Steady gains continued last week in high-yield. The wireless and tower sectors were the strongest performers, but most autos were up two points through Wednesday, and broadcasters climbed a point. Retail and media credits also made gains. Here is selected action.
Qwest Jumps On Debt Swap
The Qwest Communications 7.25% notes of '11 (Caa1/CCC+) rose slightly from 59 to a 62 bid. The structurally senior operating company notes, the 8.875% notes of '12 (Ba3/B-), gained five points to trade at 97.5.
The company is trying to exchange $12.9 billion of its bonds--a move that has some bondholders organizing to try to stop the swap from going forward or get better terms.
Wireless Surge Continues
Wireless credits continued their strong run since the lows of July and August. The Nextel Communications 9.375% senior notes of '09 (B3/B) were up five points to 93. The Rogers Cantel 9.375% notes of '08 (Ba3/BB+) were up six points to 95 and the Dobson Communications 10.875% notes of '08 (Ba3/BB+) were up seven points to 85. Communications tower companies' bonds were also higher. The American Tower 9.375% notes of '09 (Caa1/B-) jumped six points to 77.
Concerns in the June quarter about roaming revenue, new subscribers, revenue per user and customer churn were largely quelled in earnings calls this quarter, says Anthony Klarman, analyst at Deutsche Bank Securities. Klarman has a hold on Nextel, not because he has concerns about the credit, but because the bonds have climbed in value so quickly. Nextel bonds were in the mid-60s just three months ago. "I can't fault them operationally, but fundamentally I don't believe the market would allow them to trade over par."
CMS Energy Rallies
The CMS Energy 9.875% notes of '07 (B3/B+) were up seven points last week to a 90.5 bid last Thursday. One trader says the company is rumored to be close to selling some of its assets.
Tim Bond, buy-side analyst at Conseco Capital Management, says he is not sure that potential asset sales would be sufficient to help the parent company. He also has concerns that money the company may have to pay out to fund its pension plan could leave the holding company strapped for cash. He prefers the issues from CMS subsidiaries, especially Panhandle (Ba2/BB), which may be sold to a higher-rated issuer. Bids on Panhandle's 9.875% notes of '07 could not be obtained by press time last Thursday.