EDO's new device ups convertibles, stock; Diodes, Intel, AMD all up a bit; Molson Coors slips

By Evan Weinberger

New York, Sept. 6 - EDO Corp. convertibles soared Thursday on reports that it was developing a military technology that could prove extremely useful in Iraq. Diodes Inc. convertibles were also traded, as were other semiconductor issues from Intel Corp. and Advanced Micro Devices Inc.

Boston Properties LP, Molson Coors Brewing Co. and Yahoo! Inc. also traded Thursday, although not with much vigor. While trading maintained some pace Thursday, there were few themes that came through.

While many have speculated that a stagnant new issues market is the main cause for the slowed trading, one trader says that's only part of the problem. Given the uncertainty hovering over credit markets, investors are looking for short-term paper from high-grade companies. The meat has been picked from those bones, he said.

"Getting deeper out in the spectrum, I don't think there's a lot of interest," the trader said. "It all seems highly speculative at this point. You get out to this point next year you don't know what the hell it's going to look like."

An analyst said that ego - reflected in firms looking toward their ranking on league tables - may drive some pickup in new issues toward the end of the month. And the ever-present need for liquidity in a high-cost corporate-lending environment may bring companies back to the convertibles market. If "regular corporate borrowing or straight corporate debt becomes too expensive, maybe people come back to the convertibles market," the analyst said.

One small new deal came in from Toronto-based small-box retail properties group Scott's Real Estate Investment Trust, which priced C$20 million in 7.15% convertible unsecured subordinated debentures due Dec. 31, 2012. The debentures, which have a roughly 16.8% initial conversion premium and a C$10.50 conversion price, priced Thursday before trading began.

Scott's REIT plans to use the proceeds for new property acquisitions and to clear a C$10 million acquisition line.

On the American side, however, pins were dropping in the new issues market and everyone could hear them.

Equity markets had a relatively uneventful day following mixed economic reports, a welcome respite after several weeks of wild swings. The Mortgage Bankers Association announced that the number of homeowners beginning foreclosure proceedings reached an all-time high for the third consecutive month at 0.65%.

But other economic news was good, as the head of the Dallas Federal Reserve reported that inflation was increasingly under control. Also, unemployment claims were down for the first time in seven weeks and there were positive reports on the service industry and retail.

The Dow Jones Industrial Average picked up 57.88 points, or 0.44%, for a close at 13,363.35. The Nasdaq added 8.37 points, or 0.32%, to its total for a close at 2,614.32. And the Standard & Poor's 500 also moved up, posting a 6.26 point, or 0.43%, gain for a close of 1,478.55.

New EDO technology lifts notes

EDO's 4% convertible senior subordinated notes due Nov. 15, 2025 went on a big upswing after CIBC World Markets upgraded the company based on reports of a big rise in military contracts. The New York-based defense contractor said that the Defense Department raised the ceiling on its purchase of EDO's Spiral 2.1 CREW devices. The devices are designed to jam the frequencies used to set off many roadside bombs and can be mounted on vehicles. Roadside bombs have been responsible for many American and other casualties in Iraq and Afghanistan.

The convertibles closed Thursday at 151.25 versus a closing stock price of $48.22. They closed Wednesday at 139.5 versus a stock price of $45.24.

EDO stock (NYSE: EDO) picked up $2.98, or 6.59%, on Thursday.

Semiconductors active again

Westlake Village, Calif.-based semiconductor producer Diodes saw its 2.25% convertible senior notes due Nov. 1, 2026 close at 101.75 versus a closing stock price of $30.17. They closed Wednesday at 101.625 versus a stock price of $30.74.

Diodes stock (Nasdaq: DIOD) dropped 57 cents, or 1.85%, on Thursday.

Santa Clara, Calif.-based Intel saw its 2.95% junior subordinated convertible notes due Dec. 15, 2035 close at 104.5 versus a closing stock price of $26.15. That represents a small gain from Wednesday, when the convertibles closed at 104.125 versus a closing stock price of $25.99.

Intel stock (Nasdaq: INTC) gained 16 cents, or 0.62%, on Thursday.

Another semiconductor convertible that changed hands Thursday was Advanced Micro Devices' 6% convertible senior notes due May 1, 2015. The Sunnyvale, Calif., company's convertibles closed at 86.25 versus a closing stock price of $12.94. They finished trading Wednesday at 85.5 versus a $12.90 share price.

AMD's stock (NYSE: AMD) gained 4 cents, or 0.31%, on Thursday.

AMD's neighbor in Sunnyvale, the internet service provider Yahoo!, saw its zero-coupon convertible senior notes due April 1, 2008 continue their rise, closing at 121.625 versus a closing stock price of $24.15. They had closed Wednesday at 121.125 versus a stock price of $24.10.

Yahoo! stock (Nasdaq: YHOO) picked up 5 cents, or 0.21%, on Thursday.

Other activity

Molson Coors' 2.5% convertible senior notes due July 30, 2013 closed Thursday at 104.75 versus a closing stock price of $88.68. The Montreal-based beverage maker's convertibles closed Wednesday at 105.25 versus a stock price of $89.46.

Molson Coors stock (NYSE: TAP) slipped 78 cents, or 0.87%, on Thursday.

Boston Properties, a Boston-based office real estate investment trust, saw its 3.75% exchangeable senior notes due May 15, 2036 close at 109.75 versus a closing stock price of $99.13. That was a slight gain from Wednesday's close of 109.5 versus a stock price of $98.47.

Boston Properties stock (NYSE: BXP) gained 66 cents, or 0.67%, on Thursday.

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