While high-yield was flat overall through last Wednesday, it showed surprising resilience given the geopolitical uncertainty and healthy supply of new issues, says Jon Budish, senior trader at Jefferies & Co.New issue activity slowed, which many buy-siders attributed to a J. P. Morgan Securities high-yield conference in New Orleans. Pegasus Communicationswas downgraded two notches by Standard & Poor's. Here is selected action.
Xerox Trades Up After Strong Numbers
Xerox Corp. saw its 9.75% notes of '09 trade up from par to 103 last Tuesday after showing an unanticipated profit. The bonds were bid at 101 at Wednesday's close. George Kirchwey, analyst at New York-based SAMCO Capital Markets, has a hold on maturities beyond 2004. Xerox has over $2 billion in bank debt coming due in 2005 and Kirchwey is concerned that the company will not be able to generate enough cash to meet those maturities due to the outsourcing of its lease financing business to a subsidiary of GE Capital. "Xerox may be able to meet the bank debt maturities by issuing new securities pursuant to their recent $3 billion in shelf registrations, but their access to the capital markets is still overshadowed by their below investment-grade rating and declining sales revenue," Kirchwey says.
Charter Firms
Charter Communications saw its 8.625% notes of '09 improve 2.5 points to a 48 bid. One East Coast portfolio manager says he was encouraged after he read a Wall Street Journal article indicating that bondholders would be unlikely to accept an exchange offer similar to one recently completed by Qwest Communications in the event that the company would attempt such a move. However, he says he did not add to his position.
Lucent Rally Continues
Lucent Technologies saw its 7.25% notes of '06 (Caa1/B-) rise 2.5 points. One trader attributed the gain to continued positive sentiment from its recent earnings call, helped by rumors that the company might look to tap the equity market or issue convertible debt.