Analysts expect Douglas Foshee, ceo of El Paso Corp., to disclose asset-selling plans at a long-range planning meeting scheduled for this week. The sales are likely to bolster the company's debt servicing ability and help it pay off $25 billion in outstanding debt. But, given the recent run in El Paso paper, investors and analysts say they don't expect the unveiling of the plans to add any more juice to the bonds.
Bonds of El Paso (Caa1/B) have rallied significantly in the last six weeks or so, partly in anticipation of the meeting, which is set for today. Foshee, who joined as ceo in September, is expected to unveil plans to sell hard assets as part of long-term strategic planning that will also see the company focus on its core businesses. El Paso's bonds have rallied about 10 points across the board since late October, with its benchmark 7 7/8% notes of '12 up to about 96 points as of last Tuesday.
Stephen Smart, a buy-side analyst at ABN AMRO Asset Management, states that the high yield market as a whole has been rallying, with huge recoveries over the past year. With that in mind, he doesn't expect the announcement to raise El Paso bonds much higher than where they are now. An analyst at UBS Securities says that while this week will definitely be interesting for El Paso and its bonds, he'd be surprised if they rallied any more. He adds the recent rally is more due to the market tone in general.
Mel Scott, a spokesman for El Paso in Houston, declined to comment on specifics of the energy company's plans and how they might affect bondholders. But, he confirms the meeting will include an update on company progress and the company's long range plans, which include debt reduction.