Trading was light in the high-yield market during the holiday-shortened week. Traders expect up to $2 billion in new supply next week, which may have softened bidding in certain sectors, such as chemicals. Here was some notable action:
Off-Balance Sheet Debt Rattles
The disclosure of $2.3 billion in off-balance sheet debt drove Adelphia Communications' 10.875% senior notes of '10 (B2/B+) down 14 points to a 92.5 bid by Thursday afternoon. One trader says the information was available in the cable company's 10K form, and that even taking the additional debt into account, leverage is comparable to Charter Commmunications, the other major junk issuer among cable companies. Charter's 10.75% senior notes of '09 (B2/B+) dropped three points to 99.
Investors Revved Up Over Automotive Sector
Bonds of auto parts suppliers continued to be better bid as investors shifted into cyclical industries in anticipation of an improving economy. Dana Corporation's 9% senior notes of '11 (Ba3/BB) were up a point to 99. Dura Automotive Systems' 9% notes of '09 (B2/B) rose two points to 99. The recent rally by JL French Automotive Castings (B3/CCC+) tapered off somewhat, after a recent earnings call fell slightly short of raised expectations. The 11.5% notes of '09 (B3/CCC+) dropped a point, but rallied on Thursday, finishing the week unchanged at 53.
Calpine Drops On Downgrade
Calpine's 8.5% notes of '11(Ba1/B+) dropped three points to an 80 bid on Monday after Standard & Poor's cut its unsecured debt rating three notches. A sell-side energy analyst says the downgrade had been widely expected, but he questions the seriousness of the utility's commitment to paying down debt, and sees pressure continuing on the credit.