AMD finds buyers, gains on Citi upgrade; SanDisk adds; Valeant holds in after failed trial

By Rebecca Melvin

New York, Aug. 24 - Advanced Micro Devices Inc. convertibles found buyers and gained about 2 points outright as its underlying shares jumped Monday after Citigroup upgraded the semiconductor company to "buy" from "hold."

Also in the tech sector, SanDisk Corp. saw some trading activity, adding about a point, amid positive trading of its shares.

Valeant Pharmaceuticals International came down a little, but held in compared with its underlying shares after word that a mid-stage trial failed of the Aliso Viejo, Calif.-based specialty drugmaker's experimental pain treatment retigabine.

It "worked on swap," a New York-based sellsider said of the Valeant convertibles.

Terex Corp. extended gains as its shares jumped at the open Monday, but gradually sagged into negative territory by the end of the session.

Overall, the convertible market was quiet as the August vacation period continues. But the market was still seen firm despite summer-slimmed gyrations of the stock markets.

The stock markets ended virtually flat after sporting impressive gains to start the week, and pushing into new upside territory for 2009 so far.

But in regard to the convertibles market, "no one's in," a Connecticut-based sellside trader said.

"Basically, it's firm," the sellsider said of convertibles. "A little bit of money has been coming back into the space, and the bid is there for those who want to take profits."

Primary still quiet

In the primary market, a recent drought of new issuance continued from where it left off last week, which was notable in that there were no new issues of any stripe launched or priced in the United States.

Players were sanguine however that new issuance will resume once September rolls around. "The window is still open in convertibles. There's no reason why issuers won't want to take advantage of conditions right now," a sellsider said.

Advanced Micro adds 2

Advanced Micro's two convertible issues each gained about 2 points after a Citigroup analyst upgraded the name, noting that there are aspects of its businesses that are stabilizing.

The analyst cited its competitive position as likely bottoming amid recent platform wins.

The Citigroup analyst said that the Sunnyvale, Calif.-based chip company would likely outperform its 2010 consensus estimates, which he termed conservative. But he also cited the company's ongoing financing difficulties and said AMD is likely to refinance its 2012 debt.

Advance Micro's 6% convertibles due 2015 saw some pretty decent activity, and traded at 63, sources said, compared to 61 to 61.5 on Friday.

Advanced Micro 5.75% convertibles due 2012, which weren't cited as frequently in trade, were seen at 76.5.

"That paper was up based on the Citi upgrade. That got things going," a sellsider said, noting that most people trade the paper outright, so the move in the convertibles wouldn't be compared to the 8.1% jump in the paper's underlying shares, which settled at $4 per share.

SanDisk better by a point

Another mover in the technology space was the SanDisk.

Its 1% convertibles due 2013 traded at 72, which marks a continued gradual improvement in the name since it fell off a cliff last October, when they dropped to the 40 mark.

The Milpitas, Calif.-based maker of flash memory components saw its shares pare earlier gains, but they still ended the session positive by 24 cents, or 1.4%, to $17.12.

"SanDisk was firm. But most people are letting things ride for the summer," a sellsider said.

Valeant trades on swap

Valeant Pharmaceuticals' 4% convertibles due 2013 traded at 99 versus a share price of $25. The paper had stood at the 90 level at the end of May.

The Valeant Pharmaceuticals 3% convertibles due 2010 weren't seen in trade.

Shares of the Aliso Viejo, Calif.-based drugmaker sagged $2.32, or 8.5%, to $24.85 after the company's press release that retigabine, its experimental treatment for pain associated with shingles, failed to meet the main goal of a mid-stage trial.

The company said nevertheless that further detailed analyses are warranted and ongoing. Retigabine is a first-in-class neuronal potassium channel opener, is currently in late-stage development as an adjunctive treatment for patients with partial-onset seizures. In phase 3 epilepsy trials, retigabine was shown to be efficacious with a demonstrated reduction in monthly seizure rates.

Terex still gaining

Terex's newish 4% convertibles due 2015 traded at 125.141 versus a share price of $17.05 on Monday, which was up from 122 on Friday and 114 on Thursday.

Terex, a Westport, Conn.-based maker of industrial equipment, priced $150 million of convertibles on June 1.

The issue is one of those recently priced, well-in-the-money issues that has been boosted by Johnson Controls Inc.'s announcement last week that it is conducting an exchange offer for its 6.5% convertible bonds due 2012 and 11.5% convertible mandatories due 2012.

The move sparked speculation that other issuers will follow suit and offer to exchange their paper.

From the issuer's perspective, they can buy back the convertibles at a discount to the net present value of the coupons.

Johnson Controls said it is making the exchange offers to reduce its outstanding debt and related ongoing interest expense.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

SanDisk Corp. Nasdaq: SNDK

Terex Corp. NYSE: TEX

Valeant Pharmaceuticals International NYSE: VCX

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