Investors booked profits last week, locking in some recent gains and leading to wider spreads for the market in general. Some buyers also sold in the secondary market to make room for new issues. Trading was weaker toward the end of the week, fueled by several dividend deals in the primary market and some disappointing earnings reports. Here were notable movers.
Dividend, Downgrade Drops Dex
Dex Media Inc., a unit of Qwest Communications International Inc., had its 9 7/8% notes of '13 trade at 112.5 on Wednesday, down from 116 earlier in the week. The fall came after Dex sold a $361 million dividend deal last week, which caused Moody's Investors Service to downgrade the company to Caa2. The downgrade forced some investors to sell out of the new triple-C notes due to their investment guidelines, according to one buy-sider.
Qwest Disconnects
Qwest Inc. saw its 13.5% notes of '10 down as much as three and a half points on the week. The downfall, according to one portfolio manager, was a combination of the triple-C bonds rating and the announcement of a new $1.7 billion offering from the company. He noted that triple-C bonds have performed poorly of late, partly reflective of the new dividend deals coming to market, which in turn are leading to some downgrades.
Tenet Bonds Act Ill
Tenet Healthcare bonds dropped seven points after the company said it planned to sell 27 hospitals and that it was taking a $1.4 billion pre-tax hit to earnings. The 6.5% notes of '12 traded at 91 as of early last Thursday. The company's announcement also caused Standard & Poor's to downgrade the company to single-B plus, from double-B minus.
Parmalat Reverses Gains
One week after its bonds traded more than five points higher based on speculative recovery estimates, Parmalat SpA's bonds gave back the gains and then some and dropped about 10 points last week. The move came after reports that the company is deeper in the red than had previously been thought. Parmalat has six times more debt than originally assumed, for a total of $18 billion. The dollar-denominated 6 5/8% notes of '08 traded at roughly 12 cents on the dollar early Thursday, up from around 20 before the news.
