Ford 6.5% convertible up 0.5 point ahead of Friday's conference call; Tyco gains 3-plus points

By Ronda Fears

Nashville, Jan. 5 - Convertible traders reported they were not overly busy Monday, but there was quite a bit more activity than during the holidays. The market was generally firmer, and some players were selling on the strength, particularly in names like Ford Motor Co. and Tyco International Ltd.

The primary market even came back to life with Red Hat Inc. tossing the first new deal of 2004 into the ring. The company is pitching $400 million of 20-year convertible senior unsecured notes talked to yield 0.5% to 1.0% with a 32% to 37% initial conversion premium.

"The [stock] market was really positive today, so we were seeing lots of buyers, but in most cases there are not any offers," said a convertible trader at one of the busy firms in convertibles.

There were some holders selling into the upswing, though.

"Tyco and Ford were both up today, so we were lightening up in those positions due to the strength," said a buyside trader at a hedge fund in New Jersey.

"We've got a lot of new money," the trader added, saying he was taking some profits to build new positions.

The bonds of Tyco shot up more than three points, although there was no news directly related to Tyco's business operations. There were, however, headlines about the ongoing trial of former company executives accused of padding their personal pocketbooks from the corporate coffers. In one story, it was disclosed that previous Tyco chief executive Dennis Kozlowski bought his wife a $5 million ring.

In reality, though, there was nothing particularly newsworthy moving the Tyco bonds, except that there was some selling interest, one trader said. He noted, too, that the Tyco bonds have been "all over the place recently."

Tyco's 2.75% convertibles due 2018 gained 3.125 points to 132.375 bid, 132.875 offered, and the 3.125% issue due 2023 added 3.625 points to 142.25 bid, 142.75 offered. Tyco stock rose 80 cents, or 2.96%, to $27.80.

Ford reported sales figures on Monday on the heels of the Detroit auto show. A sellside trader, however, said the market's focus really was on Friday's anticipated investor presentation by Ford at a conference call slated to begin 9 a.m. ET.

"There has been a lot of improvement at Ford over the past year, maybe not to the extent of what some people would have liked, but it's been pretty good," the trader said.

"There is a lot of buzz today that there's some news coming Friday during the investor call, positive of course. It ranges from talk like they're going to sell something out of their European lineup [to boost coffers and perhaps put that money toward paying off debt], to making another convertible offering."

Regardless, the reaction in the markets was good to Ford's sales figures, even though the numbers were not overwhelming. The trader said investors are more impressed with how Ford has progressed in its restructuring plan, regarding lowering debt.

Ford focused on truck sales in its news release, stating that truck sales in December were up 16% and up 1% for all of 2003. Overall vehicle sales in the United States were down 4% in December and also down 4% for the year.

Ford also mentioned that in December, the F-150 pickup was named Motor Trend magazine's Truck of the Year, and at the North American International Auto Show in Detroit on Sunday it was named North American Truck of the Year.

"They put a lot of emphasis on the pickup at the Detroit auto show, but they also have a new Shelby car that is very hot," the convertible trader said.

Ford debuted a new version of its Ford Shelby Cobra, a two-seater, V-10 roadster developed in collaboration with U.S. racecar driver Carroll Shelby. No decision has been made on whether to bring the Shelby Cobra into commercial production, however, according to Ford.

Ford's 6.5% convertible trust preferred gained 1.6 points to 57.55 on heavy volume Monday. The stock gained 51 cents, or 3.17%, to $16.59.

The convertible trader said Ford's straight debt also tightened Monday.

Other names active, without any apparent news or reason, included Eastman Kodak Co., EDO Corp., Countrywide Financial Corp., Interpublic Group of Cos. Inc. and Lennar Corp.

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