ADM's premium points expand in active trade; SM Energy trades in line; Newmont Mining adds

By Rebecca Melvin

New York, Sept. 6 - The convertible bond market was relatively quiet but holding its own Tuesday with stocks selling off early but paring losses into the close and as market players were getting back and recalibrating for the post Labor Day trading.

"It didn't look like it was the most active, and things looked to be in line for the most part," a trader said of the secondary market Tuesday.

As for the primary market, it remained quiet as it has been for the past six weeks. But the trader, who was getting back to work and catching up after vacation, said he anticipates issuers coming to market in the next few weeks even though stock prices are not where most issuers would like to see them following the summer market rout.

Several large, liquid, better credits were active Tuesday, including Vornado Realty Trust, Transocean Ltd. and EMC Corp.

The Transocean 1.5% C series convertibles due 2037 traded outright at 98 on Tuesday, according to a pricing source.

Archer-Daniels-Midland Co. was trading actively and expanded in terms of points of premium over parity compared to Friday. The Decatur, Ill.-based agricultural company said it has acquired two oilseeds processing factories in India. Terms of the deal were not disclosed.

SM Energy Co., formerly known as St. Mary Land & Exploration Co., printed in line with its underlying shares from Friday on about a 90% delta.

Gold producer Newmont Mining Corp. was active in trade as it has been in recent days along with other gold mining companies with volatility in the price of gold. On Tuesday, gold futures for December delivery declined $3.60, or 0.2% to settle at $1,873.30 an ounce after touching an all-time high of $1,923.70. Gold trading on the Comex was shut on Monday for Labor Day.

Hertz Global Holdings Inc. looked to ease another couple of points outright after a 4-point drop on Friday although the paper was not heard in trade on Tuesday.

LDK Solar Co. Ltd. was also a name not heard in trade, but the 4.75% convertibles due 2013 appeared to be stable after plunging 26 points on Friday to 68.25.

The China-based solar wafer producer was downgraded by Argus Research on Tuesday to "sell" from "hold." LDK Solar reported a greater-than-expected quarterly loss on Aug. 29 and said revenue was down 12% on a year-over-year basis. On average, analysts predict that LDK Solar will post earnings of $0.03 per share next quarter.

Equities ended Tuesday's session with their third straight loss on fears about the European debt situation. The S&P 500 stock index dropped 9 points, or nearly 1%, to 1,165.24 and is now down 14.5% from its 2011 high reached at the end of April.

ADM premium expands

ADM's 0.875% convertibles due 2014 traded at 101.75 versus an underlying share price of $26.65 on Tuesday. That was off between 0.5 point to a point from previous levels outright.

Shares of the company ended down 33 cents, or 1.2%, at $27.10 in lighter-than-average volume.

ADM traded with about 40 points of premium over parity on Monday compared to 37 points of premium on Friday, when a market in the issue was reported at 102.125 versus an underlying share price of $28.25, according to a New York-based sellside desk analyst.

ADM announced Tuesday that it was expanding its global oilseed processing capacity through the acquisition from Geepee Agri Private Ltd.'s facilities that process rapeseed, soy and palm.

SM Energy trades in line

SM Energy's 3.5% convertibles due 2027 printed at 138.16 versus an underlying share price of $71.40, which was in line with trades from Friday, using a 90% delta, according to a New York-based sellside trader.

On Friday, the SM convertibles traded at 146.5 versus an underlying share price of $76.5 on both 85% and 88% deltas.

The Denver-based company is an independent oil and gas company.

But hedge fund investors are looking at individual valuations, not sectors like energy or industrials, the trader said.

Newmont Mining adds

Newmont's 3% convertibles traded at 143.25 versus an underlying share price of $65.55 on Tuesday. That compared with a dealer purchase on Friday at 137.25 versus an underlying share price of $62.47, according to a New York-based trader.

Friday's trade had a 90% delta and puts the upside breakeven at $70.00, he said.

The Newmont 1.625% convertibles due 2017, or the B notes, traded at 153.875 versus an underlying share price of $65.20 on Tuesday.

Shares of the Denver-based gold and copper mining company ended in positive territory by 34 cents, or half a percentage point, at $64.51 in volatile trade.

The weak dollar has helped boost gold prices in recent sessions, building on the safe-haven trade as investors sought refuge from concerns about slowing economic growth and the declining dollar.

Other convertible gold names include Goldcorp Inc. and Kinross Gold Corp.

Mentioned in this article:

Archer-Daniels-Midland Co. NYSE: ADM

EMC Corp. NYSE: EMC

Hertz Global Holdings Inc. NYSE: HTZ

LDK Solar Power Co. Ltd. NYSE: LDK

Newmont Mining Corp. NYSE: NEM

SM Energy Co. NYSE: SM

Transocean Ltd. NYSE: RIG

Vornado Realty Trust NYSE: VNO

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