Last week started strong in high yield, but was softer through Thursday. B/E Aerospace's 8.875% of '11 dropped three points to 62. WorldCom holding company paper was up by 0.75 to 23. The energy sector showed strength. Here is selected action.
Tech Trades Higher
Tech improved even as the overall market showed signs of softening on Thursday.
The Solectron 9.625% notes of '09 rose from 103 to 104.5, while Sanmina-SCI Corp.'s single issue, the 10.375% notes of '10 jumped a point to 106.
Michael Snyder, portfolio manager at Alliance Capital, believes the success of a 12% of '10 $200 million offering by ON Semiconductor may have contributed to recent strong momentum in the sector.
Auto Parts Stall
The auto parts sector was weaker in sympathy with deterioration in the Big Three automakers. TRW Automotive saw its 9.375% notes of '13 drop from 104.5 to par at Thursday's close. Dana Corp.'s 9% notes of '11 dropped from 102 to 98.5. Goodyear Tire was very volatile. The company's 7.85% notes of '11 jumped from a 68 bid to 77 on short covering after the company had its $1.3 billion credit facility extended, but had fallen to 72 by Thursday's close.
Paulo Silva, analyst at Penn Capital Management, got bearish on the sector late last year. "Consumer confidence is at all time low. People aren't buying big ticket items, which doesn't bode well for autos for '03, and that spills over into the suppliers." He says Penn will take a look at the sector toward the middle of the year if a resolution of the Iraqi conflict appears closer.
Dynegy Jumps On Refinancing Talk
Dynegy Corp.'s 8.125% notes of '05 jumped from 71.5 to a high of 77 last Thursday before going out at 76 on rumors that it would be able to refinance its bank debt.
Eric Misenheimer, portfolio manager at Northern Trust Global Investments, sees the good news continuing for independent power producers. "We're seeing credit after credit in the IPP sector having banks renegotiate terms and/or extending loan maturities. More and more bank debt is being refinanced and covenants and being waved. There's a pretty good possibility of a big upside story," he says.