Trading thins; James River jumps; Ciena in focus after disappointing quarter; Molycorp up

By Rebecca Melvin

New York, Aug. 30 - Trading in the convertible bond market Thursday was tapering off ahead of the long holiday weekend to observe Labor Day. But James River Coal Co. saw its 4.5% convertibles due 2015 jump 7 or 8 points to 44.75 amid no particular news from the Richmond, Va.-based coal producer, a New York-based trader said.

Fellow coal producer Alpha Natural Resources Inc. saw its 3.25% convertibles due 2012 trade Thursday at 90 - which was about unchanged outright - against weaker shares.

Ciena Corp. got a look from market players - but not a lot of trading action in its convertibles - after the Linthicum, Md.-based optical networking gear maker reported a wider-than-expected loss for its fiscal third quarter and forecast lower-than-expected revenue for its fourth quarter.

The Ciena 0.875% convertibles due 2017 traded during the session at 83.25, which was down 2.5 points on the day outright, according to Trace data. The issue, with a 140% premium, isn't looked upon as one compelling for hedged players, however.

It has a decent yield though in this environment, the trader said.

Molycorp Inc.'s 6% convertibles peeled back a half dozen points on an outright basis but managed to expand again on a dollar-neutral, or hedged, basis for a third consecutive session.

Intel Corp. was also a fairly active trader, with the 3.25% convertibles due 2039 trading at 127.356, according to trace data. Parity on this bond is 81.

There was no new issuance in the U.S. primary market, which has been the case all week ahead of the upcoming three-day weekend. But internationally, Austria's conwert Immobilien Invest AG priced €80 million of six-year convertibles at par to yield 4.5% with initial conversion premium of 30%.

Proceeds of the conwert deal will be used to repay the company's existing convertible bond issue.

James River jumps

James River's 4.5% convertibles due 2015 traded at 44.75 on Thursday, which was up about 7 or 8 points on the day.

James River shares added 8 cents, or 2.9%, to $2.89.

Speculation appears to be growing that the ailing coal industry may be readying to turn around.

"There are sellside guys pitching the thesis that coal is beat down enough and there's not much downside left," a New York-based trader said.

James River's 3.125% convertibles due 2018, a sister issue, were seen around 30 but not much was trading in that one, the trader said.

Ciena slips

Ciena's 0.875% convertibles due 2017 traded at 83.25, which was down 2.5 points from a previous level of 85.75.

The name, which has a 4.84% yield, was seen as an outright trade.

Shares took a "huge leg down," a trader said, to $13.46, which was a drop of 19.5% on the day in heavy volume.

This issue has a 140% premium, one trader noted. But he also said the company has been known to buy its bonds back, supporting the paper.

The company reported a wider-than-expected loss and forecast lower revenue than analysts estimated for the fourth quarter.

Excluding one-time items, the third-quarter loss was $4.1 million, or 4 cents a share, which was higher than the 2-cent loss that analysts on average had estimated, and it was down compared to net income of $8.3 million, or 8 cents per share, reported for the third quarter of 2011.

The company forecast that revenue will be $455 million to $480 million in the fourth quarter, which ends in October. That's represents a miss compared to the $499.2 million that analysts were expecting.

Revenue for the third quarter rose to $474.1 million, which was up 9%, and in line with estimates.

Molycorp sees more expansion

Molycorp's 6% convertibles due 2017, which priced earlier this month, traded down to 112 versus an underlying share price of $11.20 at the end of Thursday, which was down outright from 117.5 bid, 118.125 offered.

But it was better by about 0.625 point on a dollar-neutral, or hedged, basis.

Shares of the Greenwood Village, Colo.-based rare earth minerals producer fell $1.15, or 9.4%, to $11.08 in strong volume. But the drop was following two strong 13% gains the previous two days.

"They appear to have gotten better today with the pullback [in shares]," a New York-based trader said.

The additional 0.625 point expansion makes for a 2.25 point to 2.875 point gain for the last three sessions.

The underlying shares had popped as well and are still ahead for the week despite Thursday's 9.4% drop. Propelling the securities was positive news out of its Mountain Pass, Calif., rare earths facility, which will be starting up on schedule.

conwert Immobilien prices

conwert Immobilien's €80 million of 4.5% convertibles due in 2018 have a higher yield compared to the older convertibles that had a seven-year term at issue and a lower 1.5% coupon, or 3% yield. Both issues, the one priced Thursday and the one priced in November 2007, had 30% initial conversion premiums at issue.

conwert Immobilien is a Vienna, Austria-based real estate management and development firm focusing on redevelopment of properties throughout Central Europe.

The new issue, priced via bookrunner Barclays, with co-lead manager Raiffeisen Centrobank AG, have a conversion price of €11.59, and there is an investor put at par plus interest at three years.

conwert will use the proceeds of the offering for the repurchase of its outstanding 2014 convertibles at 107.9637% of the principal amount plus accrued interest.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Ciena Corp. Nasdaq: CIEN

conwert Immobilien Invest AG Vienna: CWI

Intel Corp. Nasdaq: INTC

James River Coal Co. Nasdaq: JRCC

Molycorp Inc. NYSE: MCP

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