Adelphia gains on hiring advisors; Getty Images soars on EPS revision; Genentech falls

By Ronda Fears

Nashville, Tenn., April 5 - Convertibles ended another slow session basically lower due to the pull from the Nasdaq. But Adelphia Communications reversed course and headed north after hiring three major investment banks to form a debt-reduction plan with an explicit focus on selling assets and Getty Images got a sharp lift from its upwardly revised profit outlook.

Leading the downdraft was another rash of selling in biotech names as Genentech became the latest among the group to announce a disappointing new drug study.

"Our market is pretty sluggish right now, certainly sloppy," said the head trader at one of the major investment banks.

"We need something to provide impetus. New issues are the best source of that and we are hoping for some big new deals soon, maybe as early as next week."

Meanwhile trading was thin, even among some of the newer issues, and most of the market was marked lower as the Nasdaq lost 1% while the Dow Jones Industrial Average eked out a 0.36% gain.

Adelphia was one of the hottest topics again, however, as the cable company gained ground. Traders had said the exodus began to taper off Thursday.

Adelphia hired Salomon Smith Barney, Bank of America Securities and Credit Suisse First Boston as financial advisors to explore option to reduce debt, strengthen its balance sheet and in particular look at potential asset sales. Adelphia also engaged Daniels & Associates as a special advisor.

Adelphia's 6% convertible notes due 2006 (B3/B) added 1.5 points to 72.25 bid, 73.25 offered and the 3.25% convertible notes due 2021, which are putable in May 2003 at par, rose by 2 points to 86 bid, 86.5 offered.

Adelphia shares regained 42c to $10.42.

"The reaction was positive to the ADLAC news, but we could be seeing some people that bought on the recent weakness begin to take profits in that name soon," said a convertible trader at a hedge fund in New Jersey.

Retail issues were higher also, but Getty Images rose sharply after it gave Wall Street a rosier earnings forecast.

Getty Images, a film and photograph provider to the ad industry, said it will now expects first quarter earnings of 4c to 5c a share, a complete turnaround from the 5c per share loss analysts' expected.

Ad demand improved a lot sooner than a lot of people expected, said Morningstar analyst Pat Dorsey. He said Getty's ability to integrate acquisitions as well as control costs helped it get ahead.

The Getty Images 5% convertible due 2007 gained 4 points to 912.5 bid, 92 offered as the stock rose $6.28 to $34.68.

In retail, Gap's 5.75% convertible due 2009 were up 1.125 points to 118.875 bid with the stock up 18c to $15.45.

But the other hot topic of the day was Genentech's bad news, which dragged down several other drugs and biotech names.

"Drugs and biotech got hit again with the Genentech news, but the Sepracor 7s were seeing some buying on the recent weakness," said a trader at one of the major investment banks.

"It was sort of old news, in that they've had trouble with this Zanelim already, but it was like icing on the cake after all the other bad news in that sector, Sepracor, Incyte."

Genentech announced that a joint study conducted with XOMA Ltd. will most likely again delay filing a biologic licensing application because the companies' experimental psoriasis treatment, Xanelim, didn't meet the statistical definition for comparability. The delay will probably extend at least beyond summer 2002.

Roche's 0% exchangeable due 2015 that converts into Genentech shares, which was issued at 66.39 in January 2000, dropped 0.5 point to 70 bid, 70.5 as Genentech shares lost $4.29 to $44.70.

The damage was more extensive elsewhere in the sector.

The Abgenix 3.5% due 2007 lost 2.125 points to 86.625 bid with the stock down 71c to $16.04. Cephalon's 2.5 due 2006 lost 1.625 to 96 bid and the 5.25% due 2006 dropped 1.75 to 106.5 bid with the stock down $1.66 to $62.50. MedImmune's 5.25% due 2008 fell 1.375 to 89.25 bid as the shares lost $1.16 to $35.12. The Ivax 5.5% due 2007 dropped 2 points to 83.75 with the stock down 91c to $13.70.

Much of the tech and telecom sectors were lower, but the stand-outs were DuPont Photomasks Inc. and RF Micro Devices Inc.

RF Micro Devices, which makes circuit equipment for wireless phones, declined on speculation that the company may be on the hunt for acquisition targets since it filed a $500 million mixed shelf Thursday, one dealer said.

"It may be that the time is right for some consolidation, due to the overcapacity issues, but it scared some people off the RFMD name," the trader said.

The RF Micro Devices 3.75% convertible due 2005 dropped 1.125 points to 85.25 bid, 86.25 offered as the stock lost 74c to $18.01.

DuPont Photomasks, which makes semiconductor circuit equipment, lead that group lower on heavy selling pressure, but traders knew of no specific news driving the movement. The DuPont Photomasks 0% due 2004, which was issued at par, lost 1.125 points to 94.25 bid, 95.25 offered. The stock fell $3.509 to $47.02.

On the new issues front, hopes were high but the market was pretty quiet.

Market sources said the Toys R Us deal will probably do well as retail issues have been ticking higher, but there has been no firm schedule for that $350 mandatory convertible deal. Otherwise, sources said there have been nothing but speculation, or hopes, about any upcoming new deals.

"There are always new deals in the wings, but we haven't gotten any leads or solid direction about where they may be coming from, sector-wise or otherwise," said a convertible fund manager in New York.

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