By Kenneth Lim
Boston, Jan. 18 - The new Dendreon Corp. convertibles continued to hold their ground on Tuesday on another quiet trading session for the market.
Kinross Gold Corp. rose slightly after the company said its 2010 production and costs were in line with its previous forecast.
Symantec Corp. was also higher after the common stock received an upgrade from Deutsche Bank.
In the primary market, Ares Capital Corp. announced a $300 million offering of new five-year notes.
The convertible market had another slow session on Tuesday, although activity picked up slightly from the week before, a sellside trader said.
"Today was a little better," the trader said. "Stocks are doing better, issuance is picking up again, albeit slowly."
Earnings season has been the most consistent driver of activity so far this year, the trader added.
"Four times a year we get have quarterly earnings season to help us get through the doldrums," the trader said.
Dendreon stays afloat
Dendreon's new 2.875% convertibles due 2016 gained one point outright on Tuesday to trade at 101.5 versus a common stock price of $36.60.
The stock closed at $36.90, lower by 0.7%, or $0.26.
The new notes priced Friday at par after arriving at the cheap end of price talk. Dendreon, a Seattle-based biopharmaceutical company, sold $540 million of the notes in an upsized offering.
"Good flow on the new Dendreons," one trader said. "There's a lot of outright interest in the name, so that's helping the new converts to hold up."
Dendreon, which will use the proceeds of the deal to help fund attempts to sell its prostate cancer drug, Provenge, overseas, is expected to succeed in gaining non-U.S. approval for its drug, the trader said.
"They're mostly doing this on their own so they can keep all the profits," the trader said. "From what I read it's probably going to be a question of when, not if they can get approval overseas. If they sell as much as people are expecting, you could see a big jump in the stock."
Success on the regulatory front for Provenge should also help the company's credit spread, the trader said.
"It's going to be positive all around," the trader said.
Kinross meets expectations
Kinross's 1.75% convertible due 2028 rose about a point outright on the back of the company's on-target guidance for 2010 production and costs.
The convertible traded at 102.5 versus a $17.00 stock price. Kinross common stock closed at $16.83, a 0.18%, or $0.03, gain on the day.
"Good activity on Kinross," a sellsider said. "Stock was up in the morning, although it came down during the day, but on the whole it was better to buy."
The gold mining company said before the long weekend that it expected 2010 production to be in line with its previous guidance of 2.3 million to 2.35 million ounces, with average sales of about $505 to $520 per ounce.
The news may have been warmly received by the market simply because the company did not disappoint investors, the sellsider said.
"I think in this case no news was good news," the sellsider said.
Nevertheless, the production represented just a little growth over its 2009 production of about 2.24 million ounces. The name could be more volatile ahead of its Feb. 16 earnings report, the sellsider said.
"The positive part is that there's now a bit more clarity for the name," the sellsider said. "The downside risk is you could get a buy-on-speculation, sell-on-news kind of trade once earnings come out."
Symantec enjoys upgrade
Symantec's 0.75% convertibles due June 2011 changed hands at 105.625 versus a common stock price of $18.05 on Tuesday, higher by about 0.75 point outright. The stock closed at $18.22, up by 4%, or $0.70.
Deutsche Bank stock analyst Todd Raker on Tuesday raised his recommendation for the stock to "buy" from "hold." His also put a new price target of $22.00 on the stock, up by $3.00.
The analyst said the Mountain View, Calif.-based electronic security company is seeing growth in its data protection and encryption businesses. Margins are also expected to increase this year, the analyst added.
A convertible trader said the convertible is currently trading above par on expectations of growth in the stock.
"It's an interesting name to watch now," the trader said. "The conversion price is $19.12 for the As. And the bond's trading at 105.5, so you have just about five months to add just under $2.00 to the stock to break even. So obviously people are quite optimistic about the name."
The convertible could be more volatile within a range as it heads toward maturity, the trader added.
"The bond floor is going to hold, but it's the ceiling that's going to be changing every day," the trader said.
Ares plans deal
Ares Capital plans to price $300 million of five-year convertible senior notes on Wednesday after the market closes, talked at a coupon of 5.75% to 6.25% and an initial conversion premium of 17.5% to 22.5%, sources said.
The notes will be offered at par.
JPMorgan, Bank of America Merrill Lynch, Wells Fargo and Deutsche Bank are the bookrunners of the Rule 144A offering.
Proceeds will be used to repay outstanding debt and for general corporate purposes.
Ares is a New York-based private equity firm.
Mentioned in this article
Ares Capital Corp. Nasdaq: ARCC
Dendreon Corp. Nasdaq: DNDN
Kinross Gold Corp. NYSE: KGC
| Symantec Corp: | Nasdaq: SYMC
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