Los Angeles-based Trust Company of the West has been adding to defensive high-yield sectors such as cable, media, broadcasting and gaming. Melissa Weiler, portfolio manager in the $5 billion high-yield group, says companies in those sectors are asset-rich and have relatively stable cash flow. Further, they receive a lot of equity funding, placing bondholders in a relatively attractive position in the capital structure. For example, TCW purchased PrimeMedia 87Ž8% senior notes of '11 (Ba3/BB-), when they fell from $95-96 to the low 90's after announcing an acquisition earlier this month. When it became clear that the acquisition would be funded through equity, the paper rebounded, and was trading at $96 last week. TCW recently bought new issues by Quebecor (B2/BB-) and the Mediacom 11% notes of '13 (B2/B+). It also picked up some Charter Communications notes of '11 (B2/B+) when those bonds dropped about two points on rumors that the firm would try to compete with Comcast for AT&T's cable business.
TCW also purchased Boyd Gaming's recent issue, the 9.50% notes of '09 (Ba3/BB-). Weiler says Boyd is a strong double-B company, which operates in several jurisdictions--a definite plus in the gaming sector.
TCW uses the Salomon Smith Barney High Yield Cash Pay Index as a benchmark. The index includes 25 different sectors, but TCW diverges most significantly in media and broadcasting, where it allocates 7-8% versus the index's 2.7%, and in telecom, where TCW allocates only 3.5% versus Salomon's 9%.
