WellPoint flat to higher in active trade; larger, higher-grade issues trade; RPM in focus

By Rebecca Melvin

New York, April 9 - WellPoint Inc.'s 2.75% convertible bonds due 2042 were flat to better in very active trade amid renewed short interest from hedged players given the valuation of the bond, a New York-based trader said.

Meanwhile other larger issues of higher grade were the flavor of the day with good flow in Intel Corp.'s 2.95% convertibles due 2035 and 3.25% convertibles due 2039. Priceline.com Inc.'s 1% convertibles due 2018 and Gilead Sciences Inc.'s 1.625% convertibles due 2016 were also trading vigorously.

International Game Technology was also trading vigorously with shares rising through the session and ending up 2.8%. The IGT 3.25% convertibles come due May 1 and will likely be active through maturity as holders look to sell them if they see something more interesting to buy.

WellPoint, Priceline, Intel, IGT and SanDisk Corp. made up about 50% of the session's trading volume, a New York-based trader pointed out. "Other than that it was very quiet out there."

RPM International Inc.'s convertibles were in focus after the Medina, Ohio-based maker of specialty chemical products filed a mixed security shelf registration with the Securities and Exchange Commission, sparking speculation whether new convertibles might be issued.

Equities rallied with many technology names extending gains from Tuesday after the minutes of the last Federal Open Market Committee meeting were released Wednesday afternoon.

The Federal Reserve policy makers were unanimous in wanting to drop its employment threshold rate as a signal for rate tightening, and the markets seemed to view the minutes as pointing to a central bank that is more accommodative than previously thought.

The minutes didn't point to what exactly would prompt an eventual hike in interest rates.

Prior to the minutes, the equity indices were mildly higher. But the Nasdaq stock index pushed up a total of 70.914 points, or 1.7%, to 4,183.90 by the end of the day. The Dow Jones industrial average rose 181.04 points, or 1.1%, to end at 16,437.18, and S&P 500 gained 20.22 points, or 1.1%, to finish at 1,872.18.

WellPoint trades actively

WellPoint's 2.75% convertibles due 2042 were seen at 143 late in the day, up from 141.77 previously, according to Trace data.

A New York-based trader said that the WellPoint bonds ended at around 142 but were unchanged on the day on a dollar-neutral, or hedged, basis, given a delta of about 80%.

Shares of the Indianapolis-based health benefits company ended up 16 cents to $96.81.

The bond was very actively traded amid renewed short interest in the bonds from hedged players given their valuation, the trader said.

A second trader said that the fact that the debt is investment grade encourages ongoing activity in these bonds.

WellPoint sold $1.5 billion of the convertible bonds in October 2012 at par.

RPM in focus

RPM International's 2.25% convertibles due 2020 were quoted at 115 bid, 116.5 offered versus an underlying share price of $42.70 but were not heard to have traded.

RPM shares added $1.01, or 2.4%, to $42.68 on the day.

The company filed an automatic shelf registration early Wednesday.

"There was a large outright seller sniffing around" following the filing, a trader said.

If the company priced another convertible deal it could affect the valuation of the existing convertibles.

Mentioned in this article:

Gilead Sciences Inc. Nasdaq: GILD

Intel Corp. Nasdaq: INTC

International Game Technology NYSE: IGT

Priceline.com Inc. Nasdaq: PCLN

RPM International Inc. NYSE: RPM

SanDisk Corp. Nasdaq: SNDK

WellPoint Inc NYSE: WLP

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