Telecom troubles drag market lower, Adelphia finds buyers on plunge

By Ronda Fears

Nashville, Tenn., April 22 - Telecoms were sinking again, dragging much of the convertibles market and sentiment along. Lucent Technologies, however, gained some ground on stronger performance albeit in the midst of lowered expectations. Adelphia Communications continued to plunge, but there were some buyers emerging.

"Earnings are taking a toll on the markets but we're seeing some buyers for a few telecom names, like even Lucent, today. We also saw some high-yield buyers for homebuilders," said a convertible trader at a major investment bank in New York.

Lucent's 7.75% convertible trust preferred due 2017 added back 3 points on buying to 92 bid, 92.5 offered as the stock gained 20c to $4.49.

Lucent posted an expected loss but reiterated confidence that it will be back in the black by fiscal 2003. The company said it will cut its workforce to about 50,000 by the end of September - another 6,000 from March 31 and down from 106,000 at Dec. 31, 2000, when the massive restructuring effort got under way.

Patricia Russo, chief executive of Lucent, said in the conference call that the company would not provide top line guidance but said bottom line results are expected to improve.

"We can't do it with any degree of certainty," Russo said of forecasting revenues and earnings.

"We're also very clear about what more we've got to do and we don't expect any help from the market."

Lucent gained on the day, but most of the telecom sector and ancillary groups lost ground along with the broader market.

Corning's 3.5% convertible due 2008 dropped 3.875 points to 95 bid, 95.25 offered with the stock down 42c to $7. Agilent's 3% convertible due 2021 fell 3 points to 124 bid, 124.125 offered as the shares lost $1.25 to $33.75.

Adelphia sank again too, as S&P cut the credit to CCC+ on the possibility that the shares may be delisted from the Nasdaq.

Adelphia has been granted a hearing before Nasdaq to review the delisting notice it received last week for failing to file its annual 10-K report in a timely manner. A hearing is scheduled May 16, which halted the delisting action, so Adelphia shares were still trading.

"There were some buyers for Adelphia," said another dealer.

"If they get delisted, the converts can be put back to them at par. There's some who believe that even in a case of bankruptcy, the assets could cover all the converts."

The Adelphia 3.25% convertible notes due 2021 dropped 1.25 points to 82 bid, 83 offered and the 6% convertible notes due 2006 were quoted down 1.25 to 67.5 bid, 68.5 offered. The 5.5% convertible preferred fell 5.75 points to 47.25.

Adelphia shares closed down 45c to $5.83.

In the midst of widespread negative sentiment, dealers said players were shifting into quality as the economic upturn seems to be farther off than hoped.

"I wouldn't say there's a bona fide flight to quality taking place," one dealer said. "There's still buyers looking to tap into the recovery in tech and telecom. But there were some high-yield buyers in our market today."

D.R. Horton, Lennar and Waste Connections were noteworthy gainers on some fixed-income buying, the dealer said.

Homebuilder D.R. Horton Inc. posted a 68% gain in earnings and was guiding the market toward additional growth through 2004. The company is projecting revenues of $8 billion in fiscal 2003 and $10 billion in fiscal 2004, up from $4.5 billion in fiscal 2001.

D.R. Horton said it expects earnings per share for fiscal 2002 ending Sept. 30 of $2.75 to $2.80.

The D.R. Horton 0% convertible due 2021 added 1.5 points to 69.75 bid, 70.25 offered as the underlying stock gained 59c to $24.94.

Fellow homebuilder Lennar Corp. joined the party, with the stock gaining $1.44 to $54.474. The Lennar 0% convertible note due 2018 added 1.5 points to 72.75 bid, 73 offered and the 0% convertible due 2021 rose 0.625 point to 42.875 bid, 43 offered.

Also higher on a nearly total negative move in the market, traders said, was Waste Connections Inc. The company is due to report earnings after the close Tuesday and a conference call is scheduled for Wednesday at 8:30 a.m. ET.

Waste Connection shares gained $1.10 to $35.28. The 5.5% convertible notes due 2006 added 2.125 points to 117 bid, 118 offered.

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