Tyson Foods gains dollar neutral; Tech Data adds outright; Kinross, Massey Energy active

By Rebecca Melvin

New York, Nov. 22 - Strong earnings reports from a pair of convertibles names stirred a little action on Monday, but overall trading in the convertible bond market was quiet as focus dissipates ahead of the Thanksgiving holiday and amid jarring headlines about insider trading raids at three U.S. hedge funds.

There was chatter about the Federal Bureau of Investigation's raids on Level Global Investors LP. Diamondback Capital Management LLC and Loch Capital Management LLC, a New York-based sellside trader said.

"Some is probably unfair, and some of these guys probably were doing things that they shouldn't have," the sellsider said regarding the essence of the chatter.

Tyson Foods Inc.'s convertibles improved on a dollar-neutral basis after the Springdale, Ark.-based meat producer reported quarterly results that swung to a profit on better pricing and lower costs for its products, a New York-based sellside analyst said.

Tech Data Corp.'s convertibles were higher outright after the Clearwater, Fla.-based distributor of information technology products reported a jump in its third-quarter profit, the same analyst said.

"We had two earnings reports out, but that's about it. I don't think there's anything worth noting. It's kind of a quiet market right now," a New York-based sellside analyst said about Monday's session.

Elsewhere, Medtronic Inc. was quiet ahead of earnings expected out on Tuesday. Not very much is expected to move the Medtronic bonds, which are trading like bonds given that the A paper is not a hedge name, and the Medtronic B's have a very light delta.

General Motors Co.'s mandatory convertible preferred stock issue traded at 50.45 versus a share price of $34.15 on Monday, which compared to 50.5 versus the closing share price of $34.26 on Friday.

Kinross Gold Corp. traded at 102 versus a share price of $17.80, according to a New York-based sellside desk analyst, and Massey Energy Corp. was higher on renewed takeover chatter as the Virginia-based coal producer announced that it has hired an adviser to explore a sale. The Massey 3.25% convertibles changed hands at 98.

Overall, the convertibles market eased slightly last week on an outright basis, but valuation for the market was higher week over week for the fourth consecutive week, a New York-based sellside analyst said.

From an outright perspective, the convertible market was down 0.1% last week, but valuation richened again week over week," the analyst said.

Tyson adds dollar neutral

Tyson's 3.25% convertibles due Oct. 15, 2013 were seen at 119 bid, 120 offered versus a share price of $16.40, according to one sellsider.

A second source said the Tyson convertibles changed hands at 118.75 versus a share price of $16.25, and that compared to 116 versus a share price of $15.35 on Friday.

Shares of the Springdale, Ark.-based meat producer rallied 96 cents, or 6%, to $16.60 on Monday.

"Earnings were pretty strong; the stock was up about 5%," a New York-based sellside analyst said earlier in the session, and estimating that the bonds moved up between 0.3 point and 0.5 point.

"It's a decent bond; the valuation is not that rich compared to the overall market. Market valuation in the last few weeks has firmed up dramatically," the sellsider said.

Tyson's fiscal fourth-quarter earnings swung to a profit compared to a year earlier driven by higher prices for its pork and other meat and poultry products and lower grain costs.

The company said overall production is expected to climb next year as U.S. chicken, beef, pork and turkey remains mostly flat but exports grow.

Tyson is cutting back on chicken production in the near term after inventories grew above forecast levels, yet the company expects an overall low-single-digit climb in 2011 production.

For the quarter ended Oct. 2, Tyson reported a profit of $213 million, or 57 cents a share, compared to a loss of $457 million, or $1.23 a share, in the year earlier period.

Excluding write-downs and other impacts, earnings jumped to 64 cents from 27 cents. And revenue increased 3.2% to $7.44 billion.

Analysts forecast earnings of 56 cents on revenue of $7.75 billion.

The profile for this convertible is for both outright and hedge players.

Tech Data adds on earnings

Tech Data's 2.75% convertibles due 2026 traded at 105.54 on Monday, compared to Friday's 104.17.

Shares of the Clearwater, Fla.-based distributor or IT products jumped $2.23, or 5.1%, to $46.24 in heavy volume.

The company reported net income of $50.5 million, or $1.07 per share, for the three months ended Oct. 31, compared to net income of $43.1 million, or 84 cents a share, a year earlier.

Revenue was $6.2 billion, compared to $5.6 billion in the year-earlier quarter.

The company said that it expects solid demand trends to continue in the fourth quarter.

The 17% jump in net earnings was due to demand for technology products in the Americas and Europe, the company said.

The result was better than expected. Analysts had forecast earnings of 95 cents per share on revenue of $5.8 billion.

Mentioned in this article:

General Motors Co. NYSE: GM

Kinross Gold Corp. NYSE: KGC

Medtronic Inc. NYSE: MDT

Tech Data Corp. Nasdaq: TECD

Tyson Foods Inc. NYSE: TSN

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