While most of the activity last week was in the primary market, the secondary market was still active and reacted to corporate earnings reports. Here are some notable movers.
Marine Company Sinks
Trico Marine, a provider of marine transportation services to the oil and gas industry based in Houma, La., saw its 8 7/8% notes of '12 trade down roughly 10 points, to as low as 50 at one point in the week. The bonds dropped after the company's recent release of weaker-than-expected fourth-quarter earnings two weeks ago. Moody's Investors Service downgraded the company's debt, cutting the senior unsecured notes from Caa2 to Caa3 on the earnings. But by last Thursday, the notes rallied to trade at around 56. Kevin Roche, portfolio manager at Penn Capital Management in Cherry Hill, N.J., notes that the weak earnings report is a concern and is partly due to pressure from TideWater, a major competitor with 25% of the market share in the Gulf of Mexico. Roche adds Trico Marine paper was trading in the high 80s last summer.
Calpine Flickers
Calpine Corp.'s 8 1/2% notes of '08 dropped four points on the week, to 74. Some investors say they are concerned about the rate the energy company is paying its most recent high-yield sale, a $2.4 billion offering that was priced with a 11 1/2% coupon earlier this month. Bruce Walbridge, portfolio manager at State Street Global Advisors in Boston, says the new deal "was a little mysterious." He notes it was a very controlled offering that was done single-handedly by Morgan Stanley, which added unique structures and offered less transparency than normal. Morgan Stanley scooped up the mandate after a Deutsche Bank-led sale was pulled. Walbridge adds the relative opacity of the new offering led to less understanding of where it was sold to and how much demand there really was for the whole deal. This has in turn led to a drop in some of the company's other outstanding debt.
Tenet Tumbles
Tenet Healthcare bonds dropped up to seven points over the week, only to rally by late Thursday. The 7 3/8% of '13 notes fell from 90 two weeks ago to 84 early in the week after the company released poorer-than-expected earnings. The company's conference call last Tuesday after the announcement seemed to reassure investors, according to one portfolio manager, who says the management team assured people that potential liabilities are not a near-term liquidity issue. The bonds inched up since then. Evan Mann, senior bond analyst at Gimme Credit, says that while the conference call did comfort investors, he is not sure whether the relatively new management team can deliver on all its promises or if the company has enough liquidity to cover any major penalty payments it might incur. He remains cautious to negative on the company and views the continued disappointing news as an indication for further downside in the bonds.