Intel, Micron recover; AMD moves up; Excel Maritime sets sail higher; Molina Healthcare eagerly anticipated

By Evan Weinberger

New York, Oct. 4 - Intel Corp. convertibles rebounded Thursday after a slide Wednesday. Staying with semiconductors, Advanced Micro Devices Inc. convertibles traded up. And after its big fall Wednesday, Micron Technology Inc. convertibles regained some lost ground.

Activity continued to return in the secondary market, according to one analyst. "It was a pretty active day. Credit markets continue to stabilize," he said. "Most things were trading up."

Other traders and analysts reported a similar return to normal activity, and much of the activity was in the usual suspects.

In the wider tech world, Equinix, Inc. convertibles suffered a barely perceptible slide while Xilinx, Inc. moved up. And in the health care and biotech universe, Mylan Laboratories Inc. and Medtronic Inc. both traded down.

One new deal priced Wednesday after the market close and another was set to do so at the same time Thursday. Excel Maritime Carriers Ltd. brought its upsized $125 million offering of 1.875% convertible senior notes due Oct. 15, 2027 with an initial conversion premium of 55%.

Waiting patiently at the starting line is Molina Healthcare, Inc., which announced an offering of $150 million in convertible senior notes due Oct. 1, 2014. The convertibles are talked at a 3.75% to 4.25% coupon and an initial conversion premium of 30% to 35%.

Equity markets were edgy Thursday ahead of Friday's September jobs report. The economic news that did greet investors Thursday morning - the Commerce department reported a 3.3% drop in factory orders in September and the Labor Department reported 16,000 new people filed unemployment claims last week - did little to lift spirits. They did keep the dream of a new rate cut alive, however.

The edginess led to a distinct lack of direction Thursday, as the Dow Jones Industrial Average flitted between a little above and a little below the break-even mark.

The Dow closed Thursday up 6.26 points, or 0.04%, at 13,974.31.

The Nasdaq also saw a minimal gain of 4.14 points, or 0.15%, for a close of 2,733.57. And the Standard & Poor's 500 closed at 1,542.84, an addition of 3.25 points, or 0.21%, Thursday.

Excel Maritime sets sail

Excel Maritime priced its convertible senior notes due Oct. 15, 2027 at a 1.875% coupon and a 55% initial conversion premium. The deal came in at the rich end of talk, which had been for a coupon of 1.875% to 2.375% and an initial conversion premium of 50% to 55%.

The deal must have garnered some positive reviews in the sales period, because it came in at an upsized $125 million. The deal was originally announced Tuesday at $100 million. The over-allotment option remains $25 million.

The conversion price is $91.30, and the conversion ratio is 10.9529. They cannot be called for seven years, and there are puts in year five, 10 and 15.

There is a contingent conversion through Oct. 14, 2014 subject to a 125% hurdle. There are standard dividend and takeover protections.

Excel Maritime Carriers is an Athens, Greece-based seaborne dry bulk transportation company. The company plans to use the proceeds for general corporate, including the possible acquisition of new vessels and paying down debt.

One analyst said that he had seen a surprisingly small amount of activity surround the new convertibles but did report that they traded up a bit. Excel Maritime's convertibles were said to have closed at 101 versus a closing stock price of $56.77.

The company's stock (NYSE: EXM) dropped $2.13, or 3.62%, on Thursday.

Molina gets hearts pumping

Molina Healthcare can expect its $150 million in convertible senior notes due Oct. 1, 2014 to be welcomed with warm smiles all around after they price Thursday night. "It's gonna model really cheap, so people are going to be real excited," one analyst said.

Also appealing is the attraction of the health insurance sector. "The managed care is kind of an attractive sector where there aren't a lot of convertibles," a fund manager said.

Several analysts said the convertibles, which are talked at a 3.75% to 4.25% coupon and an initial conversion premium of 30% to 35%, model cheap.

Molina is a Long Beach, Calif.-based health management organization that works with low-income people on Medicaid and other government assistance programs. The company plans to use the proceeds to repay outstanding debt, to fund its acquisition of Mercy CarePlus of Missouri, which was announced in September, and for general corporate purposes.

