The entire secondary market took a hit in the wake of WorldCom's announcement, with names like Nextel Communications and Charter Communications trading down. Nextel's bank debt traded at 78 on Wednesday and improved to 78 3/4 on Thursday, but the paper still was down from the 83 1/2 level, where it had been trading earlier this month. Charter started out on Wednesday with an 88 to 91 bid-ask spread but firmed up to 89 to 92 market later in the day. The name had been trading solidly in the 92 range earlier last week.
One trader explained that events such as WorldCom's accounting scandal prompt investors to take a look at their portfolios and assess the weak spots. Cable and wireless names rely on the same kind of business model as telecom companies, he noted. "People are getting to the point where they are questioning whether or not those models are going to work," he said.
But other completely unrelated names, such as waste-hauler Allied Waste, seemed to take a hit as well. Traders said Allied Waste's B/C tranche was quoted off roughly 7/8 to a point in the 98 1/2 99 1/2 range. Small pieces were believed to have moved in that context. One dealer explained that the name had fallen due to the technical pressure of trading desks trying to create liquidity in a market that had all but dried up on the WorldCom disclosure.