Convertibles quiet, mostly lower; Citigroup comes in; LDK falls; AMD 6% convertibles add

By Rebecca Melvin

New York, Dec. 18 - Convertibles were quiet and mostly lower on Friday as some investors took some profits and everything followed equity markets lower, market sources said.

Equities managed to eke out gains late in the day after trending lower much of the week. The Nasdaq Stock Market hadn't really sold off until Thursday, however.

"Some people were taking profits off the table, and there were dealers flattening out positions ahead of next week when no one is around; that always slaps things around a little bit," a New York-based sellside trader said.

Citigroup Inc.'s new 7.5% mandatory convertible preferred shares "came in," as those securities traded little changed against a higher common stock price.

"They came in. They're right around where they were yesterday at 102 with the stock up," a New York-based sellsider said.

LDK Solar Co. Ltd. slumped after running up on Thursday when the Chinese maker of solar wafers said it would be pricing an offering of American Depositary Shares and may consider selling assets as it faces a cash crunch.

But Suntech Power Holdings Co. Ltd.'s 3% convertibles due 2013 were up a little.

Advanced Micro Devices Inc.'s 6% convertibles due 2015 gained about 2 points in response to the computer processor chip maker saying it had tendered for $1.35 billion of the company's 5.75% convertible senior notes due 2012.

Overall, the convertibles market was pretty quiet on Friday after being active Wednesday and Thursday due to new issuance.

YRC Worldwide Inc. convertibles were quiet a day after they declined after the company said that it was postponing its exchange offer.

Citi comes in

Citigroup's new 7.5% mandatory convertible preferred shares traded mostly at $102, which was steady compared to its debut Thursday, a sellsider said.

That meant that on a hedged basis the mandatories were weaker versus common shares that added.

The New York-based financial services company's common stock settled at $3.40 on Friday, up 20 cents, or 6.25%.

"It's come in," a New York-based sellsider said at mid-afternoon.

On an outright basis, the mandatories settled up 3.4% at $103.37 on the New York Stock Exchange. The mandatory preferred shares trade under the ticker symbol CprH.

Citigroup priced $3.5 billion of three-year mandatory convertibles, known as tangible equity units, with a par of $100, on Wednesday at the rich end of talk.

Citi also priced 5.4 billion common shares at $3.15 each.

The company noted that at a combined $20.5 billion of the combined offering of common stock and tangible equity units is the largest public equity offering in U.S. capital markets history.

LDK slumps

LDK 4.75% convertibles due 2013 slumped on Friday to 72, which was down about 9 points, after the bonds held up and even expanded a little on Thursday. LDK's shares slid.

On Friday, the bonds were at 72 and the shares fell 99 cents, or 12.6%, to $6.85.

"It doesn't make any sense," a New York-based sellsider said. "They came out with the stock offering and said they were selling assets yesterday, and the converts rallied; no one cared if the stock was going down. But then the bonds came down Friday after running Thursday."

On Thursday, the stock fell 14% and the convertibles traded last at 81, which was up 4 points on the day.

LDK said Thursday that it would raise capital and consider selling assets to counter a liquidity crunch it was facing.

On Friday, it priced ADRs at a steep 11% discount to its share closing price on Thursday. The company said VMS Investment Group Ltd. and its affiliates had agreed to buy $50 million to $80 million in convertible preference shares of a new subsidiary that will hold its polysilicon business, which it plans to restructure.

"If we do not successfully execute our liquidity plan, we face the risk of not being able to continue as a going concern," the company said in a filing to the U.S. Securities and Exchange Commission.

However, the Chinese solar company doesn't have any debt coming due for a year or two, and they have a lot of cash right now, a sellsider said.

"Even if they needed to do a new deal or refinance, it's a pretty big company and they should be able to or get help from the Chinese government," the sellsider said.

AMD 6s gain

AMD's 6% convertibles due 2015 traded at 92.25 on Friday, which was up nearly 2 points, according to Trace data.

The company Thursday announced that it purchased $1 billion of the 5.75% convertibles due 2012 and will pay $1.01 billion, including interest, for this tender.

The notes were bought back at $990 per $1,000 principal amount, plus interest.

After this, approximately $485 million of the notes remains outstanding.

AMD is a Sunnyvale, Calif.-based maker of computer processor chips.

YRC quiet at lower levels

The YRC 5% convertibles due 2023 were quiet Friday after falling 2.75 points to 45 on Thursday.

YRC 3.375% convertibles traded down 2 points to 42 on Thursday and were quiet on Friday.

"There was nothing happening today, but they came off Thursday," a sellsider said, adding that YRC is "hard to follow."

The company has an exchange offer pending that the sellsider thinks will get done, but at the moment the vote has been postponed until Dec. 23.

"People think they are going to sweeten the deal," a sellsider said, also indicating that there is a lot of squabbling going on around the case involving the teamsters, the company, Goldman Sachs and the bondholders.

"People think the 8.5% notes are going to hold it up, and some think the converts are going to hold it up, but the 8.5s have a senior claim to the converts. The converts would get nothing, most likely in a bankruptcy," the sellsider said.

Overland Park, Kan.-based YRC was formerly known as Yellow Roadway Corp.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Citigroup Inc. NYSE: C

LDK Solar Co. Ltd. NYSE: LDK

Suntec Power Holdings Co. Ltd. NYSE: STP

YRC Worldwide Inc. Nasdaq: YRCW

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