Because Molina's business is affected by changes in what medical procedures Medicare and Medicaid will cover, there's a significant amount of volatility built in. That, said another analyst, should rope in hedged investors. "There's no risk" for hedged investors, he said.

And for outright investors who've done their homework, the volatility shouldn't be much of a problem either. "Theoretically, if people have really thought about this, it's already priced in," the analyst said.

The Molina convertibles don't come without blemish in observers' eyes. Both analysts and the fund manager said that they would prefer to see a five-year maturity rather than a seven-year maturity, although one analyst did note that the convertibles should break even in just over six years.

And the fund manager said that he thinks Molina stock is too high at the moment. He preferred the issue at a stock price of around $30. The fact that the fund manager doesn't anticipate buying the bonds doesn't mean that he's not interested in them.

"You just have to buy them at the right time. We're taking a look at them carefully," he said.

Molina Healthcare stock (NYSE: MOH) moved closer to the fund manager's magic $30 mark, sliding $1.68, or 4.64%, for a $34.51 close.

Semiconductors rebound

A day after the sector slumped, semiconductors staged a mini-comeback Thursday.

Santa Clara, Calif.-based Intel saw its 2.95% junior subordinated convertible notes due Dec. 15, 2035 close at 103.13 versus a closing stock price of $25.60. They had finished Wednesday at 101.25 versus a stock price of $25.81.

Intel stock (Nasdaq: INTC) slipped 21 cents, or 0.81%, on the day.

Intel's rival Advanced Micro Devices saw a slight gain in its 6% convertible senior notes due May 1, 2015. The convertibles closed Thursday at 89.924 versus a closing stock price of $13.35. They closed Wednesday at 89.644 versus a stock price of $13.23.

Stock in Sunnyvale, Calif.-based AMD (NYSE: AMD) gained 12 cents, or 0.91%, on Thursday.

The semiconductor convertibles taking the biggest tumble Wednesday were issued by Micron Technology. The Boise, Idaho-based chip producer's 1.875% convertible senior notes due June 1, 2014 rebounded a bit Thursday. They closed the day at 95.928 versus a closing stock price of $10.61. They finished Wednesday at 95.4 versus a stock price of $10.74.

Micron stock (NYSE: MU) continued its slide, losing 13 cents, or 1.21%, on the day.

Other techs mixed

San Jose, Calif.-based Xilinx, a computer services firm, saw its 3.125% convertible junior subordinated debentures due March 15, 2037 glide up to 99.176 versus a closing stock price of $26.32 Thursday. They finished Wednesday at 98.75 versus a stock price of $26.31.

Xilinx stock (Nasdaq: XLNX) added a penny, or 0.04%, on Thursday.

Foster City, Calif.-based internet networking company Equinix's 3% convertible subordinated notes due Oct. 15, 2014 slipped to 109.505 versus a closing stock price of $90.91 Thursday. They finished trading Wednesday at 110.333 versus a stock price of $92.43.

Equinix stock (Nasdaq: EQIX) skidded to $1.52, or 1.64%, loss Thursday.

Mylan slides after FDA news

The Food and Drug Administration announced plans to speed up generic drug approvals Thursday. That didn't help Canonsburg, Pa.-based generic drug maker Mylan Laboratories stock or convertibles.

Mylan's 1.25% convertible senior notes due March 15, 2012 closed Thursday at 94.5 versus a closing stock price of $16.56. They opened trading Thursday at 95.125 versus a stock price of $16.87.

Mylan stock (NYSE: MYL) slipped 31 cents, or 1.84%, on Thursday.

Staying with biotech, Minneapolis-based medical device producer Medtronic saw its 1.5% convertible senior notes due April 15, 2011 close Thursday at 111 versus a stock price of $57. They finished trading Wednesday at 111.638 versus a stock price of $56.84.

Medtronic stock (NYSE: MDT) added 16 cents, or 0.28%, on Thursday.

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