Ciena in line with share drop; Central European stabilizes; NorthStar steady; MetLife up

By Rebecca Melvin

New York, March 7 - The convertible bond market started out the week pretty quiet Monday as the broader markets succumbed to selling pressure amid oil jitters as the price of oil hit nearly $107 a barrel.

Technology stocks also sold off after Wells Fargo downgraded the semiconductor sector, referring to the sector's two-year climb to more than double where it was.

That downgrade exacerbated a drop in Ciena Corp.'s convertibles and stock, after the optical networking gear maker posted a disappointing forecast.

Ciena's 0.875% convertibles traded actively, a New York-based sellside trader said. It "sounds like they moved down roughly on a 50% hedge...They more or less did what they were supposed to do today."

Central European Distribution Corp.'s convertibles stabilized in active trade after taking a leg lower on Friday when the vodka maker was placed on review for a possible downgrade by Moody's Investors Service.

Central European dropped more than 12 points in all last week after the company missed estimates and posted a weak 2011 outlook earlier in the week.

Also trading were a pair of new issues from last week. NorthStar Realty Finance Corp.'s 7.5% convertibles due 2031 were steady despite weaker shares, trading at 100.25 versus a share price of $5.20, which was within Friday's market after the upsized $150 million deal priced on the cheap end of talk late Thursday.

MetLife Inc.'s $3.3 billion proceeds of 5% mandatories, which debuted Thursday, ended the session a little bit higher after early weakness in contrast to the underlying stock, which remained in negative territory, albeit with pared losses, at the end of the session.

No new deals were launched or priced in the U.S. convertible market Monday.

Ciena lower in line

Ciena's 0.875% convertibles due 2017 were actively traded on Monday, quoted at 95.5 bid, 96.25 offered versus a share price of $26.00, according to a New York-based sellside trader.

Another sellsider reported a trade at 96 versus the same $26.00 share price in the 0.875% convertibles.

That compared to trading right around par on Friday. The 4-point slide with the stock down about 3 points was about right, a sellsider said.

A New York-based sellside analyst suggested that Monday's sell-off was overdone and that he thought the shares and convertibles would bounce back.

Ciena's 0.25% convertibles due 2013 traded at 102 versus a share price of $26.00 on Monday.

Shares of the Linthicum, Md.-based communications networking equipment and software company fell $2.83, or 9%, at $25.98 on the day.

"The quarter looks fine; the guidance didn't look right. But if it wasn't for the overall tech sector [weakness], I don't think the stock would be down that much," the sellsider said.

He thought there would be a bounce.

"It came in as a function of the weak guidance and the overall tech sector," the sellsider said.

Ciena reported a wider net loss for its fiscal first quarter ended Jan. 31 despite a sizable jump in revenue, which came in higher than expected.

Revenue surged to $433.3 million, which was better than the $421.9 million analysts' expected.

Ciena's net loss grew to $79.1 million, or 84 cents a share, from $52.5 million, or 58 cents a share, for the same period last year.

On an adjusted basis, the company said it lost $13.3 million, or 14 cents a share, for the period.

Analysts had been expecting a loss of 16 cents per share.

While Ciena has put many of its Nortel integration costs behind it, some of the integration resulted in about $10 million in second-quarter revenue being pulled forward into the first quarter. Also constrained supply-chain capacity in the beginning of the second quarter has resulted in some revenue shortfall for the current period, the company said.

As a result, Ciena expects second-quarter revenue in the range of $415 million to $435 million, which is below the $438.5 million expected by analysts.

Ciena also has 4% convertibles due 2015 and 3.75% convertibles due 2018, but they weren't heard in trade.

Central European stabilizes

Central European Distribution's 3% convertibles due 2013, which trade mostly outright, were at 83.5 on Monday, which compared to 83.375 Friday, when they fell 5.675 points, according to Trace data.

"They didn't move; they traded in a fairly tight band," a sellsider said of Monday's action.

"It seems it's stabilizing a bit," he said.

Shares of the Polish company, with U.S. headquarters in Pennsylvania, weakened slightly through the session, ending lower by 13 cents, or 1%, at $12.66 in heavy volume. Earlier in the session, the shares had been down by just 3 cents at $12.76.

On Friday, Moody's Investors Service placed the vodka maker under review for a possible downgrade. The convertibles' 5- to 6-point drop Friday followed a 2- or 3-point fall on Tuesday to the low 90s on a weaker outlook and waived debt covenants.

Moody's action was in response to deterioration in Central European's operating performance during the fourth quarter of 2010 and early first quarter and word that its lenders have agreed to waive a breach of debt covenants.

"It looks like CEDC found a level on Friday and people felt they could get back into it," a sellsider said.

MetLife edges higher

MetLife's 5% mandatories, which debuted on Thursday and trade under ticker symbol MLU on the New York Stock Exchange, ended higher by 15 cents, or 0.2%, at $85.90 on Monday, which compared to trades at 84.77 versus a share price of $44.85 on Friday.

The move upward was mirrored in the MetLife common stock, but the common remained in the red nevertheless, paring the loss, but still ending down 4 cents at $45.53 compared to down 21 cents, or 0.5%, earlier in the session.

MetLife is a New York-based insurance company.

MetLife "looks fine," a New York-based sellside analyst said. "It's a big deal out there, and most accounts are trying to get into it .The convert looks fine, but it's probably not much interesting for hedge accounts."

For outright players on the other hand, they are making a directional call and the mandatories represent a "solid alternative to the stock," the sellsider said.

"It's a fair play to the stock," he said.

Mentioned in this article:

Central European Distribution Corp. Nasdaq: CEDC

Ciena Corp. Nasdaq: CIEN

MetLife Inc. NYSE: MET

NorthStar Realty Finance Corp. NYSE: NRF

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