Newmont Mining up in trade; Equinix gains outright; Savvis lower; RadioShack rises to 112

By Rebecca Melvin

New York, Feb. 11 - Liquidity in the convertible bond market remained pretty weak on Thursday, with traders complaining the market seemed to be in a "funk" and it was difficult to get anything done.

"The market appears to be in a funk. I think a lot of people bought inventory before year-end with the intention of flipping into a strong new year market. Unfortunately consensus appears to have rendered indifference at this point," a West Coast-based sellsider said.

A second sellsider said, "The amount of volume trading is very low. It's hard to get anything done, and this is earnings season."

Equities were up, but perhaps convertibles were selling off in sympathy with high yield, the sellsider suggested.

Newmont Mining Corp.'s 3% convertibles due 2012 were among the most active, moving up in line with their underlying shares, which were pulled into action as commodities led the broader markets higher.

Equinix Inc.'s convertibles were higher outright after the data center services provider said it was opening a new international business exchange in Germany and after reporting lower fourth-quarter earnings that beat estimates on Wednesday.

In the same space, Savvis Inc.'s convertibles printed lower outright, a sellsider said.

But the convertibles of the Forth Worth, Texas-based consumer electronics retailer RadioShack Corp. were stronger.

Amylin Pharmaceuticals Inc.'s 2.5% convertibles due 2011 traded at 98 and were seen settling above that by about 0.5 point, amid no particular news.

Amylin is "getting close to being a decent credit, but just barely," a sellsider said.

Gaylord Entertainment Co.'s convertibles extended gains after the hotel operator posted a fourth-quarter loss but an improved 2010 outlook Wednesday.

Meanwhile, Eastman Kodak Co.'s 7% convertibles due 2017 - which have been active in trade recently - were recommended as an equity alternative by Barclays Capital analysts.

Europe sees volatility

In Europe, convertible prices were highly volatile on Thursday as investors waffled on news that E.U. officials had agreed to provide financial aid to debt-laden Greece, a London-based trader said.

"The market's been pretty skittish throughout the day," the trader said. "All eyes are on the currency, the euro, and looking at dollar beneficiaries. Credits opened initially tighter, but they've widened to close to unchanged on the day...Prices are moving around so quick, the market's very, very jumpy."

"Sovereign proxy names" linked to Greece and Portugal got a slight bounce, while Autonomy Corp.'s newly priced 3.25% convertible due 2015 gained about a quarter-point to trade at 100 versus a share price of 1,506p.

"Autonomy is around issue price," the trader said. "Yesterday at pre-allocation it traded down, then it went to about 101; now it's back down to about issue price. Equities are lower in Europe, so it's just in sync with what's going on."

Equinix edges up

Equinix's 4.75% convertibles due 2016 traded at 134 on Thursday, compared to 131.9 on Tuesday. Those numbers were versus a 2.4% rise in its shares over the three trading days.

Equinix's 3% convertibles due 2014 traded at 103.25 versus a share price of $93.30, a New York-based sellside desk analyst said, and Equinix's 2.5% convertibles traded at 103.75 versus a share price of $93.30.

Shares of Equinix settled up $2.22, or 2.4%, at $95.23 on Thursday in heavy volume.

Equinix said it was opening a new international business exchange data centre in Dusseldorf, Germany, a second in Frankfurt and expanding an existing data centre in Frankfurt.

Analysts have referenced the potential growth in colocation services, which allow traders to cut down on transaction time as their computer servers are matched to an exchange's.

In addition, Equinix posted a sharp drop in fourth-quarter profit but beat estimates. But it also forecast weaker-than-expected first-quarter revenue on foreign exchange losses.

Net income for the fourth quarter fell 82% to $17.7 million, or 44 cents a share, from $97.8 million, or $2.33 a share, a year ago.

Revenue rose 25% to $242.6 million.

For the first quarter, Equinix forecast revenue of $245 million to $247 million, which was below the $247.6 million analysts are expecting.

For all of 2010, the company sees revenue of $1.05 billion to $1.075 billion, below the Street at $1.08 billion.

On Thursday, a Collins Stewart analyst upgraded Equinix shares to "buy" from "hold," an upgrade that comes on the heels of Boenning & Scattergood's upgrade to "outperform" on Tuesday.

Boenning & Scattergood's Stephen Salberta said catalysts for growth exist like demand for financial-trading colocation space, carrier Ethernet exchange services and growth of managed services industry.

Competitor Savvis saw its 3% convertibles due 2012 trade at 90.375 on Thursday, which was a little lower than Wednesday, a trader said.

Savvis is a Town & Country, Mo.-based provider of information technology services.

I like the credit. I like the story. So I don't understand it," a sellsider said of the lower price.

RadioShack looks strong

RadioShack's 2.5% convertibles due 2013 traded at 112 versus a share price of $19.85 on Thursday, which compared to another sellsider's level of 109 bid, 111 offered outright, but versus a share price of $19.25.

The company's earnings are expected to reflect a boost from smartphone sales, according to Goldman Sachs analysts, who are pretty high on the name.

Gaylord extends gains

Gaylord's 3.75% convertibles due 2014 traded at 104.25 versus a share price of $21.50 on Thursday, compared to 102.5 versus a share price of $21.00 on Wednesday.

Shares of the Nashville, Tenn.-based hospitality company jumped 91 cents, or 4.3%, to $22.11 in heavy trade.

Kodak bonds above par

Kodak's 7% convertibles due 2017 were last seen at 109.375 versus a share price of $5.84, according to a Barclays Capital report published Wednesday. On Tuesday, the 7% convertibles traded at 110.5 versus a share price of $5.95.

The Barclays analysts, Venu Krishna, head of equity-linked strategies, and Kannan Venkateshwar, a cross-asset strategy analyst, said that Kodak's liquidity position has improved "meaningfully" as a result of refinancing transactions as well as success in enforcing its digital camera intellectual property (IP) through a settlement with LG Electronics and Samsung Electronics.

The analysts said that as a result they considered the company to have a relatively stable balance sheet.

"Its equity may have limited upside on account of operational improvements. However, we believe the equity could benefit substantially if the company is able to monetize its IP portfolio more meaningfully in the future," the analysts wrote in research published Wednesday.

Standard & Poor's raised its outlook on Kodak to "stable" from "negative" after the company reported a fourth-quarter profit, saying that the Rochester, N.Y.-based company has enough cash for "near-term needs."

Kenneth Lim contributed to this article

Mentioned in this article:

Amylin Pharmaceuticals Inc. Nasdaq: AMLN

Eastman Kodak Inc. NYSE: EK

Equinix Inc. Nasdaq: EQIX

Gaylord Entertainment Co. NYSE: GET

Newmont Mining Corp. NYSE: NEM

RadioShack Corp. NYSE: RSH

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