Last week saw slight outflows of $91 million from high-yield mutual funds, according to AMG Data Services. Most of the focus was on new supply and a mammoth calendar, as companies rush to secure financing before interest rates back up any further. Here is selected action.
HealthSouth Perks Up Again
Bonds of HealthSouth, which have drifted lower since a July 7 investor presentation awakened hopes that the company might avoid bankruptcy, showed signs of life last week. The 10.75% notes of '08 were up 4 points to an 80 bid--recovering most of the ground that had been lost since the meeting.
Leo Dierckman, analyst at Conseco Capital Management, which owns the bonds, says rumors of asset sales may have been behind last week's rally. He noted that the size of HCA Inc.'s 6 3/4% notes of '13 was doubled to $500 million, and argues that HealthSouth's surgical or diagnostic businesses would complement HCA nicely. "It's just speculation, but the good old rumor mill is providing a nice pop," he says. Another buy-side analyst sees an asset sale as unlikely, but believes the company has a decent shot at restructuring its balance sheet to avoid a bankruptcy.
Calpine Weakens Further With Treasuries
The Calpine Corp. 8 3/4 notes of '13, the largest high-yield issue this year, fell another 3 1/2 points, to a 93 bid last Thursday afternoon. One trader blames the backup in Treasuries, while another attributes the drop to the glut of new supply.
B/E Aerospace Takes Off
B/E Aerospace saw its 8 7/8% notes of '11 (Caa2/B-) surge 8 points to an 85 bid after its earnings call Tuesday morning. One buy-side analyst says the maker of aircraft interiors looks to be the indirect beneficiary of government subsidies to the airline industry, as it has reported a strong pickup in orders over the last few weeks.