DryShips jumps as rebound continues; Knight Capital slightly higher; Trina Solar in focus

By Rebecca Melvin

New York, Nov. 26 - There was limited, name-specific trading in the convertible bond market Monday as players returned in earnest from what was for many a four-day holiday weekend for Thanksgiving.

"It was a very slow day, but with a decent amount of prints at the end of the day," a West Coast-based trader said.

DryShips Inc. was a notable trader, rebounding as much as 5 points on Monday amid no particular news as the 5% convertibles of the Athens-based dry bulk ship and tanker operator remain volatile following a 10-point drop on poor quarterly results.

There was a "small amount" of Knight Capital Group Inc.'s convertibles trading at higher levels amid speculation surrounding an expected buyout offer for the Jersey City, N.J.-based electronic trading firm. Knight Capital shares shot up 13%.

Jefferies Inc., which was among investors that bailed out Knight after a $430 million trading loss in August, saw its convertibles in trade at slightly higher levels as well.

There was also activity in Trina Solar Ltd.'s convertibles, traders said, with resulting firmness possibly due to new positions being opened in the paper.

Gilead Sciences Inc. was also active and higher on Monday. Intel Inc. and Transocean Ltd. were also active in mixed to higher trade.

There was no real news, traders said of a session that was devoid of market-moving catalysts.

There was continued debate regarding the fiscal cliff as lawmakers were set to attempt to hammer out a budget deal to avoid $607 billion of automatic tax increases and spending cuts taking effect beginning in January.

In the absence of much in the way of economic data, and as news and markets geared up following the holiday weekend, trading was very "name specific," a trader said. And there was no primary market activity.

DryShips up

DryShips' 5% convertibles due 2014 settled Monday around 75 bid, 76 offered after the convertibles traded up as much as 5 points.

There didn't appear to be any particular news moving the convertibles higher. DryShips shares ended higher by 3 cents, or 1.7%, at $1.75 in light volume.

"They sold off equally as quick," a New York-based trader said of the convertibles.

Earlier this month, DryShips reported a disappointing third-quarter net loss of $51.3 million, or 13 cents per share, compared to profit of $25 million, or 7 cents per share, in the year-earlier period.

Excluding one-time items, the company lost $33.3 million, or 9 cents a share, which was greater than the 2-cent-a-share loss expected.

The company warned that the shipping market remains severely depressed, with both its tanker and drybulk spot charter rates standing at historic low levels, which are well below cash breakeven.

Jefferies, which helped bail out the company, saw its convertibles trade up to 99 on Monday, which was slightly up from previous levels, along with higher shares.

Knight Capital adds a little

Knight Capital's 3.5% convertibles due 2015 traded higher at 92.75, up from 91.375 previously, a Connecticut-based trader said.

Knight Capital shares gained 33 cents, or 13.25%, to $2.82 in ultra-active trade.

"[I'm] seeing bids in KCG," the trader said.

Shares zoomed and the convertibles traded higher after a weekend report in the Wall Street Journal saying that the company has been approached by at least two parties regarding a bid to buy the company's market making division.

Bruyette & Woods analyst Niamh Alexander responded by upgrading the stock to "market perform" from "underperform" and lifting the share price target to $2.60 from $2.25.

Knight Capital, a provider of market-access and trade-execution, suffered a debilitating blow last summer when a glitch caused hundreds of erroneous trades to be placed, causing prices in numerous stocks to fluctuate widely.

A $400 million cash infusion of convertible preferred debt provided by a group of investors, including Jefferies, allowed the company to remain solvent.

Trina Solar around 90

Trina Solar's 4% convertibles due 2013 traded between 89.50 and 90.50 on Monday.

Trina shares added 6 cents, or 2.5%, to $2.151 in slightly better-than-average trading volume.

The convertible trades "caught my eye," a New York-based trader said. He suggested that the activity looked as if someone was starting a new position in the name, a Connecticut-based trader concurred.

Last week, Trina reported a disappointing quarterly loss and was downgraded to "neutral" from "positive" by Avian Securities.

The company, the world's fifth largest solar panel maker, said that solar module shipments were down 9% in the third quarter from the second quarter and management provided a dim outlook for the current quarter.

Shares have drifted lower since high marks in February.

Mentioned in this article:

DryShips Inc. Nasdaq: DRYS

Jefferies Inc. NYSE: JEF

Gilead Sciences Inc. Nasdaq: GILD

Knight Capital Group Inc. NYSE: KCG

Intel Inc. Nasdaq: INTC

Transocean Ltd. NYSE: RIG

Trina Solar Ltd. NYSE: ADS: TSL

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