Quiet session ends flat, lower for the week

By Ronda Fears

Nashville, Tenn., April 19 - It was another quiet day in convertibles trading, with widely mixed price changes on earnings and other news. Overall, traders said the market ended flat on the day but lower for the week. However, the week's new issue fare, totaling $1.2 billion, was higher.

"Earnings, or the forecasts for earnings really, has really tugged on the market as the week went on. We saw selling in telecom today, like Lucent, ahead of their earnings next week," said a convertible trader at a major investment bank in New York.

Lucent's 7.75% convertible trust preferred due 2017 dropped 3.375 points on the day to 89 bid, 89.5 offered as the stock lost 21c to $4.29. Nortel Networks was also lower, with the 4.25% convertible note due 2008 down 1 point to 70 bid, 70.75 offered as the stock dropped 7c to $3.97.

"Expectations have fallen so dramatically and there are still misses, like in telecom and chips, so selling has picked up again in those areas," the trader continued.

Among semiconductors, the trader noted LTX Corp. was lower on rumors of a negative research report, which never materialized, and Nvidia Corp. lost ground due to lower projections from Microsoft on XBOX sales.

LTX's 4.25% convertible note due 2006 dropped 2 points to 116.5 bid, 117.5 offered as the stock fell $2.97 to 23.63.

Microsoft told the market late Thursday that it has cut its own forecast for XBOX unit sales by about 25% to 3.5 million to 4.0 million units for fiscal 2002 ending in June. Nvidia provides graphics chips for the XBOX units.

Nvidia's 4.75% convertible note due 2007 fell 4.375 points to 108.5 bid, 109 offered with the stock closing down $2.70 to $36.92. The convert had made a run over the last couple of weeks due to better than expected earnings, the trader noted, so there was some profit taking this week in the issue.

Healthcare issues were mostly higher, traders said, and several among the group were being rewarded for showing profit gains or beating expectations.

Province Healthcare Co. initially declined after reporting Thursday that it expects to meet or exceed first quarter targets, a convertible fund trader said, because the company also announced it filed a $300 million shelf registration and that spooked some investors.

"They have a new convertible and more stress on their balance sheet would be very negative," the trader said. "But that blew over and they gained today in-line with the sector, reflecting their results."

Province Healthcare said it expects earnings per share to meet analysts' current consensus expectations for the quarter of 35c, as well as meet or exceed guidance of comparable facility revenue growth in the 4% to 6% range. Admission growth is seen in the 1% to 3% range. Province operates non-urban hospitals.

The Province Healthcare 4.25% convertible note due 2008 gained 2.75 points to 105 bid, 106 offered and the 4.5% convertible note due 2005 added 2.875 points to 107 bid, 108 offered. The common stock closed up $1.50 to $34.01.

Also higher was Quest Diagnostics Inc., a provider of diagnostic testing services, after reporting first quarter net income nearly doubled to $66.7 million, or 67c per diluted share, from $35.7 million, or 37c per diluted share, in first quarter 2001.

Quest's 1.75% convertible note due 2008 gained 2.375 points to 118.25 bid, 119.25 offered as the stock added $2.70 to $89.35.

Atmel continued to slide after missing Wall Street's expectations. And, Teradyne saw more selling on disappointment about its sales projections.

Atmel's 0% convertible due 2018 dropped 0.75 points to 59.75 bid, 60 offered and the 0% due 2021 lost 0.25 to 33.75 bid, 34.75 offered. Atmel shares ended off 18c to $9.67.

Teradyne's 3.75% convertible due 2006 fell another 3.25 points to 155.5 bid, 155.875 offered. The stock lost 92c to $35.58.

New issues were somewhat of a bright spot. Market participants applauded getting "fresh blood," referring to the new entrants into the convertible market, but lamented much of an at-issue discount in the pricings.

BJ Services' new 0.5% convertible discount senior unsecured notes, which priced at 79.076 to yield 1.625% and a 45% initial conversion premium that expands to 50% in three years, was quoted flat in the immediate aftermarket with the stock down $1.19 to 35.29

Greater Bay Bancorp's zero-coupon convert, which sold at 63.92 for a yield-to-maturity of 2.25% and initial conversion premium of 24%, was quoted by a fund trader up 0.25. The stock closed up 44c to $33.98.

Capital One Financial Corp.'s 6.25% mandatory convertible was seen 0.5 point higher at 52 with the stock up 66c to $63.375.

Next week, the only firm new deal slated is Temple-Inland's $300 million of three-year mandatory convertibles in the uppers DECS structure.

Price talk puts the yield at 7.5% to 8.0% and initial conversion premium between 18-22%. The company, a diversified conglomerate with interests in paper, building products and financial services, is also selling 3.6 million common shares, aiming to raise another $200 million.

Temple-Inland shares closed off 1c to $55.79.

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