JDS Uniphase, Human Genome weaken in thinly traded convertibles market

By Rebecca Melvin

Princeton, N.J., Aug. 12 - Among names mentioned as having traded Friday in the convertible bond market were JDS Uniphase Corp., Human Genome Sciences Inc. and Scientific Games Corp. The bonds traded flat to lower.

Automakers traded mostly lower for a second consecutive day, while airline convertible paper moved mostly sideways, although Northwest Airlines Corp. was slightly firmer. The movement occurred as the broader stock markets sagged amid trade deficit woes, record high oil prices and a disappointing earnings report from Dell Inc.

Meanwhile, ahead of quarterly earnings reports expected Monday, Agilent Technologies Inc. traded flat and Lowe's Cos., Inc. moved lower, according to a Trace trade check.

Trading activity was very "light," so much so that "you can't even tell if things are in or not," said one New York-based sellside trader.

"It's been the worst day all summer," another sellsider in New York said, in terms of the level of activity.

"Investors took the Dell news very seriously. That suggests to me that it's time to buy some techs. Personally I am looking for tech opportunities," a New York-based buyside source said.

That thinking seemed to lift some technology stocks from their lows on Friday, but their convertibles remained languid.

Investors eye tech names

The convertibles of Agilent Technologies remained flat ahead of the Palo Alto, Calif.-based technology company's fiscal third-quarter earnings report expected before the open Monday.

According to a Reuters news report late Friday, the company is expected to announce Monday that it's selling its semiconductor unit to private equity firms Kohlberg Kravis Roberts & Co. and Silver Lake Partners for about $2.65 billion. The unit sells semiconductor chips for mobile phones, printers and other technology equipment.

Also on Friday, the company announced a pact with Taiwan's Sunplus Technology to co-develop a new generation of integrated PC optical mouse system chips.

Agilent's 3% convertibles due 2021 traded in the range of 99.5 bid, 100 offered, flat to slightly weaker from Thursday. Shares of Agilent closed up 29 cents, or 1.1%, at $26.41.

JDS Uniphase convertible slips

JDS Uniphase stock also added 1% on Friday, but its convertibles slipped more than 0.5 point ahead of the optical-components maker's fiscal fourth-quarter results seen Thursday.

The Street consensus calls for the San Jose, Calif.-based fiber optics-components maker to post a loss of two cents per share on revenue of $167 million. In the year-ago quarter, JDS Uniphase reported a loss of a penny per share on revenue of $175 million.

On Monday, J.P. Morgan Securities upgraded the stock to "neutral" from "underweight," saying that improving gross-margin trends are expected.

JSD Uniphase's 0% convertible traded at 79 on Friday, compared to a range of 79.4 bid, 79.9 on Thursday. Its shares closed up two cents, or 1.3%, to $1.55.

Human Genome convertible sags

The older 2.25% convertibles of Human Genome due in 2011 traded weaker at the low end of their recent range at 105.25, versus a stock price of $13.35. Its stock price closed four cents higher than its level at that trade at $13.39, which was still down 1.1%.

The newer Human Genome 2.25% convertibles due 2012 were seen steady at 96 bid, 96.50 offered, which is the range at which the issue closed on its first day in the secondary market on Aug. 4.

The Rockville, Md.-based drug discovery company sold $230 million of the new seven-year bonds to repurchase part of its 3.75% convertibles and 5% convertibles. Those issues weren't seen trading Friday.

Northwest Airlines trade flat to higher

The convertibles of Northwest were flat to slightly higher even as its stock moved lower on Friday when the Eagan, Minn.-based airline raised fares to match increases initiated by its competitors to offset higher fuel costs.

The airline also said it's preparing to bring in 1,500 contract workers and management to replace mechanics and cleaners should they go on strike, as well as replacement flight attendants who may strike in sympathy with the Aircraft Mechanics Fraternal Association.

The mechanics union says it will strike Aug. 19. The union wants Northwest to reconsider its plan to cut jobs, pay and benefits the airline says is necessary to save $1.1 billion a year in operating costs. Northwest says the savings are needed to compete with low-cost carriers and stave off bankruptcy.

On Thursday, chief executive Doug Steenland said the fourth-largest U.S. airline was forced to ask its workers to make painful sacrifices in order to survive.

Northwest's 6.625% convertible traded at 37.5, flat to 0.5 point higher, versus a stock price of $4.05.

Northwest's 7.625% convertible traded flat at 33.75, compared to 33.625 bid, 34.625 offered on Thursday.

Northwest stock closed down nine cents, or 2.2%, at $4.02.

Cheniere faces probe

The new 2.25% convertibles of Cheniere Energy Inc. didn't seem to react to news Friday that U.S. securities regulators have opened a formal probe of the Houston-based liquefied natural gas company's activities.

The company said an informal inquiry into some of its actions had become a formal probe. The investigation is related to the company's agreements and negotiations with Chevron USA, its December 2004 stock offering and trading in its securities, Cheniere said.

The "factual" investigation of actions and communications by the company and its current or former directors, officers and employees and others, is being conducted regarding agreements and negotiations with Chevron USA, the company's December 2004 public offering of common stock, and trading in the company's securities.

Cheniere priced $300 million of 2.25% convertibles on July 22. The issue jumped in its first day of trading to 108.5. Most recently the paper was seen at 116.

On Friday, Cheniere Energy shares dropped 19 cents, or 0.5%, to $36.91.

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