Trading was fairly light last week through Thursday, with the bond market closed Tuesday due to Veteran's Day. Reliant Resources was up on better-than-expected numbers early in the week and Warnaco Group dropped following a third-quarter earnings call. Here was selected action.
Levi Gets Ripped
Levi Strauss & Co. dropped 10 points last Thursday after the company lowered its earnings guidance for the year. The 12.25% notes of '12 dropped from 82 to 72 and were headed lower following the conference call. One bulge-bracket analyst sees the bonds dropping lower. He argues that they would recover in the 50s and 60s, depending on the issue.
New Deals Softer After Issue
A few new deals have dropped in price immediately after issue, rather than quickly gaining in value as they have done in recent weeks. The Terex 7.375% notes of '14, which priced Monday at 99.11, were half a point lower after issue. The Host Marriot 7.125% notes of '13 also dropped half a point last Wednesday. The bonds were issued at par late last month. The Triad 7% notes of '13, which grew by $150 million before being priced at par on Nov.6, had dropped 1.5 points by Wednesday afternoon.
Tim O'Hara, head of high-yield capital markets at Credit Suisse First Boston, attributes the move to Treasury sensitivity in lower-coupon issues. He points out that recent high-coupon deals his firm has led, including the Dollar Financial Group 9.75% notes of '11, which priced on Nov. 7 at par, were higher after issue.
RCN Rises On Numbers
RCN Corp.'s 10.125% notes of '10 were up four points on the bid side to 46 on Wednesday morning following the company's earnings report of narrower losses. Andrew Muns, analyst at Banc of America Securities, argues the bonds should trade lower. He says that the market may be too optimistic in its valuation of RCN's Lehigh Valley property, which he assumes the company is currently shopping.