Tyson weakens; SunPower steady to lower; Vishay Intertechnology, PDL BioPharma on tap

By Rebecca Melvin

New York, May 9 - Tyson Foods Inc. traded down Monday in line with its underlying shares after the Springdale, Ark.-based meat processing company reported earnings that missed estimates by a penny.

Archer-Daniels-Midland Co., a high-grade name in the convertibles space, similar to Tyson, but even more so, traded slightly higher and was notable in the absence of other prominent trading during the lackluster session.

Stocks keep going up, commodities turned around to move higher, and convertibles were little changed in an "I don't care" session among holders, market sources said.

Priceline.com Inc.'s 1.25% convertibles were marked 182.3 versus a share price of $531.00 as that equity wavered following weakness on Friday.

Meanwhile, SunPower Corp. continues to be an active convertible name since Total SA offered to buy the San Jose, Calif.-based solar power company. The convertibles were a touch weaker on Monday.

The session was described as "dead," with the broader markets better, although off their highs for the day. Oil rose 5% and other commodities gained ground. But even in equities, volume was light.

"We traded some Intel, Priceline and SunPower; there's been a lot of activity in that name since the merger was announced," a New York-based sellside trader said.

After the market close, in the primary market, Vishay Intertechnology Inc. launched $150 million of 30-year convertible debentures to price early Tuesday, and PDL BioPharma Inc. launched $135 million of four-year convertible senior notes to price late Tuesday.

Tyson slips in line

Tyson's 3.25% convertibles due 2013 traded lower by about 4 points. A good level for the notes was 125.125 versus an underlying share price of $18.10, according to a New York-based sellside trader.

The notes were previously about 129. They trade on about a 63% to 65% delta, which is pretty middle of the road.

Tyson shares fell $1.14, or 6%, to $17.75 in heavy volume on Monday.

"It's indifferent," a New York-based trader said regarding the move in the Tyson convertibles. "It's one of the universe's high-grade names, and it generally trades a little better than it should. You can make an argument for it [to investors], but [the move] was meaningless."

The trader explained that if the day's stock move had been a credit event and shares went down from $15 to $6 that would have been something remarkable, but as it was there was no meaning in the move.

"These depend on premium, time left and credit," he said.

Tyson said that its feed prices are higher and that it's more difficult to pass increases through because of weaker demand.

For the quarter ended April 2, the company earned $159 million, or 42 cents per share, on a par with last year's results. Analysts on average forecasted 43 cents a share.

Operating margin fell to 2.8% in the quarter from 4.5% a year earlier.

Revenue was up 15.7% to $8 billion, beating the average estimates of $7.54 billion.

Chicken sales rose 10% to $2.74 billion as chicken volume rose 6% and prices rose 3.7%, and beef sales rose 18.9% to $3.33 billion, with volume slipping 0.6%, but prices rose 19.6%.

ADM up 03 point

Archer-Daniels-Midland's 0.875% convertibles due 2014 were seen at 109.19 at the market close compared to 108.7 previously.

The convertibles were 109.125 against a share price of $34.00 on Monday, a trader said.

Shares of the company settled higher by 14 cents, or 0.4%, to $34.11 in light volume on Monday.

"This is another high-grade name, so they are easier to trade. It's a $1 billion deal," a trader said.

The convertibles trade on a light 25% delta.

"You need the stock to go up," he said about the play in this name.

Parity is 78.75. "This is a super high-grade name in our space," the trader said.

SunPower steady to lower

SunPower's 4.5% convertibles were marked at 109.25 bid, 109.5 offered near the close, compared to 109.5 previously, a Connecticut-based sellside trader said.

SunPower shares settled higher by 7 cents, or a third of a percentage point, at $21.48 on Monday.

The name is still in play even though a takeover has been announced because there is still a question about what is going to happen to the shares after the deal is done, a trader said. "Are they going to tender or what?" he said.

The trader expects that this paper will come in a little more, or move lower, due to how difficult it is to borrow the stock and how expensive it is to carry.

"I expect that they will come in a little more," he said.

The delta on the name varies due to the difficult borrow.

Vishay, PDL to price

Vishay planned to price $150 million of 30-year convertible debentures Tuesday that were talked to yield 2% to 2.5% with an initial conversion premium of 10% to 15%.

PDL BioPharma planned to price $135 million of four-year convertibles Tuesday that were talked to yield 3.5% to 4% with an initial conversion premium of 25% to 30%.

Vishay's debentures are being sold via JPMorgan as the bookrunner for the Malvern, Pa.-based maker of semiconductors and electronic components, and PDL's deal was being sold via Bank of America Merrill Lynch as the bookrunner.

Mentioned in this article:

Archer-Daniels-Midland Co. NYSE: ADM

PDL BioPharma Inc. Nasdaq: PDLI

Priceline.com Inc. Nasdaq: PCLN

SunPower Corp. Nasdaq: SPWRA

Tyson Foods Inc. NYSE: TSN

Vishay Intertechnology Inc. NYSE: VSH

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