Pre-holiday trading quiet; NetApp adds on hedge; Navistar, Walter in focus; AMR improves

By Rebecca Melvin

New York, March 28 - Pre-holiday trading in the convertible bond market was quiet Thursday, the day before Good Friday and the last trading day of the quarter, market players said.

"It's very quiet with all the holidays going on. There's zero trading," a New York-based trader said.

NetApp Inc. was an exception to the day's sleepy tenor, and those 1.75% convertibles, which mature June 1, traded up nearly a point on a dollar-neutral basis in decent volume on no particular news, a New York-based trader said.

There was a little follow-on activity in names that traded actively on Thursday. Navistar International Corp.'s 3% convertibles traded at 102, which was off 0.25 point from Wednesday's level, with the underlying shares of the Lisle, Ill.-based heavy-duty truck maker down 1.6%.

And Walter Investment Management Corp.'s 4.5% convertibles continued to print, extending gains to nearly 108, from 106.25 notched on Wednesday, with the underlying shares of the Tampa, Fla.-based mortgage services company also slightly lower.

Elsewhere, AMR Corp.'s 6.25% convertibles due 2014 were up 0.125 point at 110.625 on Thursday, according to Trace data, on the heels of bankruptcy court approval of its merger agreement between AMR's American Airlines and US Airways by judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York.

A year ago, the AMR convertibles were trading at less than half that level at around 46.

Equities ended solidly higher in light volume, with the S&P 500 stock index notching a record high of 1,569.08, which was up 6.24 points, or 0.4%, on the day. The Dow Jones industrial average rose 51.07 points, or 0.4%, to 14,577.23, and the Nasdaq Composite index added 11 points, or 0.3%, to 3,267.52.

NetApp adds dollar neutral

NetApp's 1.75% convertibles due June 1, 2013, traded up to 108 bid, 108.25 offered versus an underlying share price of $33.70. That was up more than a point on an outright basis and nearly a point on a dollar-neutral basis.

Shares of the Sunnyvale, Calif.-based data storage company gained 42 cents, or 1.3%, to $34.13 for the session.

"It was one of the more active names. Although it's been a slow week, we were seeing some flow in that," the New York-based trader said, adding that on a hedged basis with the stock up 1%, the paper was up 0.75 point to 0.875 point on a dollar-neutral basis.

The trader said there was no specific news spurring the name; it is simply one of the market's more liquid names and one of the more active names for the week.

Navistar, Walter in focus

Navistar's 3% convertibles due 2019 traded around 102, which was slightly off the highs of Wednesday and in line with the underlying shares, which were down 15 cents, or 0.4%, to $34.48 in late-afternoon trade.

The Navistar convertibles were boosted Wednesday with Navistar's $300 million add-on to its 8.25% senior straight notes due Nov 1, 2021.

Meanwhile, Walter's 4.5% convertibles due 2019 continued to rip, moving up to 108 Thursday, after jumping to 106 bid, 106.50 offered on Wednesday, which was up nearly 2 points on the day.

Shares of the Tampa, Fla.-based mortgage services company edged higher by 12 cents, or 0.3%, to $37.16 in late-afternoon trading ahead of a three-day holiday weekend.

The shares had been significantly higher but pulled back around noon ET. They still clawed back to positive territory and extended a turnaround from last week when the shares and the convertibles dropped on disappointing earnings.

A new loan modification program announced Wednesday was said to have reinvigorated the name, which was trying to recover from last week's 21% drop in the shares.

AMR adds a little more

AMR's 6.25% convertibles due 2014 traded up 0.125 point to 110.625 with the underlying shares that trade over the counter gaining 12 cents, or 3%, to $4.12.

The Fort Worth, Texas-based parent of American Airlines, which filed for bankruptcy on Nov. 29, received bankruptcy court approval for its merger agreement with US Airways on Wednesday. But the court gave its thumbs up without approving a $19.9 million exit package for outgoing AMR chief executive Tom Horton.

The next step in the bankruptcy process is to have the merger plan approved by creditors and antitrust regulators. The companies hope to close the merger by the third quarter.

Mentioned in this article:

AMR Corp. NYSE: AMR

Navistar International Corp. NYSE: NAV

NetApp Inc. Nasdaq: NTAP

Walter Investment Management Corp. NYSE: WAC

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