Convertibles quiet; Lincare A paper improves dollar neutral; Informatica up; Helix firm

By Rebecca Melvin

New York, July 2 - The convertible bond market quieted down before noon Friday ahead of the July 4 holiday weekend and following an early flurry of trades and the latest jobs data, sources said.

Markets are closed Monday for Independence Day.

One trader, seeking to match his bid with an offer, was told by a broker at about 10:15 a.m. ET that "the day's over."

The past week was a rocky one for equity markets, and that trend persisted Friday, but convertible bonds pretty much held in and remained largely unchanged on Friday.

Equities were downbeat once again, however, on weak jobs data.

The Department of Labor's report said that private employers added 83,000 jobs in June, but due to temporary census worker job cuts of 225,000, overall nonfarm payrolls for June declined by 125,000.

The number of private jobs created was lower than the 112,000 analysts had expected.

The unemployment rate retreated by more than expected to 9.5%, down from 9.7% in May. A 9.8% rate had been expected, but the better figure wasn't seen as particularly positive since it was said to be attributable to a smaller worker pool as some long-term unemployed left the labor ranks.

"People look at that, and they don't have a lot of confidence," a New York-based trader said of the jobs report and its significance for the markets.

Looking ahead to trading, next week looks to bring more of the same, he said.

Secondary mixed

The typical liquid names that trade in the convertibles universe, including Amgen Corp., Medtronic Inc. and Transocean Ltd., were mixed to unchanged Friday.

Lincare Holdings Inc. saw its convertibles drop outright - the series A convertibles were in trade - but at a pace that was not as steep as for the underlying shares, thereby making them a point or two better on a dollar-neutral basis, a New York-based sellside trader said.

Lincare's stocks and bonds were dropping on bad news about Medicare reimbursements.

Informatica Corp. was bid Friday at Thursday's better trade price. The paper is moving down on a lighter delta and is the kind of trade "that's going to fit the market that we're in," a trader said.

Other convertibles names being watched included Helix Energy Solutions Group Inc., which saw its shares drop Friday on likely downward reserve revisions and a slower pace of divestiture plans, but the bonds were holding firm, a sellsider said.

Helix, formerly known as Cal Dive International Inc., said late Thursday that previously discussed potential divestitures are going to take longer than expected due to the Gulf of Mexico oil spill, and that its mid-year reserves will reflect a significant downward revision related to updated well performance data.

Lincare As improve dollar neutral

Lincare Holdings' 2.75% series A convertibles due 2037 traded at 110 versus a share price of $29.00 during Friday's session, according to a New York-based sellsider.

Trace data had the bonds at 109.153 by early afternoon Friday, which was down 7.2 points on the day.

The Lincare As are callable and putable November 2012.

Lincare's 2.75% series B convertibles due 2037, which are callable and putable in November 2014, were down a greater amount of 12.1 points and were standing at 111.345, according to Trace data.

Shares of the Clearwater, Fla.-based oxygen and respiratory therapy services company were trading down $2.58, or 8.2%, to $29.06, in Friday afternoon trading.

The drag on shares was caused by news of a deeper-than-expected reimbursement cut from the Centers for Medicare and Medicaid Services.

Sources said that the health care services provider announced single-payment amounts for nine Metropolitan Statistical Areas, and that oxygen supplies and equipment are to be reduced by an average of 31% starting January 2011.

The Lincare As are at least 1 or 2 points better on a dollar-neutral basis, a sellsider said, and at the 110 price, they are even better than that, he said.

Informatica better

Informatica's 3% convertible senior notes due 2026 were bid at 125 on Friday, following a trade Thursday at 125 versus a share price of $23.76.

Shares of the Redwood City, Calif.-based provider of data integration software for businesses was flat to lower Friday, trading at $23.82, or down 4 cents in afternoon trading on the Nasdaq Stock Market.

A recent swap trade went up at 139.5 versus a share price of $27.22, so the new price works out to be moving on an 83% delta, whereas they had been mostly on a 90% delta, a sellside trader said.

The Informatica paper is a short dated, coupon-paying bond that has been in favor of late. It was listed among bonds with at least $100 million outstanding and with a relatively low point premium, in a recent note from Citi sales and trading personnel.

"Informatica is a good trade if you think it's going lower. It has a lot of gamma, and some people are moving down on a lighter delta as the stock goes down, while others will just ride it," a trader said.

Mentioned in this article:

Amgen Corp. Nasdaq: AMGN

Helix Energy Solutions Group Inc. NYSE: HLX

Informatica Corp. Nasdaq: INFA

Lincare Holdings Inc. Nasdaq: LNCR

Medtronic Inc. NYSE: MDT

Transocean Ltd. NYSE: RIG

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