The high yield market responded with nervousness to Federal Reserve talks on increased interest rates, with the market adjusting and moving lower. One high yield trader said it was a buyer's market. Here are some notable movers.
Europe: Telecolumbus Leads Cable Down
One week after pricing at par, German cable operator Telecolumbus' 9 3/8% notes of '12 were off by more than four points. One investor remarked that the deal was not very widely placed and said he was disappointed with underwriter Merrill Lynch's support for the deal. Telecolumbus' move lower was in sync with an overall dip in cable names, with Cablecom, Telenet and NTL all down three to four points by the middle of last week. Traders said the drops were due to profit taking and in anticipation of more cable paper coming to market in the coming months, including a rumored E800-900 million deal by Germany's Kabel Deutschland.
MCI: A Long Distance From Par
MCI Inc.'s 7.7% notes of '14 traded in the low 90s mid-week, dropping from 95 a week earlier. The company was added to several high-yield indices at the beginning of the month, including those of Bear Stearns and Lehman Brothers. Merrill Lynch has not added it yet since it does not include unrated companies in its index, according to a recent Merrill Lynch report. One trader said a lot of people will buy MCI because it is in the indices, while many will also trade it because of the company's uncertainty in an unstable industry. He added that it hasn't been a great performer, and it remains to be seen where it will settle in. Mike Taylor, high-yield strategist at Bear Stearns, said MCI's movement will definitely have an impact on the performance of the index. MCI is currently unrated and investors are waiting to hear how the rating agencies will rate the company, which recently emerged from bankruptcy.
Charter Dips
Charter Communications' 8 5/8% notes of '09 dropped a couple of points to trade at 82 mid-week. Eric Geil, analyst at Standard & Poor's, questioned how sustainable the company's improvements will be in light of the heavy competition from DIRECTV Group and EchoStar Communications. The key is for Charter to hold onto its video customers, said Geil. S&P rates Charter triple-C plus with a developing outlook, which is defined by S&P as situations in which future events are so unclear that the rating potentially may be raised or lowered. Charter is due to release earnings today.