Market quieter, selective buyers emerge for beaten-down names

By Ronda Fears

Nashville, Tenn., June 28 - It was quieter Friday as most of the selling subsided, traders said. Except, that is, for Xerox Corp. as it was the latest accounting scandal to hit the tape.

Buying was fairly strong, however, in the beaten-down areas as investors picked over the names that have been punished with guilt-by-association sell-offs. That was mostly taking place in cable, media and telecom, but there were also buyers seen making picks in biotech.

"Creative accounting has caught up with corporate America," said a dealer.

"Xerox got hammered. Everyone really thought the worst of the storm was over, for that name, but it turned out not to be the case. Punishment is swift and severe in the markets."

Xerox said it would restate results for 1997 to 2001 to reclassify more than $6 billion in revenues. That was far more than the $3 billion estimated by the SEC in an April settlement, which at the time was thought to resolve the problem.

The Xerox 7.5% convertible trust preferred due 2021 fell 6.125 points to 50 bid, 50.375 asked.

Xerox shares lost $1.03 to $6.97.

Otherwise, selling was much more subdued than earlier this week. And, buyers were prevalent.

"Compared to Wednesday and Thursday, especially with the media names, it was pretty quiet today," said Sri Nadesan, a senior convertible analyst at Wachovia Securities, inc.

"We found buyers stepping in, particularly for Clear Channel."

Clear Channel Communications, a long-standing staple in the media group, battled the market to no avail Thursday about there not being an SEC investigation, saying it has no accounting issues or irregularities.

After the dust settled, buyers emerged again.

Clear Channel's 0% due 2018 added 0.5 point to 46.25 bid while the 1.5% due 2002 gained 1 point to 97 bid and the 2.625% due also rose 1 point to 96 bid.

Clear Channel shares closed up 82c to $32.02.

EchoStar also was in recovery mode.

EchoStar's 4.875% due 2007 was quoted up 1.125 points to 79.25 bid and the 5.75% due 2008 up 1.5 points to 77.375 bid.

EchoStar shares added $1.30 to $18.56.

Cable names like Charter Communications, Cablevision, Comcast and Cox were also mostly higher.

Charter's 4.75% due 2006 gained 2 points to 49.25 bid as the underlying shares added 86c to $4.08.

Advertising names were one of the strongest gainers, traders said.

Omnicom Inc., Lamar Advertising and Interpublic Group all recouped some lost ground, but Getty Images bucked that trend.

Getty Images went south on a Thomas Weisel Partners research report that raised concerns about the company's sales forecast.

The Getty Images 5% due 2007 lost 1.5 points to 82 bid as the stock fell $2.23 to $21.77.

Tyco also found some believers for the IPO of CIT Group that is set to take place next week, and that caused the 0% converts to get a strong mark-up.

The 2020 issue was quoted up 4 points to 61.5 bid and the 2021 issue up 3 points to 68.5 bid.

Tyco shares gained $1.18 to $13.51.

Looking to next week, the market is expected to be very quiet with the Fourth of July holiday break on Thursday. Many people are taking off half the week and some all week.

No new issues are anticipated, and that likely means that the prospect for a Mirant deal will be pushed back until after the holiday.

"Not just with a name like Mirant, but just because of the really suspicious stance of investors right now, you just about have to do a roadshow," said convertible fund manager in Boston.

"So, I'd be surprised if anything prices next week. And, probably not even the week after the holiday, unless it's a really stable name. But no one knows who that would be right now."

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