Remarketed Stanley in trade at 109; Charles River weaker in active trade; AMD, Intel quiet

By Rebecca Melvin

New York, May 14 - The convertible bond market was quiet Friday amid a sell-off in the broader markets.

"No one wants to sell anything down! And no one is willing to step up to buy either," a New York-based sellside analyst said Friday.

Although volatility - which the broader markets have seen plenty of recently - is generally a healthy thing for the convertibles market, potential buyers might be concerned that when they want to sell, there won't be another buyer out there, the sellsider said by way of explanation.

"It was just sleepy, an incredibly quiet day," another sellsider said.

Early in the week, the convertibles secondary market was rebounding dollar neutral in tandem with the stock markets' moves upward, but it softened later in the week.

The softness just continues with the overall credit market, a sellsider said.

Equity market volume has dropped since a week ago, Thursday, when the "flash crash" occurred. And on Friday, the Dow Jones Industrial Average ended down 162.34 points, or 1.5%, at 10,621; the Nasdaq Stock Market fell 47.51 points, or nearly 2%, at 2,347; and the S&P 500 index fell 21.75 points, or 1.9%, to 1,136.

Stanley Black & Decker Inc., which has remarketed its floating-rate convertible notes due 2012, was an interesting name Friday, sources said.

"It's like a new issue," a New York-based sellside trader said, putting fair value at 108. The normally quiet name was seen in trade at 109 versus a share price of $60.75, according to a syndicate source.

Charles River Laboratories International Inc., another normally quiet name, was a top trade of the day, moving a little lower with its stock down $1.00 amid no particular news, sources said.

"It caught someone's radar," a New York-based sellside trader said, calling it a name du jour since it's unusual to see it so active.

Advanced Micro Devices Inc.'s convertibles were very quiet in trade despite a sharp drop in their underlying shares as the broader markets declined and semiconductor shares were lower in particular with graphics chip maker Nvidia Corp.'s weaker second-quarter revenue forecast.

Intel Corp.'s convertibles were also quiet on Friday, with its underlying shares lower, sources said.

Stanley trades at 109

Stanley Black & Decker's floating-rate convertibles traded at 109 versus a share price of $60.75 on Friday. A second source said the paper had fair value of 108.

Stanley is remarketing the bond portion of its mandatory preferred corporate units upon expiration of the stock purchase contract portion. The underlying notes, which mature in 2012, have a floating-rate coupon of Libor minus 350 basis points and a conversion price of about $64.47.

The repurchase contract on the mandatories settled the other day.

The Stanley issue is not a normally active issue, but on Friday it was one of the interesting features of the session, sources said. The issue is $320 million in size.

Stanley received an A- rating from Standard & Poor's on Tuesday.

The New Britain, Conn.-based company is a provider of hand tools, power tools and related accessories.

Citigroup has managed the redistribution of the bond portion of the mandatory. Citi said in a research note about the remarketing that Stanley shares have returned about 20% year to date and is the leader of its peer group.

Stanley performance eyed

Stanley reported first-quarter results in late April, with net sales at $1.26 billion, which was up 38%, compared to the first quarter of 2009.

According to a Citi note, there are only five U.S. convertibles that fit the criteria of a minimum of $250 million outstanding, investment-grade rating, and shortish maturity of two years or less. Those bonds, in addition to the Stanley bonds, include Amgen's 0.125% convertibles, PNC's 4% convertibles, Medtronic's 1.5% convertibles, and Old Republic International's 8% convertibles.

Another 17 convertibles fit the category of investment-grade rating, $250 million or more outstanding and are putable in the next two years.

Stanley's balance sheet grew significantly after the Black & Decker acquisition in March. Its cash on April 3 was $1.5 billion versus $400 million on Jan. 2.

Short-term debt was $708 million, compared to $300 million on Jan. 2, and long-term debt was $2.75 billion, up from $1.08 billion in January. Total debt/capitalization ratio was 35% after the first quarter, down from about 41% at the end of 2009, according to the Citi research note.

Current takes Charles River lower

The Charles River 2.25% convertibles due 2013 traded at 95, which was "in a little" with the stock down a $1.00 at $31.90 on Friday.

Market players were interested to see it so active on Friday. Trace volume was about $13 million shares, but sources said that figure understates activity since more trades were in smaller amounts not registered by Trace. One source estimated that $20 million of Charles River's 2.25% convertibles changed hands.

"They're coming in, trading around 95," a trader said.

Wilmington, Mass.-based Charles River develops animal and other research models for the biotech industry.

AMD, Intel quiet

AMD's 6% convertibles due 2015 were last at 97.3, little changed from previous levels, according to Trace data.

AMD's 5.75% convertibles due 2012 were seen last at 101.

Shares of the Sunnyvale, Calif.-based semiconductor company lost 62 cents, or 6.6%, to settle at $8.80 on Friday.

But neither the Intel 3.25% convertibles due 2039 nor the Intel 2.95% convertibles due 2036 were reported in trade.

Nvidia tumbled 12% after the company projected revenue for the quarter to come in about 3% to 5% below first-quarter levels, implying a forecast of $952 million to $972 million. On average, analysts had expected $991 million.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Charles River Laboratories International Inc. NYSE: CRL

Intel Corp. Nasdaq: INTC

Stanley Black & Decker Inc. NYSE: SWK

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