Convertibles mixed on light volume; Navistar better; ProLogis down in line; Cephalon adds

By Rebecca Melvin

New York, June 28 - Volume in the convertible bond market was light on Monday and action was mixed, as the broader markets chopped along amid a lack of significant headlines.

Navistar International Inc., which has seen its shares move up by about $5 in the last two months, improved on the day.

But there were sellers in ProLogis, which was down, but only in line with its underlying shares.

Cephalon Inc.'s 2.5% convertibles due 2014 looked to have gained on the day, according to sources. One sellsider also saw a trade of Human Genome Sciences Inc.'s 2.25% convertibles of 2011, at 168 versus a share price of $24.20. But other sources said they didn't see that name trade. The last sale on the Human Genome convertibles of 2011on Trace data was from Thursday, when the paper had plunged 15 points to 170.

Saks Inc.'s 2% convertibles due 2024 traded at 90 versus a share price of $8.25.

After Goldman Sachs & Co. put a "neutral" rating on the U.S. solar industry in general and initiated coverage on a number of solar stocks, including a "neutral" on Yinglin Green Energy Co., that China-based solar power company saw its 0% convertibles was in trade at 113.

"A few prints in the short-dated Yinglin 0%s went up at 113, but they are putable at 116.427 in December, a Connecticut-based trader said.

Transocean Ltd. saw its 1.5% convertibles due 2037, or C paper, trade in decent size at 84.25 bid, 84.375 offered, which was up compared to Friday when the C paper traded at 83.75. There were only odd lots of Transocean's 1.625% A convertibles in trade, however, and they were last 96.875, which was little changed on the day.

Seagate Technology LLC saw its 2.375% convertibles in trade after they were unexpectedly called for redemption on Aug. 20.

The Seagate convertibles, which were originally issued by Maxtor Corp., were called last week. All $33.16 million of the Seagate 5.75% convertible subordinated debentures due March 2012 and the remaining $326 million of the Seagate 2.375% convertible senior notes due August 2012 were called.

The 5.75% notes will be redeemed for cash on July 27 at par plus accrued interest.

The 2.375% notes will be redeemed for cash on Aug. 20 at 100.68% plus accrued interest.

Micron Technology Inc. wasn't mentioned in trade, but market players were anticipating the Boise, Idaho-based memory chip maker's third-quarter earnings release after the close of markets on Monday.

"Micron July call options were very busy today, and they have been bid up; people are expecting a blowout quarter. We'll see," a New York-based trader said.

After the market close, the company reported that it beat margin and revenue expectations amid a rise in memory chip prices and after companies were more outgoing in terms of purchasing technology equipment.

Nevertheless, shares of Micron slid in after-hours trading immediately after the release and after rising during the session.

Financial regulatory reform

The fate of regulatory reform legislation was once again thrown into doubt on Monday after news of the death of senator Robert Byrd, D-W.Va.

Sen. Byrd's death throws a wrench in the works after lawmakers notched a deal Friday after a two-week conference process.

While the House is still expected to pass the final bill, it's unclear when the Senate would act, or whether Democrats still had enough support to enact it.

In addition to Sen. Byrd's death, senator Scott Brown, R-Mass., is saying that he may not support the legislation either, and his vote is seen as vital to approval of the legislation.

Navistar improves

Navistar's 3% convertibles due 2014 traded at 122.76 versus a share price of $52.97 late in the session, compared to 123.02 versus a share price of $53.20 early on and compared to 122 versus a share price of $52.71 on Friday.

The late print is the better price, a New York-based trader said of the paper that has been performing consistently and well, of late.

Shares of the automotive manufacturer on Monday ended down 25 cents, or 0.5%, at $52.79 after earlier pushing up into positive territory.

Cephalon adds

Cephalon's 2.25% convertibles due 2014 traded last at 107.65 versus a share price of $59.24, which represented a gain of nearly 2 points.

A trader reported an earlier trade of the Cephalon 2.5% convertibles at 107.5 versus a share price of $58.75.

Shares of the Frazer, Pa.-based biopharma spent most of the session solidly in positive territory but ended up by only 9 cents at $58.86.

Share trading of Cephalon was lighter than normal, and one sellsider said he saw "only small Cephalon traded," meaning that the trades were of small size.

ProLogis trades in line with shares

ProLogis' 2.625% convertibles due 2038 traded last at 90, which was up nearly 0.5 point outright on the day, after earlier trading lower at 89.625.

The ProLogis 2.625% convertibles were the most active of the Denver-based industrial real estate investment trust's convertibles. Sister issues include ProLogis' 2.25% convertibles due 2037 and ProLogis' 3.25% convertibles due 2015.

The company's common stock ended down 13 cents, or 1.2%, at $11.03, which was off its lows of the day.

"They were all in line," a New York-based trader said of the convertible bonds.

As for why the bonds were lower outright, the trader said, "Someone seemed to want out."

Mentioned in this article:

Cephalon Inc. Nasdaq: CEPH

Human Genome Sciences Inc. Nasdaq: HGSI

Navistar International Inc. NYSE: NAV

Micron Technology Inc. NYSE: NU

ProLogis NYSE: PLD

Saks Inc. NYSE: SKS

Seagate Technology LLC NYSE STX

Transocean Ltd. NYSE: RIG

Yinglin Green Energy Co. NYSE: YGE

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