NII Holdings climbs to 102.75; Amazon to redeem $150 million of 4.75s; IMC Global up 11 points

By Ronda Fears

Nashville, Jan. 27 - Earnings and merger chatter kept convertible players busy enough during the session and beyond, traders said. NII Holdings Inc. injected new paper into the market, too, and it gained 2.75 points out of the gate.

In the secondary market, though, it was "wildly busy," as one dealer put it, adding that "these are long days for a lot of our clients."

After the close Amazon.com Inc. announced fatter profits and bigger revenues, but the market gave the internet bookseller a cold shoulder. Amazon shares closed down $1.29, or 2.26%, to $55.75 in advance of the earnings, and in after-hours trading were down another $1.875, or 3.37%.

Amazon also announced it would redeem another $150 million of its 4.75% convertibles due 2009, at 102.375 plus accrued interest. Last October, the online bookseller took out $200 million at 102.85. After the latest call, there will still be about $900 million outstanding on the issue.

"It was no big surprise, the Amazon call, since they started this last fall," said a convertible dealer, who attributed a good deal of the stock's decline to short selling.

Thus, he said there was little reaction in the convertibles as they have been hovering around the call price since October.

"Amazon's name still comes up every once in a while when people are speculating about who the next issuer might be, but that is quite a stretch if you ask me," the trader said.

NII Holdings took advantage of the paper-starved market to up its overnighter to $250 million from $200 million. The 30-year issue price to yield 2.875% with a 50% initial conversion premium and was sold at the tighter end of yield talk of 2.75% to 3.25% and at the cheap end of premium guidance of 50% to 55%.

The new NII convertible closed at 102.75 bid, 103.75 offered. The stock reacted a day late to the overnighter, ending down $2.41, or 2.26%, to $104.07.

Goodyear deal may get traction

It looks like The Goodyear Tire & Rubber Co. may be in the revival stages, a market source said, citing a company news release that the tire maker has launched a syndication effort for a $300 million bank loan and plans to open talks with its senior lenders about issuing debt.

Goodyear said it intends to commence a syndication for a new $300 million term loan addition to its existing $1.3 billion asset-based credit facility; the proceeds of the loan would be permitted to be used for general corporate purposes. Also, it intends to begin discussions with lenders under its senior secured credit facilities for an amendment to allow capital markets transactions.

Goodyear had been planning to sell at least $250 million of debt securities and at least $75 million of equity or equity-linked securities by year-end 2003, plus refinance its term loan and revolving credit facilities due April 2005 by year-end 2004, per a new master contract with the United Steelworkers of America. High-yield market sources had said in December that the bond deal could have been as big as $800 million to $1.2 billion.

Those plans were delayed when the company announced an internal investigation has identified possible accounting problems in early December, which prompted an official investigation by authorities.

Goodyear disclosed that an ongoing internal investigation has identified "possible improper accounting issues in Europe." The discovery delayed the company's filing of its amended 2002 form 10-K with the Securities and Exchange Commission.

In addition, Goodyear said the delay in filing the revised financials could affect its ability to issue the new securities.

Goodyear shares Tuesday closed off a penny at $10.38.

Earnings flood massive

Earnings moved a lot of issue Tuesday, traders said, and it was a mixed bag overall despite the negative bend in the stock markets.

Agere Systems Inc. narrowed its loss for the quarter ending Dec. 31 and, together with a stock upgrade, the convertibles rebounded from a recent slump, a buyside trader said. The believers, he said, say the worst is behind the chipmaker as sales grew for the fourth consecutive quarter. That, he added, flew in the face of the disappointing news from Novellus Systems Inc. that it expected to miss on its earnings.

The Agere 6.5% convertible due 2009 added back some 10 points on Monday that it has lost over the past week, the trader said. Agere shares rose 41 cents, or 11.78%, to $3.89.

Valero Energy Corp. beat analysts expectations sharply, but a sellside trader said the improvement was somewhat dampened by expectation that the company may need to raise funds, which could harm its leverage ratios. That, he said, overshadowed the enthusiasm for Valero, which has been evident for several weeks due to rising gasoline prices.

The Valero 2% convertible due 2006 rose 0.25 point to 28.5 bid, 28.625 offered with the stock gaining 48 cents, or 0.9%, to $53.93.

While the broader market was lower, convertibles were mostly higher, dealers said. Some moving higher included Agilent Technologies Inc. and Xerox Corp., both marked sharply higher on good earnings news, traders said.

Chatter on mergers rampant

Buzz continued in the wireless carrier sector, with AT&T Wireless Services Inc. relenting to pressure and setting a deadline of Feb. 13 to accept takeover bids.

"Right now no one is really sure what the repercussions of taking AT&T Wireless out of the picture might be, so we're not seeing a whole lot of activity [in convertibles] related to that," a sellside trader said.

IMC Global Inc., however, shot up on news that Cargill would merge its fertilizer business with IMC Global into a new publicly traded company.

Standard & Poor's placed the ratings for IMC Global on positive watch, and Moody's put the B2 credit on review for possible upgrade.

S&P said the watch reflects the likely improvement to credit quality if the merger is consummated essentially as planned. The merger, expected to be completed in the summer of 2004, is subject to regulatory approvals as well as IMC Global's shareholder approval.

IMC Global's 7.5% mandatory due 2006 climbed 11 points to 84 bid, 84.25 offered. The underlying stock gained $1.39, or 13.43%, to $11.74.

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