B of A, Wachovia add; Sirius looks weaker ahead of maturity; Newmont Mining, Nabors strengthen

By Rebecca Melvin

New York, Dec. 17 - Better quality, more liquid convertible bond names continued to have better buyers, but few sellers during Wednesday's midweek session; while more questionable issues were often offered, with no takers, market sources said.

Several financial names were in play the day after a Fed rate cut spurred a rally in equities. But equities reversed course Wednesday in pretty thin volume.

"It's quiet. I have some buyers looking for things, but it's getting harder to find," an East Coast-based sellside trader said.

The Federal Reserve on Tuesday cut the Fed Funds target rate to between zero and 25 basis points from the previous target of 100 bps in an attempt to contain the financial crisis.

The move was seen as a largely positive development, although market sources said it was not a surprise.

Bank of America Corp. and Wachovia Corp. convertible preferreds both gained in trade Wednesday, despite their shares settling lower.

Sirius XM Radio Inc., which has convertible paper coming due in February, and with its stock trading at not much more than a dime, has had its paper offered much more frequently than bid, with the longer-dated paper wavering in the low to mid-20s and the paper coming due in February quoted at 80 bid, 81 offered.

Century Aluminum Co., not normally heard in trade, was up.

Newmont Mining Corp. gained as gold prices rose, and Nabors Industries Ltd. was a little higher, despite a lower stock and as oil dropped below $40 a barrel for the first time since 2004.

B of A, Wachovia preferreds up

Bank of America's 7.25% perpetual convertible preferreds gained to 635 compared to about 602. On Nov. 24, the Bank of America preferreds traded at 590.

Shares of the Charlotte, N.C.-based bank dropped back 48 cents to $14.62, which was down 3%.

Wachovia's 7.5% perpetual convertible preferreds traded at 705 and were seen settling at 707, compared to 665 on Tuesday. On Nov. 24, the Wachovia convertible preferreds traded at 610.

Wachovia, another Charlotte, N.C.-based bank, is being taken over by Wells Fargo & Co. Shares of Wachovia closed down 20 cents to $5.88 Wednesday.

"I have been a buyer [of Wachovia] since it was in the mid 50's. When it becomes WFC paper in two weeks, it should trade at 92!" a sellsider said.

Bank of America and Wachovia were issuers of convertible preferreds earlier this year, and in fact a sizable chunk of convertible new issuance was done by financials trying to build their capital structure this year.

Financials may continue to be issuers in the new year, sources believe, but it's unlikely to be in the form of preferreds, which have lost favor with investors given what has happened to the asset class this year, they said.

Sirius XM weaker

Sirius XM 3.25% convertibles due 2011 were offered Wednesday at 24 to 24.5 but were not finding buyers at that level. One sellsider reported an offer at 17, and another source showed the paper settling at 21.9.

The Sirius XM 2.5% convertibles due February 2009 were seen settling at 80 bid, 81 offered.

The Sirius convertibles "have not changed a lot. They have been for sale, for sale, for sale," a Connecticut-based trader said.

Some of the closer-dated paper, which is due in two months, has been taken out via debt-for-equity offers, but there is still $200 million left outstanding out of $300 million, and given where the stock is trading, it is getting tougher to do that kind of deal for the remainder.

"We have one big holder wondering how he's going to get paid," the trader said, adding that the company has a genuine business and something ought to be able to be done. "The question is: are they going to tank the whole capital structure to get it done," he said.

Shareholders are reportedly against a move by the New York-based satellite radio company to do a reverse stock split to prevent the company from being delisted from the Nasdaq stock market.

The stock settled Wednesday at $0.13, which was down 2 cents, or 13%.

The $200 million in convertible debt is not the only maturity Sirius XM is facing in the coming year. All told it has $1 billion in debt coming due in 2009.

Century Aluminum adds

Century Aluminum's 1.75% convertibles due 2024 were in trade Wednesday and settled at 53.25, which was up from about 52 previously.

Shares of the Monterey, Calif.-based aluminum producer gained 18 cents, or nearly 2%, to $9.72 on Wednesday.

The aluminum producer said before the market open that its West Virginia subsidiary will shut down a smelter in that state by Dec. 20, reducing production by about 3.54 tonnes per month. The plant produced 170,000 tonnes of aluminum in 2007.

It also gave employees 60 days notice of a possible permanent shutdown.

"These are economic decisions based on the global economic crisis and the unprecedented decline in aluminum prices," Ravenswood plant manager Jim Chapman said in a news release.

Since reaching an all-time high in July at $3,375 a tonne, aluminum has tumbled to a more than five-year low at $1,440 a tonne on Tuesday.

Newmont, Nabors strengthen

Newmont Mining's 1.625% convertible senior notes due 2017 were traded at 106.5 versus a share price of $40.25, compared to about 105 versus a share price of $40.01 on Tuesday.

The Newmont 1.25% convertibles due 2014 traded at 111 versus the $40.25 stock price. Shares of the Denver-based copper and gold mining company settled down 84 cents, or 2%, at $39.17.

Gold prices rose to their highest level in nine weeks as the dollar tumbled after the Fed rate cut, boosting the appeal of the precious metal as an alternative investment.

Gold futures for February delivery rose $25.80, or 3.1%, to $868.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $883.60, the highest since Oct. 10.

Nabors Industries' 0.94% convertible due 2011 edged higher to 82 Wednesday, compared to about 81 on Tuesday, even as its shares edged lower.

Nabors common stock closed down 5 cents, or 0.38%, to $25.99. Nabors is a Hamilton, Bermuda-based land drilling contractor.

Oil fell below $40 a barrel for the first time in more than four years after the Organization of Petroleum Exporting Countries agreed to trim supply, with the group's 11 members with quotas cutting back current production by 2.46 million barrels a day to 24.845 million barrels a day.

Crude oil for January delivery declined $3.54, or 8%, to $40.06 a barrel at 2:47 p.m. ET on the New York Mercantile Exchange, the lowest settlement since July 13, 2004.

Mentioned in this article:

Bank of America Corp. NYSE: BAC

Century Aluminum Co. Nasdaq: CENX

Nabors Industries Ltd. NYSE: NBR

Newmont Mining Corp. NYSE: NEM

Sirius XM Satellite Radio Inc. Nasdaq: SIRI

Wachovia Corp. NYSE: WB

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