Convertibles quiet in shortened, pre-holiday session; Greatbatch trades higher on call

By Rebecca Melvin

New York, Dec. 24 - The convertible bond market was mostly quiet on Monday as thinly manned trading desks shut early on Christmas Eve in tandem with other financial markets. Markets will remain closed on Tuesday for Christmas.

There was some activity in Greatbatch Inc., which announced that it is calling all of its outstanding 2.25% convertible subordinated debentures due 2013.

The Greatbatch convertibles were trading slightly above par, up from a level slightly below par. The call was good for investors, a New York-based trader said.

The call follows on the heels of several significant calls in convertibles in the past week or so, including Exterran Holdings Inc.'s planned redemption of all $143.75 million of its 4.75% convertible senior notes due 2014, announced Dec. 20.

The Houston-based provider of operations, maintenance, service and equipment for oil and gas production will redeem the notes for cash at par plus accrued interest on Jan. 15.

Volumes in convertibles thinned down to nothing on Monday, sources said.

"We've had six trades on our desk," a New York-based trader said at late morning.

"It's really quiet," a second trader, based in Connecticut, said.

What little volume there was included trades in Gilead Sciences Inc. and Amgen Inc.

Generally, convertibles have been following stocks higher and lower in the recent sessions, as positions of convertibles have stood pat heading into the new year.

"The problem is that everyone is loath to sell anything because there is nothing to replace it with," the Connecticut-based trader said, adding that the current market is trading pretty rich due to tight supply.

The equity markets declined in the shortened, pre-holiday session.

The Dow Jones industrial average fell 51.76 points, or 0.4%, to 13.139.08. The Standard & Poor's 500 index slipped 3.49, or 0.35%, to 1,426.66, and the Nasdaq composite index shed 8.41, or 0.3%, to 3,012.60.

The markets closed at 1 p.m. ET on Christmas Eve Monday and remain closed Tuesday on Christmas Day. Trading has been light throughout the last week heading into the holiday, which can exaggerate swings in stock prices.

Greatbatch trades up

The 2.25% convertibles of Greatbatch, of which there is $197,796,000 outstanding, traded up to 100.10 to 100.12. Prior to the call they were seen at 97.75.

Greatbatch shares were steady to lower by a dime at $22.93.

The convertibles had been trading outright, yielding about 3%, prior to the call, a trader said.

The convertibles were a so-called boring name that weren't a hedged play, but the call was deemed positive for investors that held the bonds, and also good for the company, a provider of components for medical and industrial applications, based in Clarence, N.Y., because it will save them a significant amount of interest. One trader put the savings to the company at a ball park of $1 million.

The date fixed for redemption is Feb. 20. The redemption price, at which the debentures will be redeemed is 100% of the principal amount.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Exterran Holdings Inc. Nasdaq: EXLP

Gilead Sciences Inc. Nasdaq: GILD

Greatbatch Inc. NYSE: GB

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