Clearwire extends gains on positive quarterly figures; United Therapeutics paper unchanged

By Rebecca Melvin

New York, Oct. 13 - Clearwire Corp. extended gains Thursday, adding another few points in conjunction with gains in the underlying common shares of the Kirkwood, Wash.-based wireless services provider after it announced some preliminary quarterly numbers that were better than expected.

The name was very active, sources said.

United Therapeutics Corp. was steady and quiet, with none of the newly priced $250 million issue of 1% convertible senior notes seen trading on the Street on Thursday, sources said.

Overall, the convertible bond market returned to a more muted tone Thursday, a day after the risk-on trade stirred better bids in convertible paper.

"The market has bounced off the lows and at this point is digesting it," a Connecticut-based sellside trader said Thursday.

Names like Suntech Power Holdings Co. Ltd. have moved up forcefully in recent days, trading back up above 50 from below 40. But they were quiet on Thursday. The same could be said of DryShips Inc., which has resurged to 65 bid, 66 offered.

Otherwise is was the usual suspects topping volume charts in convertibles, including Medtronic Inc., EMC Corp. and Amgen Inc., and these trades weren't associated with big price movements.

"It just seems very quiet," a New York-based trader said. "The market started to firm up, but there's a Jewish holiday today and with the liquidity gone in our market, these holidays make it just that much harder to get anything done."

The Jewish holiday Sukkot, or Feast of Tabernacles, commenced Thursday.

Still, there is a better tone to the market, aided perhaps by crossover market players entering the convert market from other spaces like high yield and distressed.

Overall markets were slightly softer Thursday, weighed down by data including the Labor Department's new claims for unemployment benefits, which edged down last week by 1,000 to a seasonally adjusted 404,000. When the figure comes in above 400,000, it is taken as likely that the economy is shedding more jobs than it is adding.

In addition, the U.S. trade deficit with China hit a new record in August, even as the overall trade gap barely budged.

"Today, I didn't notice anything either way," a trader said about notable convertible market action.

Clearwire jumps on results

Clearwire's 8.25% exchangeable notes due 2040 traded up to around 35 on Thursday and was offered last at 35 but traded at 34 late in the session, which was up from 31 bid, 32 offered on Wednesday.

The Clearwire convertibles were trading around 25 on Oct. 10.

"They were active and up with the common," a Connecticut-based trader said. "They trade outright but they move in step with the common."

The wireless services company announced record quarterly revenue as a result of subscriber base growth and lower expenses.

The company said that it will report record quarterly revenue of about $332 million, which is up 126% year over year, for its third quarter when it reports earnings in the coming weeks.

Net wholesale subscriber additions are expected to total a record 1.9 million for third quarter, representing about 29% sequential growth in ending wholesale subscribers. Third-quarter 2011 ending subscribers are expected to be about 9.5 million.

Clearwire expects to have an improved adjusted EBITDA loss by more than 50% in the third quarter as compared to pro forma adjusted EBITDA loss for the second quarter.

Available cash at $700 million as of Sept. 30 was lower than at the end of June but higher than expected.

Majority owned by Sprint, Clearwire's shares fell by about a third last Friday after Sprint said it planned to stop selling phones for use on Clearwire's WiMax network at the end of 2012.

Clearwire needs about $1 billion in new funding to support its operations and upgrade its network.

United Therapeutics unchanged

United Therapeutics' 1% convertibles due 2016 were seen at about 100.375 bid, 100.875 offered versus the closing share price of $39.75, which was little changed compared to where it ended on its debut Wednesday.

One trader still had the paper on a 70% delta and said that they didn't change but only moved delta neutral with the underlying shares.

Traders attributed the lack of action in the new issue to the fact that the deal was done on swap.

"It was not even quoted. Yesterday, all we saw was one market in the morning and that was a point wide," a New York-based trader said.

Coming on swap means that players are unlikely to flip out of the paper regardless of the stock. There is a short position that was made with the long.

Shares of the Silver Spring, Md.-based biotechnology company ended slightly higher by 31 cents, or 0.8%, on the day.

"I have a lot of guys that didn't care on it," one trader said, adding that convertible action in the last day or so has been "gap-y."

United Therapeutics priced $250 million - including the $40 million over-allotment option - of convertible notes due 2016.

Proceeds from the deal underwritten by Deutsche Bank Securities Inc. will be used for a recently approved stock repurchase program.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Clearwire Corp. Nasdaq: CLWR

DryShips Inc. Nasdaq: DRYS

EMC Corp. NYSE: EMC

Medtronic Inc. NYSE: MDT

Suntech Power Holdings Co. Ltd. NYSE: STP

United Therapeutics Corp. Nasdaq: UTHR

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