AMR recoups 6.5 points from filing collapse; WebMD better; Take-Two trades flat to higher

By Rebecca Melvin

New York, Dec. 2 - The convertibles market was pretty quiet on Friday and didn't keep up with the rally in equities this past week, perhaps in part because high-yield issues were shaken by another bankruptcy bombshell when American Airlines parent AMR Corp. filed for Chapter 11 bankruptcy protection from creditors on Tuesday.

But the AMR convertibles recovered about 6.5 points during the week from their initial 25-point collapse and were trading at about 21.50 on Friday afternoon.

"The first day it traded down pretty hard," a New York-based analyst said of AMR, quoting the low print at the 15 mark on Tuesday.

AMR was the latest in a string of bankruptcies that have hit companies with bond issues in the convertibles market. Last week, PMI Group Inc. filed for bankruptcy and before that it was MF Global Holdings Ltd.

Convertibles didn't keep up with the equity rally primarily because high yield didn't keep up with the rally, the New York analyst said.

"Most of the high-yield bonds in the universe were hit pretty bad with AMR," the analyst said. "A lot of high-yield debt was down a few points on the filing."

A few names that recovered during the week didn't continue to run higher on Friday. Clearwire Corp. was an example of this. But Radian Group Inc. traded in the range of 44 bid, 45 offered on Friday, compared to 43 on Tuesday.

Meanwhile, WebMD Health Corp.'s 2.5% convertibles were said to have come in about 2 points on Friday to 89.875 bid, 90,625 offered versus an underlying share price of $36.04, compared to where one market player thought the market stood, which was at 92.5 bid, 93.5 offered versus the same $36.04 share price.

Take-Two Interactive Software Inc. looked to have changed hands at levels flat to slightly higher on previous markets, however.

"There's not much appreciation, most of [the bonds are mixed," a New York-based sellsider said.

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