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U.K. High Yield Manager Looks At New Issues, Fallen Angels

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London-based Threadneedle Investments, which manages E700 million in high-yield bonds, is considering new issuance as well as scouring fallen angels for opportunities. Barrie Whitman, fund manager, says he has been taking profits in some of the better-performing names in the portfolio to fund new purchases. He declined to name specific new issues under consideration. Threadneedle is constantly re-evaluating its portfolio and conducting in-depth monitoring of credits so that a sudden change in credit quality or value can provoke a change in the portfolio.

Recently, Threadneedle has taken profits in PTC, a Polish telecom, Grohe, a bathroom products manufacturer, Luxfer, a conglomerate that manufactures engineering materials, Kappa, a Dutch packaging company, BSN, a glass manufacturing company. Whitman says all these names had seen quite a run up and had reached what he considered to be a fair value.

In terms of fallen angels, Whitman has added Vivendi, Fiat, ABB, Rhodia, Xerox, Ahold and Cable & Wireless over the past few months. He says Threadneedle has been focusing on companies that have the ability to de-leverage and improve their credit profiles. He says that, like its other credit decisions, Threadneedle looks at credits on a case-by-case basis and conducts a bottom-up credit analysis. "It's a question of weeding through the opportunities," he says.

Threadneedle has also been active in the new issue market. Recently, the firm picked up bonds from Impress--a canning company, Safilo--a sunglasses frames manufacturer and Frensenius, a company that makes medical equipment. Threadneedle uses theMerrill Lynch European currencies high-yield constrained index.

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