As the appetite for yield continues,ABN AMRO Asset Management is finding it increasingly difficult to identify anything on the high-grade new issue calendar in which it wants to invest, according to Charles Ullerich, portfolio manager at the Chicago firm. "Many deals we like continue coming at very tight levels. Things appear to be getting done that wouldn't get done in a less frenzied market," he says.
Rather than buying new issues, ABN has continued adding to its allocation in the secondary market, such as the Qwest Communications 7.25% notes of '11, which were bid at 91.5 last Tuesday, ahead of expectations that the long distance carrier might publish restated financials from 2000 and 2001 and resolve an accounting investigation by the Securities and Exchange Commission. "People may say they're in a declining industry, but those phone lines aren't going away at the flip of a switch," he says.
Volatility in recent issues such as Worldspan's 9.625% notes of '11 has caught the attention of Peter Ehret, portfolio manager at AIM Advisors. He notes that the appetite for dicier deals recently included a rare early divided deal by Houghton Mifflin (BW, 10/6). Still, he is not overly concerned about future blowups. "Certainly there are companies that have market access now that didn't have it 18 months ago, but the mere fact that people are openly worrying about this shows that we're a long way from that haywire stuff that we saw in the late 90s."
