Convertibles stabilize as buying continues, jitters ease

By Ronda Fears

Nashville, Tenn., Jan. 31 - Convertibles made a nice rebound Thursday amid a calmer atmosphere, traders said. There were still some sensitive spots with regard to accounting issues and earnings, but most situations were on the mend. The primary market was active as Gabelli delayed its deal for one day while Acxiom Corp. appeared to have advanced its by a day.

"There were still a few hot spots, but for the most part it quietened down considerably today," said a convertible trader at one of the major investment banks. "People seemed to be standing back a bit more today, looking at what they wanted to put their cash into, now that they've sold off some stuff."

Traders described the market as higher but with far fewer spikes than earlier in the week, as stocks continued north. The Dow Jones Industrial Average gained 157.14, or 1.61%, to 9920.00 and the Nasdaq rose 20.59, or 1.08%, to 1934.03.

Players were anticipating terms on the new $110 million mandatory from Gabelli Asset Managment Co. early Thursday, but the deal was delayed until after the close. A source close to the deal said it was delayed at the issuer's request, but was still alive and well. Final terms are anticipated early Friday now. Gabelli shares ended up 40c to $39.40.

Solutia was also at bat with $100 million of mandatories and Acxiom Corp. was pricing $150 million of convertible notes. Solutia shares closed off 4c to $8.89. Acxiom stock added 4c to $14.04.

"The new deals we've been seeing lately have been small, but it's really remarkable that the new issue pipeline hasn't dried up completely throughout this ordeal in the stock market," said a convertible trader at a hedge fund in New York. "Convertibles have really come into their own place in the credit markets, being about to seemingly get some new deals done regardless of what's going on in stocks."

January's issuance more than double that a year before, which launched a record-setting year for new issues of convertibles. The big Ford deal was the bulk of the month's business, though. Most deal sizes were fairly small.

Outside of new deals, traders said buyers were looking eagerly at the beaten down techs for revival prospects. Several semiconductor names were sharply higher, although the group remained widely mixed. Telecom, telecom equipment makers and networking names did not participate in the party to any large extent, traders said, because the Global Crossing bankruptcy is still casting a pall on that area.

"There are some tech areas that people are beginning to feel pretty confident about, but everyone's still a bit leery about telecom," one trader said.

Agilent, Axcelis, ATMI and Symantec were all higher.

Retail was also seeing a delayed surge as a result of Amazon.com's profit earlier in the week, traders said. Amazon's 4.75% convertible due 2009 rose 1.125 points to 60.5 bid, 61.5 offered with the stock up 29c to $14.19, and J.C. Penney, Barnes & Noble and Lowes were all higher as well.

Toward the end of the day, some traders were noticing that some attention was beginning to turn to utility and power names as storms hit the U.S. plains, although the group had been suffering severely from warmer winter weather taking a bite out of normal usage levels. Calpine Corp., an independent power producer that came under fire as the Enron fallout escalated, was higher as investors backed off the intense selling. Calpine's new 4% convertible due 2006 added 1.25 points on the day to 92.25 bid, 92.5 offered with the stock up 14c to $11.20. Mirant, however, continued to sink as the power company posted far lower profits than a year ago, with a $66 million charge related to the Enron bankruptcy, and cut its forecast for 2002. The Mirant 2.5% convertible due 2021 dropped 4.5 points on the day to 67 bid, 68 offered as the stock closed off 4c to $10.01.

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