Penn Capital Management will look for new high-yield buying opportunities this summer, said Eric Green, senior portfolio manager and director of research for $350 million in high-yield in Cherry Hill, N.J. He noted it prefers to invest in single-B and triple-C credits. "We're happy with our portfolio at the moment, but this summer, when the market becomes illiquid, there are many buying opportunities," he stated. Green said he now has a bullish outlook for high-yield, adding that the market earlier this year was too frothy and Penn Capital had cash levels at 10% in February and March until it found buying opportunities.
Penn Capital has recently been buying up Calpine Corp., Qwest Communications and Danka Business Solutions notes, Green said. "We've been aggressively buying Danka '10s in the low 90s we see huge opportunity there and think they will be called in the next year," he added.
The high-yield fund has two styles: the $150 million Core Portfolio invests in higher-quality credits and the $200 million Core Opportunistic Portfolio invests down the credit ladder to include distressed and defaulted companies. The Core's benchmark is the Merrill Lynch High-Yield Master I Index and the portfolio is double its index in gaming, 150 basis points overweight in energy and utilities and underweight in restaurants and technology, said Green. The Core Opportunistic is double its index, which is the Merrill Lynch High-Yield Master II Index, in telecom and media and a little over the index in utilities, he explained. The fund's large holdings include Paxson Communications' preferreds, Charter Communications and Adelphia Communications.