Ford, GM mixed to lower pending bill; Amgen eases; Fifth Third Bancorp, ON Semiconductor weaker

By Rebecca Melvin

New York, Dec. 9 - The convertible bond market was mostly firm early Tuesday even as stocks put in a mixed performance; but, some names came off as stocks slid to a sharply lower close, and others were pulled into trade amid negative headlines, sources said.

Prices were "in good shape" and volume was healthy, a New York-based sellsider said around midday.

Ford Motor Co. and General Motors Corp. convertible bonds were mixed to lower despite declines in the shares of both.

A legislative bill to provide emergency loans to GM and Chrysler and create a so-called "car czar," or federal overseer, to supervise broad auto industry restructuring, was diligently being negotiated in Washington, but various leaders provided differing timetables of when a final version might be ready.

Amgen Inc., which has been a favorite staple of convertible players who have looked to the security of investment-grade issues, ebbed back from high marks notched this month, but not all gains were erased.

Fifth Third Bancorp's convertible perpetual preferreds were in trade on the downside after financial services analyst Richard Bove lowered his 2008 and 2009 earnings estimates for the regional bank, citing expectations of high loan losses cutting into earnings.

ON Semiconductor Corp. was also weaker on the day.

Ford, GM convertibles hold gains

Ford Motor's 4.25% convertibles due 2036 finished the day around 36 versus a share price of $3.23, after having traded earlier at 36.5 versus a share price of $3.25 and on Monday at 37.9.

Shares of the Dearborn, Mich.-based car maker fell 15 cents, or 4.4%, to $3.23 in heavy volume, from $3.38 on Monday.

The GM 6.25% convertibles due 2033 closed at $4.25, which was up 1.2% in heavier-than-average volume.

But the GM 5.25% convertibles due 2032, which traded strong at 4 intraday, closed down 1% at 3.86, also in heavier-than-average volume.

The GM convertible paper known as the GRMs also traded strong at 9 intraday but closed lower at 7.85, which was down 2.5% on the day.

GM common stock settled at $4.70 on Tuesday, which was down by nearly 5%, or 23 cents.

Amgen pulls back a bit

Amgen's 0.125% convertibles due 2011 were reported in trade early at 94.75 versus a share price of $58.125, which would have been a high mark on that issue. NASD Trace reported the Amgen paper at 93 late in the day, compared to 93.9 on Monday.

On Nov. 14, the Amgen 0.125s were at 89.

Amgen's 0.375% convertibles due 2013 traded early at 91.25 versus a share price of $58.125, according to a New York-based sellside trader. Trace reported the paper closing lower at 89.9 versus a share price of $57.96.

Shares of the Thousand Oaks, Calif.-based biotech mostly wavered in lighter-than-average volume, ending little changed at $57.96, which was down 21 cents.

In convertibles trading, Amgen is typically among the top volume names, and Tuesday was no exception. Other top volume names in trade were also the usual suspects, including Transocean Inc. and EMC Corp.

The biotech giant has more than a couple of blockbuster drugs on the market, with several more planned to be released in the next few years. Its third-quarter earnings per share increased 14%.

Fifth Third lower on estimate cut

Fifth Third saw its 8.5% series G perpetual convertible preferreds trade at 77.89, which was lower by about 3 to 5 points from previous levels, and its shares dropped 55 cents, or nearly 7%, to $7.75.

The Cincinnati-based regional bank is looking at higher loan losses in the fourth quarter due to its exposure to automakers, and its turnaround is still a few quarters away, well-known analyst Richard Bove of Ladenburg Thalmann said Tuesday.

Bove said 2009 loan losses may be higher than 2008's, and the analyst cut his earnings estimates to 11 cents from 16 cents a share for 2008 and to 77 cents from 94 cents a share for 2009.

He cut his price target to $11 from $15 but still rates the stock "neutral."

In addition, Bove said that Fifth Third is likely to sell $3.46 billion in new preferred stock to the Treasury under the U.S. government's Troubled Asset Relief Program.

"Based on these new capital injections, the bank is likely to be able to leverage its balance sheet to make more loans," Bove said.

ON Semi slips

ON Semiconductor's 2.625% convertibles due 2026 were reported to have traded at 54 versus a share price of $3.15 early, and later they slipped to 53. By the close, the paper was cited at 52, according to one pricing source.

Shares of the Phoenix-based semiconductor maker settled down 9 cents, or nearly 3%, at $2.95.

Competitor stocks like that of the much larger Texas Instruments Inc. ended higher Tuesday despite the fact that Texas Instruments lowered its fourth-quarter guidance dramatically after the market close on Monday.

The revised guidance is generally in line with the estimates provided by other semiconductor companies in recent days, independent research firm Credit Sights said in a report.

Texas Instruments said it expects revenue in the range of $2.3 billion and $2.5 billion, compared with a previous outlook of $2.83 billion to $3.07 billion.

Earnings are now expected to be in the range of 10 cents to 16 cents a share, compared with a previous range of 30 cents and 36 cents a share.

Semiconductor companies are seeing deterioration of end demand. "It seems that demand has weakened across all verticals. However, several have been particularly hard hit and these include automotive, computing and wireless handsets," Credit Sights said.

In addition semiconductor companies, which are for the most part at the bottom of the tech value chain, are also suffering from channel inventory contraction, or destocking, Credit Sights said.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Fifth Third Bancorp. Nasdaq: FITB

Ford Motor Co. NYSE: F

General Motors Corp. NYSE: GM

ON Semiconductor Corp. Nasdaq: ONNN

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