Omnicare weaker on hedged basis; YRC better on hedge; Avis convertibles indicated higher

By Rebecca Melvin

New York, Feb. 17 - Omnicare Inc.'s convertibles were active in trade Wednesday with the paper up slightly outright but lower on a hedged basis given a 2% rise in its underlying shares, market sources said.

"OCR was active, and it came in a little. At least $15 million traded, which is unusual for that name," a New York-based sellsider said.

YRC Worldwide Inc.'s convertible preferreds, issued as part of an exchange including convertible bonds, were active and lower outright but better on a hedged basis on news regarding the company's stock dilution and shareholder approval of the conversion shares.

"The YRC common got slammed, but the preferreds held in OK," a New York-based sellsider said.

Transocean Inc. and Ford Motor Co. were among the usual suspects among top-volume names. But convertible market action overall Wednesday was pretty muted, sources said, despite earnings news in several convertibles names, as stocks moved upward in choppy action.

Market tone "felt" better, but there was "not much going on," according to one New York-based convertibles sellsider.

A market was seen in iStar Financial Inc. floating-rate convertibles at 61.75 bid, 64 offered ahead of that New York-based finance company's earnings report. But Avis Budget Group Inc., Terex Corp. and Penske Automotive Group Inc., which were also reporting, were mostly quiet. Still, Avis and Terex were indicated better.

Priceline.com, which generally isn't seen in trade given its very high convertible prices, was quiet ahead of its earnings.

Nabors Industries Ltd. was a couple points lower with a 3.3% drop in the underlying shares after the Hamilton, Bermuda-based oil drilling company late Tuesday reported that it narrowed its fourth-quarter loss on lower revenue that was better than expected.

Economic news helping support the broader markets included better-than-expected industrial production and housing starts. Housing starts were up 2.8% in January to a seasonally adjusted 591,000 units, reversing a weather-related dip in December, according to the Department of Commerce.

Industrial production data for January showed a 0.9% increase, which was better than expected, while a 72.6% capacity utilization rate for January was in line with estimates.

Omnicare weaker

Omnicare's 3.25% convertible debentures due 2035 were trading at 79.625 bid, 79.875 offered, which was down from the previous session by about 2 points.

The low delta name yields about 4.6%.

Shares of the Covington, Ky.-based geriatric pharmaceutical services company added 53 cents, or 2.1%, to $25.70 on Wednesday.

The convertibles were considered very active Wednesday. On Friday, the Omnicare convertibles printed down to 80.25 late in the day after an earlier 80.5 to 80.75 transaction.

They had been trading with an 83 handle about a month ago, a sellsider said.

YRC holds in on hedged basis

YRC's 20% convertible preferred shares traded down to about 83.5 on Wednesday from 88 in the previous session, while shares of the troubled Overland Park, Kan.-based trucking company slid nearly 16 cents, or 29%, to $0.39 on the day.

The company said Wednesday that shareholders had approved increasing authorized shares and reducing the par value of the stock, steps necessary to complete the private sale of $70 million of convertible notes.

Shareholders also authorized a reverse stock split to reduce the share count later on. YRC said it would issue common stock to convert preferred shares that were issued in a debt-for-equity swap with bondholders.

iStar in focus

iStar Financial's floating-rate convertibles due 2012 were bid at 61.75, with one source reporting some brokers at around 59, even though shares of the financial company added 14 cents, or nearly 5% on the day, to $3.08.

There was interest in the name, but prospective sellers were higher at around the 64 level.

The commercial real estate lender reported a wider fourth-quarter loss that was better than expected.

The loss widened primarily due to a drop in interest income, the company said.

Avis, Terex indicated higher

Meanwhile, Avis' 3.5% convertibles due 2014 were indicated better at 107 compared to a previous level of 105.25, and Terex's 4% convertibles due 2015 were seen better at 143, up from 140. Avis shares were up about 4% on the day on a loss that was narrower than expected.

Terex shares ended the session about 2% higher ahead of earnings seen after the market close. But the shares dropped in after-hours trade when the Westport, Conn.-based industrial company reported that it narrowed its fourth-quarter loss on lower revenue.

Mentioned in this article:

Avis Budget Group Inc. NYSE: CAR

Ford Motor Co. NYSE: F

iStar Financial Inc. NYSE: SFI

Nabors Industries Ltd. NYSE: NBR

Penske Automotive Group Inc. NYSE: PAG

Terex Corp. NYSE: TEX

Transocean Inc. NYSE: RIG

YRC Worldwide Inc. Nasdaq: YRCW

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