Convertibles mostly quiet; Amkor gains on debut; LDK Solar moves up; Quantum lifts on tender

By Rebecca Melvin

New York, March 27 - Action in the convertibles market was muted Friday, but the tone remained firm, as profit taking hit equities, which have steamed higher for much of this month.

Amkor Technology Inc.'s newly priced 6% convertibles opened at 103 and crept up to 107 on their first day of secondary market trading, according to a syndicate source. But 62.5% of the privately placed issue was purchased by Amkor chief executive James J. Kim and his affiliates, and the new paper wasn't that actively traded, sources said.

LDK Solar Co. Ltd. convertibles gained as the overall solar sector pulled back a little after notching stellar gains Thursday. Thursday's move was attributed to word of a solar subsidy expected to be implemented in China.

Quantum Corp. gapped higher after the information-storage concern announced a tender offer for up to $142 million of its 4.375% convertible bonds.

Charter Communications Inc.'s 6.5% convertibles printed last around 6.5 bid, 7 offered after the St. Louis-based cable operator filed for a pre-packaged Chapter 11 bankruptcy.

But Johnson Controls Inc. paper pulled back a little along with its underlying shares after the supplier of auto parts and building materials announced restructuring plans in anticipation of continuing depressed auto sales.

Trading volumes were slim, with most trades below 20 million bonds, a sellsider said Friday afternoon.

But traders still seemed to be basking in the primary market's revival and didn't seem to mind a breather as stocks sagged.

March brought the market's first decent level of new issuance since September. The revival corresponded with this month's surge in equities.

"Alcoa was such a home run, and the Newell deal was really cheap. It has really helped things, and it's a good sign for the market in general," a Connecticut-based sellside trader said.

Some kind of pull back in stocks was fully expected "The slope of this rally has been sharper than any since 1934," the sellsider said.

The Dow Jones Industrial Average fell 148.38 points, or 1.87%, to 7,776.18. The S&P's 500 index shed 16.92 points, or 2.03%, to 815.94. And the Nasdaq Composite index slid 41.80 points, or 2.63%, to 1,545.20.

For the week, however, the Dow was up 6.8%, the S&P rose 6.2% and the Nasdaq was up 6%.

Amkor lifts with shares

The new Amkor 6% convertibles due 2014 traded up to 107 after starting the day at 103. The move mirrored action in the underlying shares of the Chandler, Ariz.-based company, which rose 19 cents, or 7.2%, to $2.82.

A sellside source said the paper was seen at 102 bid but didn't really trade in the Street.

Amkor priced $240 million of five-year convertibles at the tight end of talk. Of that amount $150 million was set aside for Kim and his affiliates.

"I see no reason to play issues with no float. You also don't want the float to increase because James Kim is selling at some point," a New York-based sellsider said, adding that the "only reason this issue worked at those terms is because he bought most of it."

A concern is that Kim selling the paper may foreshadow a problem for the company, and even though as a holder one would want more liquidity in that name, "you would have to be nervous if it happened."

The Amkor convertibles were sold via Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., to qualified institutional buyers under Rule 144A and to Kim.

Amkor is a semiconductor test and assembly service provider.

Johnson Controls slips

Johnson Controls' 6.5% convertible bonds closed at 129.375 versus a common stock price of $12.54, which compared to an earlier trade at about 131 versus a share price of $13.00. On Wednesday, the Johnson Controls bonds traded at 132 versus a $13.00 stock price.

One sellsider said that he didn't see holders react early Friday to news that the Milwaukee-based automotive and construction industries' supplier cut its auto-production forecast and said it will close 10 plants.

The supplier now expects North American light vehicle production to fall by 500,000 additional vehicles to 8.8 million cars and light trucks this year to Sept. 30.

It also cut its European forecast by 12% to 14.3 million units.

Johnson Controls will take a charge of $200 million to $215 million in its second fiscal quarter to reduce operations, 80% of which will be in its "automotive experience business" as opposed to its building business.

The company reaffirmed that it expected to return to profitability in its fiscal third and fourth quarters.

LDK stronger, but solar surge cools

LDK Solar's 4.75% convertibles due 2013 traded up and settled around 44, compared to a previous quote of 37 bid, 39 offered, according to a sellside trader.

At the same time, shares of the Xinyu City, China solar company moved down 57 cents, or 7.4%, to $7.19.

The huge rally in the overall solar power sector cooled off a bit Friday, the sellsider said. On Thursday, the sector surged, especially those companies based in China, after word that China is going to be offering a large subsidy on solar installation.

The Ministry of Finance announced that China is going to subsidize solar projects in excess of 50 kilowatts of rated capacity to the tune of nearly $3 per watt.

"I think there were the some pretty good buy interest, and today someone stuck out a high offer, and someone took it," a sellsider said of LDK's move.

LDK, which hadn't been seen in trade on Thursday, did trade stronger Friday as high offers were put out by those hoping to get paid "fancy prices," the sellsider said.

Also in trade, JA Solar 4.5% convertibles were seen closing slightly higher at 47.182, up from 47, as its shares gained 16 cents, or 4.3%, to $3.93. Based in Hebei, China, JA Solar makes solar cells.

The 3% convertibles of Suntech Power Holdings Co. Ltd., another China-based solar company, were seen closing at 45.3, up about 0.5 point outright, against a common stock that was up 3.2%, or 36 cents, to $11.65 on Friday.

Quantum gaps up on tender

Quantum's 4.375% convertible bonds due 2010 traded just below 70, which is the tender offer price, compared to a prior level of 44 bid, 45 offered, according to a sellside trader.

Shares of the San Jose, Calif.-based data storage company jumped up 37 cents, or 92.5%, to $0.77.

Quantum is tendering for all but a small amount of the bonds outstanding.

It intends to finance the tender with proceeds of a term loan to be received from EMC Corp.

The tender will expire on May 12 and is contingent on certain conditions, such as tendering of no less than $135 million of the notes and receiving at least $100 million in gross proceeds from the EMC loan.

Mentioned in this article:

Amkor Technology Inc. Nasdaq: AMKR

Charter Communications Inc. Nasdaq: CHTR

LDK Solar Co. Ltd. NYSE: LDK

Johnson Controls Inc. NYSE: JCI

Quantum Corp. NYSE:QTM

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