Sterlite down but better bid; Allegheny in line with lower shares; Kinetic 'in' on hedge

By Rebecca Melvin

New York, July 6 - The convertible bond market had some winners and some losers on what was called a "typical summer day" Wednesday. Trading was still somewhat light, as expected, due to the holiday-shortened week but more active than on Tuesday.

After a quiet start, there were some better bids late in the session, a New York-based trader said.

Swap traders came in and supported Sterlite Industries (India) Ltd., which traded down on what looked like a big outright sale.

"They traded down about a point and half, but then were bid up through that level about a point to end down just a half [point]," the trader said.

Allegheny Technologies Inc.'s convertibles traded a couple of times and were lower outright but were in line with lower underlying shares.

Kinetic Concepts Inc.'s convertibles were "in" on swap with the stock sharply higher on a rumor of a cash takeover, a New York-based sellside desk analyst said.

Eastman Kodak Co. gapped lower outright, changing hands at 77.25 versus a share price of $2.85 on Wednesday, which was down from about 80.5 bid, 81 offered on Tuesday.

Ciena Corp.'s 4% convertibles due 2015 traded at 116 versus an underlying share price of $17.60, which was down from 119 versus a share price of $18.35 on June 30.

Hutchinson Technology Inc.'s 3.25% convertibles were bid 84 early. "Those got better along with the stock," a New York-based sellside trader said of the Hutchinson bonds.

In general, the market was kind of quiet. "It still feels like a holiday," a trader said. Monday markets were closed in observance of Independence Day.

A second trader said: "It felt like the morning was quiet, but it was better to buy in the afternoon."

Stock markets were slightly higher during the session and into the close, despite lagging financial stocks.

Sterlite lower, catches bid

Sterlite's 4% convertibles due 2014 traded down about 1.5 points in early trade but regained equilibrium when bids came in and erased about a point of the loss, a trader said.

Shares of the Mumbai, India-based mining company ended down 37 cents, or 1.8%, at $15.08 in active trade on Wednesday.

"In my area, I saw pretty big trade in Sterlite. It looked like they traded down outright on a big seller, and then a bunch of swap buyers came in," the trader said.

The bonds trade on about a 40% delta, he said.

Allegheny lower in line

Allegheny's 4.25% convertibles due 2014 traded at 160.25 outright with the stock around $61.00. That was down 3.5 points outright, according to Trace data.

Shares of the Pittsburgh-based specialty steel maker dropped $2.31, or 3.7%, to $60.41 in active trade on Wednesday.

"They were kind of in line on an 82% to 85% delta. There wasn't much movement," a trader said.

The convertibles weren't overly active, but they did cross during the session.

The underlying shares slid in the early going, with losses tapering off during the session, but the stock still ended at the lows of the day in pretty active trade.

Kinetic 'in' on hedge

Kinetic Concepts' 3.25% convertibles due 2015 traded at 139 versus an underlying share price of $64.50 on Wednesday, compared to last week's 127.75 versus an underlying share price of $57.35, according to one sellsider.

That was in about 3 points on hedge, the sellsider said. But a second trader said the convertibles looked about in line on an 80% delta in the morning.

"On an 80% delta, it nukes to 138.5, versus an underlying share price of $64.25, so that's about in line," the second trader said.

Shares of the San Antonio-based maker of advanced wound-care products jumped $7.42, or 13.6%, to $66.20 in heavy volume on Wednesday.

The shares surged on reports that the company is attempting to sell itself for about $5 billion in a leveraged buyout to private equity and has held talks with several firms. Should a deal be reached it would be one of the largest private equity transactions since the end of the 2008 credit crisis.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Ciena Corp. Nasdaq: CIEN

Eastman Kodak Co. NYSE: EK

Hutchinson Technology Inc. Nasdaq: HTCH

Kinetic Concepts Inc. NYSE: KCI

Sterlite Industries (India) Ltd. NYSE: SLT

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