Last week was a strong one, particularly in higher quality sectors such as publishing, technology and autos. WorldCom bonds were up 1 1/2 points to 31 1/4. Here is selected other action.
OM Group Jumps On Major Asset Sale
OM Group, a metal refiner, saw its 9 1/4% notes of '11(Caa2/B-) rally 7 1/2 points to 95 1/2 after the company sold its precious metals unit.
RBC Capital Markets, which had a strong buy on the bonds at 86, continues to see upside, says Brett Levy, managing director and head of research. "We had set par as a target for the end of the year, and with this announcement we might want to accelerate that," Levy says. He notes that when the sale closes in July, it will create net proceeds of some $700 million, allowing the company to pay down the vast majority of its bank debt.
Auto Parts Strong Despite Big Three Woes
Issues from high-yield auto suppliers gained last Wednesday even as high-grade issues from their major clients, the Big Three automakers, were under pressure following an earnings warning by DaimlerChrysler. Dana Corp's 9% notes of '11 (Ba3/BB) were up two points to a 106 bid late Wednesday. TRW Automotive's 9 3/8% notes of '13 (B1/B+) climbed 2 1/2 points to 106 1/2.
Bruce Walbridge, portfolio manager at State Street Global Advisors, is negative on the sector despite the gains. "Suppliers will continue to face competitive pressure as the OEMs [original equipment manufacturers] look for cost concessions. That will create margin pressure," he says.
Triton, TXI Deals Strong Out of the Chute
Recent deals from Triton PCS, a wireless communications firm, and TXI Corporation, which makes steel and cement products for construction companies, moved well above issue price in their first full week in the market. The Triton 8 1/2% notes of '13 were bid at 104.5 last Wednesday, while the TXI 10 1/4% notes of '11 (B2/B+) were up to 104. Both issues priced at par. While one analyst accused underwriters of leaving money on the table, a portfolio manager says the moves are typical in a strong market.