Tyco-Watchers Split On Next Move For Bondholders
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Tyco-Watchers Split On Next Move For Bondholders

Investors and analysts are divided over whether bondholders ofTyco International should take profits after last week's dramatic tightening, or hold on for what they estimate could be between 30 and 60 basis points of additional value. Last Tuesday, the 6.375% notes of '11 tightened from 245 basis points to 130 basis points over Treasuries after the company announced plans to split into four separate companies and pay down $11 billion in debt.

Mark Girolamo, co-head of investment-grade research at Deutsche Banc Alex. Brown, says bondholders should hold on. He says Tyco executives seem confident that they will be able to carry off the plan, which he says seems, "pretty reasonable."

But, some bondholders say they will not take chances. "If I can make 80 to 100 basis points in two days, I'm not going to hold out for the last 30 or 40," says Greg Habeeb, portfolio manager at Calvert Asset Management in Bethesda, Md. Habeeb says Calvert started buying Tyco bonds in the days preceding the announcement because he sensed that rumors about the company were a ploy by short-sellers to drive the price down. He says rumors included the imminent resignation of the company cfo, accounting difficulties and a possible attempt by the company to take over Honeywell. "The quantity of rumors was very suspicious," he says. Calvert sold its Tyco bonds Tuesday and Wednesday of last week.

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