Franklin Templeton Investments is seeking to add new euro-denominated high-yield issues and to pick up U.S. high-yield names in the secondary market. Atanas Christev, high-yield portfolio manager, who manages E33 million in mainly euro-denominated high-yield bonds, says he is considering adding the upcoming issue from C.P. Ships. The shipping company has strong positions in the Trans-Atlantic business, and, although shipping is a very cyclical sector, Christev is relatively comfortable with the credit. He says he likes to buy bonds with coupons in the 9% range. "When we get issues that begin to perform very well and yields tighten, we look for replacements," he says. Templeton uses the Merrill Lynch euro high-yield index as its benchmark, because it includes U.S. issuers as well as European ones.
Christev has been looking at service sector credits and sectors that are virtually non-existent in the euro market such as oil and gas-related credits and aviation-related names. Christev views these names as being able to benefit from outsourcing business. For example, he is considering Integrated Electrical Services' 9 3/8% of '09. The company installs wiring, electrical and IT networks. And quite a few aerospace companies are proving resilient post 9/11, says Christev. Accordingly, he is considering B.E. Aerospace's 8 7/8% of '11 and Sequa Corp., which does avionics. He would need to take a more thorough look at Sequa and B.E. Aerospace before investing, he says. He is also going to take a look at Universal Compression, a company that makes and rents out compression equipment for gas wells.