The secondary market was lighter in general with the exception of a few large movers. Many investors chose to sit on the sidelines, with one noting that because bond spreads are so tight, portfolio managers are wary of selling assets and being forced to reinvest at rich levels. ALehman Brothersjunk-bond conference in Orlando, Fla., also contributed to a quiet week. Here are some notable movers.
Nextel Up A Notch
Nextel Communications saw its new 5.95% notes of '14 (double-B), issued two weeks ago move up almost a point to roughly 99.5 late last week. The paper traded positively after the company received an upgrade from Standard & Poor's from double-B minus to double-B plus, with a positive outlook. Moody's Investors Service also has a positive outlook on the company's ratings. Marcus Jones, senior analyst at Moody's, says Nextel will likely be upgraded later this year if it continues on its current path of reducing debt and growing its subscriber base.
Packing It In
Packaging companies performed poorly on the heels of recent earnings reports in the sector that market professionals consider disappointing. Radnor Holdings, a foam and paper cup manufacturing holding concern, saw its 11% notes of '07 drop from 91 to around 81 and Portola Packaging saw its 8 1/4% of '12 drop from roughly par to 84. Paulo Silva, portfolio manager at Penn Capital Management, states that these packaging companies are suffering as chemical companies have increased their resin costs. Resin costs are significant because they make up a major component of packaging, Silva notes. He adds that the packaging companies have not managed to pass on these higher costs to their customers, which makes them less attractive borrowers.
WKR-Three In Cincinnati
Cincinnati Bell's 8 3/8% notes of '14 fell about three points to trade at par and a half after the company released restated financials and requested a waiver from its bank lenders. David Peterson, analyst at Fitch Ratings, says it put the Midwest telephone operator's ratings on a negative outlook due to the waiver request. Fitch rates the senior unsecured debt single-B plus.