Stillwater postpones notes sale, convertibles hovering near lows; Eastman Kodak weak

By Stephanie N. Rotondo

Portland, Ore., Sept. 27 - The convertible bond market remained subdued Tuesday, according to traders, though overall, the tone was positive.

Traders attributed the lack of real volume to month-end activities, as well as an upcoming Jewish holiday.

Stillwater Mining Corp. announced that it had opted to delay a planned senior notes offering in the straight bond market due to unfavorable market conditions. However, as Tuesday saw a decent gain in commodities - and the company's stock got a boost as well - one trader was surprised at the development.

The trader also noted that Stillwater's convertibles didn't experience the same "bounce" as the stock did.

Meanwhile, Eastman Kodak Co.'s convertible paper was continuing to decline. The notes had started to fall on Monday after the company said it had drawn down its revolving credit facility.

No bounce for Stillwater

Stillwater Mining said it was delaying a $300 million offering of five-year senior notes on Tuesday due to current market conditions.

The company had previously said it was planning to use proceeds from the sale to fund its takeover of Peregrine Metals Ltd.

"They were all getting killed [recently]," a trader said of the mining sector. However, Stillwater's stock was "running up [Tuesday]." As such, putting off the deal seemed an odd move.

"I think it's crazy," the trader said. "They should have just waited a day and just ran with it."

He saw the 1.875% convertible notes due 2028 trading with a 94 handle, making the yield to put in 2013 5.7% to 5.9%.

The trader also noted that early last week, the convertibles were trading at 97 and then at 93.

"They have not bounced back too much," he said.

The stock closed up $1.15, or 13.55%, to $9.64 on Tuesday.

In its release announcing the postponed note deal, Francis R. McAllister, chairman and chief executive, said that the "dramatic deterioration of the capital markets during the past week has led us to conclude that it would not be in the best interests of our shareholders to complete a financing under the terms currently available. We have ample cash liquidity available, in addition to our strong cash flow, to fully fund the approximately $165 million net cash portion of the Peregrine transaction, provide for our working capital needs and fund near-term capital requirements.

"We will continue to monitor the range of long-term capital alternatives and may, when market conditions are reasonable, return to the market."

Stillwater is a Billings, Mont.-based mining company focused on the platinum group of metals.

Kodak remains weak

Eastman Kodak's convertible notes due 2017 were continuing to fall on Tuesday, following Monday's news that the company had drawn $160 million from its revolving credit facility.

The draw increased fears regarding the Rochester, N.Y.-based company's cash burn, and investors were concerned that the company might not be able to sell its patents soon enough to avoid running out of cash.

One trader said the convertibles were trading in a range between 44 and 46, down from levels around 47.5 on Monday.

Around noon ET, a trader saw the convertibles trading at 48.5 versus a stock price of $1.95.

Charming convertibles trade

A trader said Charming Shoppes Inc.'s 1.125% convertible notes due 2014 - an issue that does not trade often - traded Tuesday at 86 bid, 86.15 offered.

That was a 7.08% yield to maturity, he said.

"They have only traded in round lots five times [since June]," he said. In July, the issue was trading "89 and change." Since then, the convertibles have slowly been on the decline, though Tuesday's levels were in line with trades that occurred on Friday.

Charming Shoppes is a Bensalem, Pa.-based retailer.

Mentioned in this article:

Charming Shoppes Inc. Nasdaq: CHRS

Eastman Kodak Co. NYSE: EK

Stillwater Mining Corp. NYSE: SWC

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