By Rebecca Melvin
New York, March 2 -The convertible bond market traded mildly on Friday in line with underlying shares, or unchanged on a hedged basis, amid a lack of trading catalysts, market players said.
Traders continued to watch the three Hologic Inc. issues in follow-through action from Wednesday when the Bedford, Mass.-based diagnostic imaging and surgical products company said it exchanged $500 million of its existing 2% convertibles due 2027 for new 2% convertibles due 2042.
Holders of the Hologic bonds made a few points on the initial exchange, which pushed the maturity out by about six years; but on Friday the issues traded mixed, with the newest issue moving a little lower, while the older exchanged issue was up by 0.125 point, according to Trace data.
Otherwise, there was some trading of United States Steel Corp., which saw some buyers this past week, but the convertibles were nevertheless little changed for the week, or roughly in line with the underlying shares.
Alliant Techsystems Inc. was also in trade on Friday, with the Alliant 3% convertibles ending down by nearly a point as the issue saw hedged sellers and outright buyers, a New York-based trader said.
Two new issues that enjoyed "blow out" debuts this week weren't heard in trade on Friday.
DealerTrack Holdings Inc., which debuted in the secondary market on Wednesday, had notched consecutive gains as the underlying shares of the Lake Success, N.Y.-based auto retail services company added for the week.
Stone Energy Corp.'s newly priced 1.75% convertibles jumped upon release to the secondary market Thursday, but the underlying shares slipped on Friday and ended down more than 10% for the week.
Both convertible deals were upsized and priced toward the rich end of talk. They are non-callable, five-year notes being distributed under Rule 144A, and they were both priced concurrently with call spreads that boosted the conversion premium from the issuers' perspective.
"We were bidding on some things," a trader said Friday. "But it was really a sleepy Friday."
Equities slipped on Friday as investors looked to trim some risk heading into the weekend, but for the week, the S&P 500 index ended higher amid mixed economic data for the week.
New Hologic adds
Hologic's newly exchanged 2% convertibles due 2042 were little changed from Wednesday when they materialized in the market after an exchange, trading at about 101.5 bid, 102 offered, but that level was a little lower compared to Thursday.
Holders who participated in the exchange made a few points from about 98 to 101 as the company gave them "a little kiss" to roll them back, a trader said.
"It changes the debt schedule. The remaining ones of the old ones changes to six years. The curve should be a little more downward sloping to the front end," a sellsider said.
U.S. Steel little changed
U.S. Steel's 4% convertibles due 2014 ended the week at about 114.75 versus an underlying share price of $27.51, a trader said, which was essentially in line with where it had been all week. According to Trace data, that level was down about 0.125 point on the day.
Shares of the Pittsburgh-based integrated steelmaker closed down 6 cents, or 0.2%, to $27.51 on Friday.
"There were buyers in U.S Steel this week, which is something we haven't seen for a couple of weeks," the trader said.
It's a play in terms of the overall recovery of the global economy in general and the steel industry in particular, he said.
Although U.S. Steel is a big player in the steel industry, its stock is one of the more volatile, the trader noted.
"They don't always make money and that's a huge issue for a lot of players, especially outright players. But it's good to see people coming back and taking a look at this," he said.
Alliant Techsystems lower
Alliant's 3% convertibles due 2024 ended Friday at 104.5 bid, 105 offered versus an underlying share price of $59.53.
Shares of the Minneapolis-based defense contractor were down by 45 cents, or 0.75%, to $59.50 on Friday.
The issue was seeing action that is pretty much the trend for the convertibles universe currently. They have interest from the outright players, and convertibles "as of right now are dominated by the outright guys," a trader said.
Mentioned in this article:
Alliant Techsystems Inc. NYSE: ATK
| DealerTrack Holdings Inc.: | Nasdaq: TRAK
|
| Hologic Inc. | Nasdaq: HOLX
|
| Stone Energy Corp. | NYSE: SGY
|
| United States Steel Corp. NYSE: X
|
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