Convertibles little changed ahead of bank plan; Newmont weakens; ViroPharma plunges outright

By Rebecca Melvin

New York, Feb. 9 - Convertibles players said delay of the Treasury Department's bank rescue plan put a damper on the market in terms of liquidity Monday, but pricing was little changed after strengthening on Friday.

The Obama administration postponed until Tuesday the plan that Treasury secretary Timothy Geithner was expected to unveil on Monday.

The plan will outline initiatives aimed at helping stabilize the U.S. financial system.

"It was dead today, really dead. I guess we're waiting on the Geithner thing," a New York-based sellside trader said.

Bank of America Corp. convertible preferreds, which were a major focus of trade last week, weren't heard in active trade Monday despite a 12% jump in their underlying shares.

Among the most active names were energy and commodity names, a New York-based sellside trader said.

ViroPharma Inc. fell outright, but hedge players were seen coming out OK after the Exton, Pa.-based biotechnology company's shares plunged more than 50% after the its Maribavir antiviral compound failed a late-stage study.

If holders "were short a lot of stock, they probably did OK," a New York-based sellside desk analyst said of the ViroPharma convertibles.

Transocean Inc. was flat to higher, among the day's most actively traded names; meanwhile, Nabors Industries Ltd., another oil services company, was little changed.

Oil prices extended losses, slipping to under $40 a barrel on Monday amid speculation about rising supplies.

Newmont Mining Corp. weakened during the session in tandem with lower prices of both copper and gold.

Nabors, Transocean flat to higher

Nabors Industries' 0.94% convertibles due May 2011 ended at about 85 after trading during the session at 87. Shares of the Bermuda-based land drilling services company ended near their lows for the day but were still in positive territory at $11.92, up 9 cents, or 0.76%.

Transocean's 1.625% series A convertibles due 2037 ended the day at about 88, little changed from previous levels.

Shares of the Houston-based offshore drilling services company ended up $1.01, 1.7%, at $60.74, in nearly average volume.

The Transocean 1.5% series B convertibles due 2037 ended the session at 84, and the Transocean 1.5% series C convertibles due 2037 settled at 81.75.

Crude oil for March delivery fell 1.5% to settle at $39.45 a barrel on the New York Mercantile Exchange. Oil is down 11% this year and 57% from a year ago.

Oil was higher last week when it traded between $38 and $43 a barrel. On Friday, oil fell 2.4% to $40.17 a barrel after Labor Department jobs data showed the unemployment rate was up to 7.6%, up from 7.2% in December and up from 4.9% a year ago.

Slowing economies both here and abroad could cause global oil consumption to be reduced.

Newmont edges lower

Newmont's 3% convertibles due 2012, traded early in the session at 114.25 versus a share price of $40.75 on Monday, but were seen settling lower at about 112.825 versus a share price of $40.26.

Newmont's series A 1.25% convertible senior notes due 2014 traded at 109 early in the session and were seen closing lower at about 106 Monday.

Newmont's series B 1.625% convertible senior notes due 2017 traded at 106 early in the session and settled lower at 102 bid, 103 offered.

The issues were little changed compared to late January, however, when the Denver-based gold and copper mining concern priced the 3% convertible issue.

Shares of the company ended lower by $1.17, or 2.8%, at $40.26.

Gold retraced some of the gains notched in the last several weeks as investors viewed the safety of gold as less desirable given the prospects of a strong government fiscal stimulus spending and bank rescue package.

Gold futures for April delivery fell $21.40, or 2.4%, to $892.80 an ounce on Monday on the Comex division of the New York Mercantile Exchange.

Meanwhile, copper also slipped, with copper futures for March delivery settling down 1.55 cents, or 1%, to $1.613 a pound on the Comex.

Last week copper jumped 11% on speculation the government stimulus programs would revive economic growth and spur greater metals consumption.

ViroPharma plunges outright

ViroPharma's 2% convertibles due 2017 fell about 20 points outright amid a better than 50% plunge in their underlying shares, but on a hedged basis the move was considered favorable given the paper's high delta.

The 2% convertibles traded at 57 versus a share price of $6.00, compared to previous levels of about 77.

Shares of the biotechnology concern fell $6.47, or 53%, to $5.74 after the company announced that the phase 3 clinical trial for its experimental Maribavir treatment didn't achieve the preliminary endpoints in bone marrow transplant patients.

Maribavir failed to reduce the incidence of cytomegalovirus disease compared to patients who took a placebo or meet key secondary endpoints

"We are extremely disappointed by the outcome of this pivotal study," Vincent J. Milano, ViroPharma's president and chief executive, said in a release.

"We just received these data and there are far more questions than answers; we still have a significant amount of work to do to fully understand this outcome and its impact on the overall program. Our disappointment is no doubt shared by physicians and transplant patients, who must today contend with CMV disease," Milano said.

Mentioned in this article:

Nabors Industries Ltd. NYSE: NBR

Newmont Mining Corp. NYSE: NEM

Transocean Inc. NYSE: RIG

ViroPharma Inc. Nasdaq: VPHM

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