The secondary market continued to improve, and held up well even through Thursday's equity sell-off. A $450 million issue from Owens-Brockway was well-received, trading up to 101. Autos, airlines, commodity chemicals and homebuilding were all up on the week. Here is other action.
Cablevision Rallies On Trifecta
Of Good News
Cablevision Systems' 7.625% notes of '11 surged from 77 all the way to 90 last week after investors in the credit received several pieces of good news. Investors seemed most pleased by the company's announcement that it would sell its Bravo television network to NBC.
Conseco Capital Management increased its position in the name after the sale was announced. "It was more important psychologically versus the actual dollars that came in the door because it shows the company's willingness to monetize assets to enhance their liquidity position," says Jeff Lovell, analyst at the Carmel, Ind., money manager. Lovell also points to the $75 million equity injection into the company, and a strong earnings call as further reasons for optimism.
Hospital Equipment Maker Returns
To Health
Dade Behring saw its 11.91% notes of '10 trade up six points to 104.75 as bonds of the maker of hospital laboratory equipment began trading again after it emerged from bankruptcy protection last month. Elie Radinsky, analyst at Jefferies & Co., has an 18 month price target of 109 on the paper. He says Dade has managed to increase equipment sales in each of the past six quarters despite its weak financial profile. The installed base of equipment will drive sales of proprietary products used with it, he argues. He sees equipment sales accelerating further, and is also encouraged by Dade's new products and its potential to tap new markets. "It has reduced debt markedly and will continue to deleverage, which should help the company in its sales pitches even further," he says.
Bad Reaction Continues For Specialty Chemicals, While Commodities Improve
Avecia's 11% notes of '09 (B3/B-) were hammered, dropping from 94 to 80, though much of that damage came late in the previous week. One bulge-bracket analyst says fallout from OM Group (BW, 11/4) and a delay in a drug the company produces for Astra Zeneca, which will hurt earnings. He argues that the bonds are oversold, however, and should trade at 85. "Specialty chemicals are a bit of a black box. People don't understand," he says.
Commodity chemical producers continued to trade higher last week, however. Lyondell Chemical Company's 9.875% notes of '07 (Ba3/BB) were up roughly two points last week to 99, while the Huntsman International 10.125% notes of '09 (Caa1/B-) were also two points higher, at 82. Both issues have gained some 10 points over the last two to three weeks, and a pair of sell-side analysts say investors should begin taking some of these names off the table. Both analysts point to a weak economy, and the threat of war causing crude oil prices to surge--an event that would drive production costs higher for these companies. The analysts attribute the recent gains to a better tone in high-yield generally.