Traders reported firm bids, but some said the market was drifting lower. Airline issues improved on surprisingly strong earnings, and $1.2 billion in new money went into mutual funds last week, according to AMG Data Services.
Calpine Issue Drops
Calpine Corp.'s 8 3/4% notes of '13, issued last Wednesday at par, fell to 95 before going out at a 96.5 bid last Thursday. Traders say the issue was a bit too large for investors to take above par, as they have done with other recent deals. Some also blamed the Mirant Corp. filing.
Mirant All Over The Map After Bankruptcy Filing
Active trading was the only common denominator for various issues from Mirant Corp. last week after the company filed for Chapter 11 bankruptcy protection. The 7.90% notes of '09 (Ca/D) plunged 19 points to 36, before rallying 10 points as vulture investors fought over the remaining meat. However, the structurally senior Mirant Americas 8.30% notes of '11 (Caa3/D) actually went up 15 points to 77 after the filing.
Herman Slooijer, portfolio manager of $1.12 billion at Robeco Group in the Netherlands, says the Mirant Americas notes, which he owns, would have been more subordinated had a proposed restructuring managed to succeed. He argues that Mirant could have avoided a filing, given that Calpine Corp. recently managed to pull off a similar exchange. "The bonds are up to 77 so you see there's value in the company, and now some of the banks aren't getting that value," he says.
Treasury Sell-off Slams Low Coupon Issues
Alan Greenspan had a rare affect on a portion of the junk market last week when he squashed hopes for another interest rate cut, causing Treasury prices to plunge. Lower coupon issues such as the Arch Coal 6.75% notes of '13 (Ba2/BB+) and the Iron Mountain 6 5/8% notes of '16 (B2/B) fell in price, despite decent spread performance. Arch Coal dropped two points to 101. Iron Mountain was down three to a 95 bid.