire the Rockville, Md.-based biopharmaceutical company.

Human Genome's shares ended higher but pared gains after a report midsession that said Glaxo had not held talks with Human Genome about an acquisition, a Connecticut-based sellside analyst noted.

Overall, the day's activity was described as "nothing going on at all," which has been the case for much of the last two weeks due to the August vacation period.

In stock markets, the major indices eked out minor gains after toggling the flat line much of the day. Trading was choppy despite reports that showed an increase in new home sales and a better-than-expected jump in durable goods orders. The 4.9% jump in July, the sharpest increase in two years, was better than the 3% increase economists had predicted.

Textron, International Game add

Textron's 4.5% convertibles due 2013 traded at 138 versus a share price of $15.40 on Wednesday, up from about 133 previously.

Shares of the Providence, R.I.-based aircraft, industrial and finance company closed up 84 cents, or 5.7%, at $15.64.

International Game's 3.25% convertibles due 2014 traded at 128 versus a share price of $21.00, which was up from about 126 previously. Shares of the Reno, Nev.-based maker of gaming machines and systems added 56 cents, or 2.7%, to $21.23.

Demand in the convertibles market appears to cut across themes at this point, a New York-based sellside trader said.

Transocean trades mixed

Transocean 1.625% series A convertible notes due 2037 traded at $97.25 versus a share price of $76.75 and later were seen closing with a 96 handle.

Transocean 1.5% series B convertibles due 2037 had an early spread of 96.63 bid, 97.13 offered versus a $77.00 share price. The paper traded during the session at 95.45.

Transocean 1.5% series C convertibles due 2037 were bid at 91.63 versus a share price of $77.19, one sellsider said.

Shares of the Swiss petroleum drilling contractor slipped 63 cents, or 0.8%, to $76.56.

The BBB+/A- rated paper is frequently in trade due to its liquidity and credit quality.

"These are money good," an analyst said, noting that the paper appears to be trading to the puts.

The series A paper is not that stock sensitive, given that the conversion price is $168 and the current stock price is $76 or $77. "In a year, people are going to put them," the analyst said.

The series A paper has a 112% premium. The series B paper has a 105% premium, with 2.3 years to the put.

"All are yield 4% to the put," the analyst said.

Charming Shoppes adds in quiet trade

Charming Shoppes' 1.125% convertibles due 2014 were quoted late at 72.375 bid, 72.875 offered, which was up a couple of points from previous trades.

Shares of the company ended lower by 11 cents, or 2%, to $5.32.

The convertibles were quiet much of the day, not reacting much to the miss on earnings, a New York-based sellside trader observed. But he said, "The credit is still fine with them recently signing a new credit facility and selling their private label credit card business."

Before the open the company reported net income was $5 million in the quarter, compared to a net loss of $10.7 million a year ago.

The current year's results include restructuring charges offset by a gain on the repurchase of debt; the prior year's results include restructuring charges and a loss from discontinued operations.

Net sales decreased $121.4 million, or 18.7%, reflecting a 14% decrease in comparable-store sales and the impact of net store closings. Same-store inventories decreased 18%.

The company also said it has agreed to sell its credit card receivables to Alliance Data Systems Corp. for net cash proceeds of about $110 million.

It also entered into a 10-year operating agreement for the servicing of the Charming Shoppes' private label credit card receivables program.

In addition, the company said it had repurchased $38.2 million of its 1.125% convertibles at a cost of $21 million during the quarter.

As of Tuesday, the company has repurchased $51.7 million of the notes this year at a cost of $26.6 million.

Charming Shoppes president and CEO Jim Fogarty said, "Our consolidated results for the quarter continued to reflect a difficult retail environment, delivering both disappointing comparable-store sales and earning power. Our sales reflected negative but generally improving comps to last quarter at our Lane Bryant and Catherines brands, as we made progress on more balanced and compelling assortment.

"On profitability for the quarter, we were able to offset volume declines with disciplined inventory management, gross margin improvement, and reductions in both SG&A and occupancy expense."

Mentioned in this article:

Charming Shoppes Inc. Nasdaq: CHRS

Human Genome Sciences Inc. Nasdaq: HGSI

International Game Technology Inc. NYSE: IGT

Time Warner Inc. NYSE: TWX

Textron Inc. NYSE: TXT

Transocean Inc. NYSE: RIG

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