The secondary market was "decent" last week, according to one high-yield trader. The market backed up a bit in selected areas but was generally firm. Here are some more notable movers.
Nortel Drops On Management News
Nortel Networks Corp.'s 6 1/8% notes of '06 dropped up to three points last week to trade around par mid-week after the company announced that its CEO, Frank Dunn, along with other management had been fired for cause. One high-yield investor said the company is also suggesting not releasing first quarter earnings and has announced that it is going to restate 2003 earnings downward. He added there has been some speculation that the earnings were pumped up in '03 so management could get bonuses.
MCI Falls Further
MCI Inc.'s 7.735% notes of '14 continued to trade down, dropping three points on the week to 95. Gibson Smith, portfolio manager at Janus Capital Group, said there is a general misunderstanding about the company. He noted that investors are waiting for new ratings on the company, which should come in the next one to three months, and are concerned after Standard & Poor's recently gave a negative outlook to AT&T, with the possibility of downgrade. That news has put pressure on MCI's notes, he added.
Level 3 Gets Leveled
Colorado-based Level 3 Communications saw its 9 1/8% notes of '08 trading at roughly 72, down eight points from two weeks ago. The company posted a first-quarter loss last Thursday. Eric Geil, analyst at Standard & Poor's, said there has been a lot of negative sentiment in the sector and the decrease could also possibly be related to recent Global Crossing negative accounting news. The company has a developing outlook at S&P which is due to its position in a very uncertain market. "Developing" at S&P is used "for those situations in which future events are so unclear that the rating potentially may be raised or lowered," according to an S&P report. Geil noted that he is not surprised by the downward turn in the company's bond prices and he questions the sustainability of the business which hasn't been able to deliver revenue growth. The corporate credit rating is triple-C.