Newmont falls; Human Genome up on earnings, health care names bid higher; Annaly sells add-on

By Rebecca Melvin

New York, March 2 - Two convertible bond issues of gold mining company Newmont Mining Corp. fell on Tuesday as gold prices soared and supported a nearly 3% increase for their underlying shares. But Newmont's stock was down slightly in after-hours trading.

The convertible bond secondary market was more active Tuesday than it has been for weeks, with Trace volume breaking $1 billion of bonds for the first time in awhile, sources said.

Nevertheless, the market seemed pretty quiet to market players, with some of the large, liquid issues absorbing some of that volume, and thereby keeping the Street generally subdued, according to several sellsiders.

Precious metals names were active, including Newmont Mining, which typically moves in line with underlying shares.

"I think it's mostly outright, directional trading," a New York-based sellside trader said of the Newmont convertibles.

"There was definitely a decent amount of volume today, with $100 million in volume before the open. There seemed to be some portfolio kind of things going on," the sellsider said.

Also in the metals space, Allegheny Technologies Inc. was in trade.

Biopharmas eyed

Human Genome Sciences Inc.'s 2011 convertibles traded higher after the Rockville, Md.-based biopharmaceutical company reported a fourth-quarter loss that was narrower than expected on revenue that soared.

M&A speculation also drove a fair amount of activity in the health care space - including biopharmas - after news Monday that Melville, N.Y.-based OSI Pharmaceuticals Inc. received a hostile takeover bid.

Cephalon Inc.'s shares were higher again, pulling the Cephalon 2.5% convertibles into trade at higher levels, and BioMarin Pharmaceutical Inc. was also higher.

Patriot seen as takeover play

Also on the M&A front, a rumor emerged Tuesday that Patriot Coal Corp. may be the takeover target of Massey Energy Co. The Patriot convertibles were indicated a point higher at 82.85 as their underlying shares jumped 11% in heavy volume.

Technology companies like ON Semiconductor Corp. and SanDisk Corp. were also among top-volume names trading in the convertibles market.

Ford Motor Co. convertibles traded higher during the session, although the underlying shares, which traded in ultra heavy volume, ended lower on the day.

Ford reported Tuesday that its U.S. sales were up 43% for February versus a year earlier and 22% higher than January. The Ford vehicle sale total surpassed General Motor Corp.'s for the first time in many years - albeit by only some 330 vehicles.

Annaly returns for more

In the primary market, Annaly Capital Management Inc. priced an additional $100 million of 4% convertibles due 2015 at par Tuesday, bringing the total of that issue, which initially priced in early February, up to $600 million, according to a syndicate source.

The original Annaly Capital bonds priced at a discount of 98 but closed Monday at 101.5. The bond issue was indicated slightly lower at 101.325 at the close Tuesday.

New issuance has been in a dry spell, and last month's new issues consisted of three deals, including information technology company CSG Systems International Inc., Annaly Capital and energy company BPZ Resources Inc.

Overseas, London-based metals and mining company Vedanta Resources plc launched a $775 million offering of seven-year convertible bonds that were talked to yield 3.5% to 4% with an initial conversion premium of 35% to 40%.

Vedanta bid higher in the gray

Vedanta's $775 million offering of seven-year convertible bonds was seen bid up by about 0.5 points in the gray market on Tuesday, a London-based trader said.

"They seem reasonably priced," the trader said. "I think some of the investors who are holding the older issue will also be trying to buy these because they're more attractive, so you could see some demand from that."

Vedanta's existing 5.5% convertibles due 2016 closed at about 121.5 on Tuesday. The common stock closed at 2,554p, lower by 3.29% or 87p.

Bookrunners JPMorgan Cazenove and Morgan Stanley have a greenshoe of $75 million in the Regulation S offering.

Proceeds will be used to refinance existing debt and for general corporate purpose. Vedanta is a London-based mining company with operations in India, Zambia and Australia.

Barclays Capital convertible analyst Luke Olsen wrote in a note that the deal would look "compelling if it prices on mid or better" using a credit spread assumption of 550 basis points and a volatility of 29%.

"Subject to pricing, we prefer the new issue to the existing 2016 convertible because of its shorter tenor given its first put in 2013 (cf. 2014 for the existing convertible), which also places it before the 2014 straight bond," Olsen wrote. "Notwithstanding, we recommend hedging the credit if possible."

Newmont Mining falls

Newmont's 3% convertibles due 2012 traded Tuesday at 117, which was down 8 points from the previous session, according to Trace data.

The paper had traded as high as 131.5 during the day and compared to about 125 on Monday.

Newmont's 1.25% convertibles due 2014 traded last at 120, which was down 8.5 points on the day.

But Newmont's 1.625% convertibles due 2017 traded last at 132.25, which was up 2.851 points for the day, after earlier trading as low as 123.75, according to Trace data.

Gold futures hit their highest level in six weeks amid high demand from investors. Gains accelerated sharply when the April most-active contract rose through a key technical level that spurred additional buying. Fund buying was reported in gold and other commodities.

The April gold contract climbed $19.10, or 1.7%, to $1,137.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

In keeping with its commodity sector, Newmont is a volatile name, which has been gradually moving higher in recent weeks. On Jan. 20, the Newmont 3% paper traded at 121 versus a share price of $45.65.

Human Genome, other biopharmas add

Human Genome Sciences' 2.25% convertibles due 2011 traded at 202.5 versus a share price of $30.50 on Tuesday, according to a New York-based sellside desk analyst. That compared to 198 on Monday.

Human Genome shares traded higher early in the session and then pared gains, ending up 26 cents, or 0.87%, at $30.09. Earlier the stock was as high as $30.73.

The company posted a narrower-than-expected fourth-quarter loss of $9.7 million, or 6 cents a share, compared to a loss of $61.9 million, or 46 cents a share, a year earlier. Analysts had been expecting a loss of 10 cents a share.

Revenue surged to $53 million from $12.9 million, boosted by sales of the inhaled anthrax treatment ABthrax to the U.S. government.

Meanwhile BioMarin's 1.875% convertibles due 2017 traded at 115.75 versus a share price of $20.65 during the session, according to a New York-based sellside desk analyst.

The convertibles were seen closing out the session at 116.47 compared to 114.35 on Monday.

Shares of the Novato, Calif.-based biopharmaceutical company ended up 55 cents, or 2.7%, to $21.22.

Cephalon's 2.5% convertibles due 2014 traded at 119 versus a share price of $70.30 during the session, which was up from a level of about 117.7 on Monday. Shares of the Frazer, Pa.-based biopharmaceutical company ended up 88 cents, or 1.3%, at $70.68.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Annaly Capital Management Inc. NYSE: NLY

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Cephalon Inc. Nasdaq: CEPH

Ford Motor Co. NYSE: F

Human Genome Sciences Inc. Nasdaq: HGSI

Newmont Mining Corp. NYSE: NEM

Massey Energy Co. NYSE: MEE

OSI Pharmaceuticals Inc. Nasdaq: OSIP

Patriot Coal Corp. NYSE: PCX

Vedanta Resources plc London: VED

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