Molson Coors active, in line with shares; Prologis trades flat to lower; DFC Global tanks

By Rebecca Melvin

New York, April 1 - Molson Coors Brewing Co. and Prologis Inc. were among the most actively traded names in the convertible bond market on Monday, which was quiet on the first day of the new quarter following a three-day holiday weekend and with many European markets remaining closed.

Molson Coors' 2.5% convertibles due July 30 were higher outright, but in line, or unchanged on a dollar-neutral basis, with the underlying shares gaining after a Goldman Sachs analyst raised her rating on the Denver-based beer and beverage maker and distributor to "buy" from "neutral."

Prologis' 3.25% convertibles due 2038 were also active and changed hands at 115ish, according to Trace data, with the underlying shares of the investment-grade San Francisco-based real estate investment trust slightly weaker.

DFC Global Corp.'s 3.25% convertibles due 2017, which priced a year ago this month, fell sharply on a 22% plunge in the underlying shares after the Berwyn, Pa.-based provider of financial services lowered guidance.

Equity markets were weaker but also subdued post holiday after the Institute for Supply Management's manufacturing purchasing managers index fell to 51.3 in March from February's 54.2.

That reading was below expectations of 54. Meanwhile, February construction spending rose 1.2% on the month, slightly above forecasts for a 1% rise.

"I think it was especially quiet with Europe closed. But it's been quiet for the last couple of weeks," a New York-based trader said, noting that new convertibles issuance has also slowed.

Despite a pickup in volatility in equities given the Cyprus debt crisis, there wasn't a corresponding response in convertibles, the trader said.

"I guess we'll see better tomorrow how April is going to go," the trader said.

Molson active, in line

Molson Coors' 2.5% convertibles traded up to 104.5 versus an underlying share price of $51.12 on Monday. They last traded at 103 versus an underlying share price of $48.49 on March 27, according to a New York-based trader.

That was up a couple of points on an outright basis, but flat, or in line, on a hedged basis, the trader said.

Molson shares rose $2.97, or 6%, to $51.90, hitting a multi-year high, in active trade.

"The stock is up nice today and the bonds have been very active. The bonds are up a couple of points outright, but on a hedged basis they are the same," the trader said.

Goldman Sachs analyst Judy Hong raised Molson Coors' rating to "buy" and raised her price target to $63 from $47.

Beer volumes in North America are starting to recover as more people go back to work, Hong said in a note.

She also said there is "significant room" for further growth in consumption because beer consumption is about 8% below normal levels due to the recession, according to Hong.

DFC tanks on lowered guidance

DFC's 3% convertibles due 2028 fell more than 10 points to about 98 as DFC shares plunged.

The stock ended down $3.60, or nearly 22%, to $13.04, touching a multi-year low.

DFC "is like a falling knife," a Connecticut-based convertibles analyst said.

DFC forecast fiscal third-quarter results that were below estimates and significantly cut full fiscal year guidance, citing a "credit crunch" in the United Kingdom that is hurting its business.

For its fiscal third-quarter ended March 31, DFC said it expects operating income of 20 to 24 cents per share. DFC also lowered its guidance for 2013 diluted operating earnings to $1.70 to $1.80 per share, from a previous company estimate of $2.35 to $2.45 per share, excluding one-time items.

Analysts were forecasting net income of 63 cents per share in the third quarter and $2.35 per share for the fiscal year, which ends in June.

In addition, industry guideline changes have caused many shorter-term consumer loans to come due and caused in increase in defaults.

"In response to these developments, we have tightened our underwriting criteria during the fiscal third quarter to minimize the impact of the anticipated rising loan defaults. It is difficult to ascertain how long this regulatory transition period will last, but our current conservative underwriting posture had a significant effect on our store-based and internet loan growth in the United Kingdom during the fiscal third quarter ended March 31, 2013, and we expect this will continue for the foreseeable future," the company said in a release.

"While we are naturally disappointed with our fiscal third quarter performance, we still believe we are well positioned to meet the growing needs of our customers in the United Kingdom once we move beyond this transitory period," Jeff Weiss, the company's chairman and chief executive, said in the release.

Mentioned in this article:

DFC Global Corp. Nasdaq: DLLR

Molson Coors Brewing Co. NYSE: TAP

Prologis Inc. NYSE: PLD

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.