Newmont Mining, Amgen gain; Coeur d'Alene adds on debut; Aspect Medical slumps

By Rebecca Melvin

New York, March 13 - The convertibles market was moving Thursday mostly on individual headlines crossing the tape; but a bounce in the stock markets midday helped spur some additional trading at better levels, market participants said.

A gold price spike prompted trading in several gold-mining convertible names, notably Newmont Mining Corp., which moved up in line with its underlying shares. But the newish convertible issue of Kinross Gold Corp. was mostly flat and not seen in trade, despite a 3% increase in its underlying shares.

The mining sector also drew attention on Thursday with the debut of the new 3.25% convertibles of silver-mining concern Coeur d'Alene Mines Corp.

That issue was viewed as attractive, and seen trading as high as 102; but later in the session the level was closer to 100.5 bid, 101 offered, several sources said, even as the underlying shares gradually rose throughout the day to a 3.2% gain at the close.

The convertibles of Penske Automotive Group Inc. were active, in line with their shares, and Transocean Inc. and Bank of America Corp. improved as the day wore on, one source said.

Elsewhere, Amgen Inc.'s convertibles gained on a 4.9% jump in the company's shares after the benefits of its anemia drugs were affirmed for continued use.

But the convertibles of Aspect Medical Systems Inc. tanked after a study challenged the effectiveness of its anesthesia monitoring device.

The market was definitely better after stocks bounced, but "still a little heavy," one New York based sellside convertibles strategist said.

The turnaround came after a Standard & Poor's report said the end looked in sight for write downs by large financial institutions related to the credit markets' turmoil. Nevertheless, the valuation write downs of subprime asset-backed securities could reach $285 billion for the global financial sector, the S&P's report said, which was higher than the $265 billion published earlier this year.

The agency said it has increased the assumption of percentage write downs of high-grade collateralized debt obligations of asset-backed securities with collateral from 2006 and 2007.

"The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write downs of subprime [asset-backed securities]," S&P credit analyst Scott Bugie said in a written statement.

Prospecting among mining names

Although not a lot of activity was seen in the new Coeur d'Alene 3.25% convertibles, they were considered attractive, especially to outright players, who eyed the rising price of silver and Coeur d'Alene's lagging stock price, which promised to move higher.

"It's been a laggard," a New York-based outright manager said of Coeur d'Alene's stock. Several reasons for this were a couple of acquisitions the company made last year and uncertainties at that time related to Bolivia, from where a large portion of revenue comes, he said.

But as far as those things go, "the clouds appear to be abating," he said.

The issue was seen modeling as much as 7% cheap, using a credit spread of 850 basis points over Libor and a volatility of 45%. Volatility was probably even greater at 60%, but players tend to cap it at 45%.

The issue priced late Wednesday - an upsized $200 million of 20-year convertibles - at the midpoint of talk for the coupon, which was 3% to 3.5%, and at the rich end of talk for the initial conversion premium, which was 25% to 30%.

Deutsche Bank Securities Inc. was bookrunner.

The notes are non-callable for seven years, with puts in years five, seven, 10 and 15. The bonds have full dividend and cash make-whole takeover protection.

The Idaho-based mining company plans to use proceeds to complete construction of the San Bartolomé silver project in Bolivia and to construct the Palmarejo silver and gold project in Mexico. It has mining interests in Alaska, Nevada, Argentina, Australia, Bolivia, Chile and Tanzania.

Coeur d'Alene shares (NYSE: CDE) closed up 14 cents, or 3.2%, at $4.51 on Thursday.

Meanwhile the 1.875% convertibles of Stillwater Mining Co., which priced last week, closed Thursday at 102, almost 103, versus a stock price of $19.03, compared to a close of 100.4, versus a stock price of $17.84 on Wednesday.

The Billings, Montana-based Stillwater is a producer of platinum and palladium.

Its shares (NYSE: SWC) closed up 6.7%.

Gold pushed past the record breaking $1,000 an ounce level on Thursday. And many traders are looking to metals and related commodities as a safe bet as world demand continues to grow and the supply of natural resources by definition are limited. But one convertibles sellside analyst asked if this was in fact "another bubble."

The 1.25% convertibles and 1.625% convertibles of Newmont Mining gained 3.5 points and four points, respectively, as its shares jumped 4.7%.

The Denver-based gold producer has operations in the U.S., Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand, and Mexico

The Newmont 1.25% convertible senior notes due 2014 closed at 135.7, versus a share price of $53.78, compared to 132.28, versus a share price of $51.38 on Wednesday.

The Newmont 1.625% convertibles due 2017 closed at 136.7, compared to 132.72 on Wednesday.

Newmont shares (NYSE: NEM) closed up 4.67% at $53.78.

Amgen gains, Aspect Medical plummets

The Amgen 0.125% convertibles added about 1½ points, while the 0.375% issue gained about ½ point, compared to a 4.87% rise in Amgen stock, after a panel of the federal Food and Drug Administration said that the anti-anemia drugs of Amgen and Johnson & Johnson should continue to be marketed for cancer patients in general, although use should be curtailed for those with certain types of cancer.

The panel recommended against giving the drugs, known as erythropoiesis-stimulating agents, to patients with advanced breast, head or neck cancer due to concerns that the drug could increase the risk of tumor growth. Anemia drugs are often taken by those undergoing chemotherapy.

Although the panel rejected a more extreme option of recommending complete withdrawal of all approved uses of the drugs for cancer patients, Thousand Oaks, Calif.-based Amgen could still face downward pressure on sales of Aranesp.

The Amgen 0.125s were seen closing at 93, versus a share price of $47.18, compared to a close of 91.7 on Wednesday, versus a share price of $44.99 on Thursday.

The 0.375s were seen closing at 87.9, compared to a close of 87.1 on Wednesday.

A key difference between Amgen (Nasdaq: AMGN) and Norwood, Mass.-based Aspect Medical, which saw its convertibles plunge more than 20 points on Thursday, is that Amgen is a biotechnology behemoth with a wide range of therapeutics, while Aspect Medical is basically a one-product company, a sellside convertibles analyst pointed out.

Aspect's 2.5% convertibles due 2014 closed at near 50, down from 78 bid, 80 offered on Wednesday. Its shares (Nasdaq: ASPM) plummeted $4.63, or 45%, to $5.64.

A study published in the New England Journal of Medicine found that Aspect's Bispectral Index isn't any better than older products at preventing anesthesia awareness - or the condition of patients remaining conscious at some level during surgery.

The study compared Aspect's brain-wave monitoring device to an older product that tracks the levels of anesthetic gas exhaled by patients.

Aspect Medical priced $110 million of seven-year convertibles last June.

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