Much of the focus was on the new issue market, with offerings from benchmark high-yield names such as Charter Communcations and Calpine Corp. Bull-market deals paying a dividend to LBO sponsors have continued to crop up, including one from Dex Media that had been in the works for at least a month (BW, 10/5). Here was selected action.
Chemical Name Grinds Tighter
Acetex Corp., a chemical company operating primarily in Canada and Europe, saw its 10.875% notes of '09 improve another point after it released earnings last Tuesday. The bonds were trading at 111.25 last Friday morning, up from 107 in August.
Bruce Walbridge, portfolio manager at State Street Global Advisors, decided to cash in his chips and buy the Ford Motor Co. 7% notes of '13--a high-grade issue. He viewed Acetex's numbers as "fairly weak," adding "it's tough to be excited about a single-B niche chemical company at inside a 7% yield, when you can buy Ford and pick up 70 basis points."
Mediacom Improves After Earnings Report
Cable issuer Mediacom Communications Corp. saw its 9.5% notes of '13 jump three points to a 98 bid after it reported earnings last Wednesday. It eventually settled at 97 last Friday morning. A pair of sell-siders agrees that earnings were better than some had feared, but are mixed in their recommendation. Stephen Weiss, analyst with Bear Stearns, continues to view the bonds as attractive. "It's far from our favorite cable name, but its credit profile is probably poised to improve somewhat, even under a low growth scenario. At levels around 10-11%, it's a hard value to pass up with a lot of 6-7% media paper out there," he says. He argues that the credit has ample liquidity, noting that it has become cash flow positive.
Aryeh Bourkoff, analyst at UBS Securities, has a hold on the name, arguing that, "2004 will be characterized by competition cable hasn't seen before." He sees Charter Communications as more attractive on a relative-value basis, at yields of roughly 15% for most cash pay issues.
Calpine Fluctuates Wildly, But Improves
Calpine Corp. saw its 8.5% notes of '11 dip one to two points initially after it reported earnings. The company also announced and priced $1 billion in new notes, $600 million of which are convertible into equity. Bids on the already outstanding 8.5% of '11 issue jumped to 74 after the deal, and were down only slightly, to 73.75 Friday morning. One trader attributed the positive move to the fact that the convertible issue will be behind the straight bonds in the capital structure.
Federated Investors, which holds a "modest" allocation to the name, is less than enthused about the credit, according to Nate Kehm, portfolio manager at the Pittsburgh bond giant. "Earnings were as expected. They need an improvement in gas spark spreads, which they aren't getting right now, and the clock is ticking," he says.