High-yield was mostly unchanged in light trading through Thursday. Despite the poor week in equities, strong inflows from the previous week helped bolster the market somewhat. A deal from Gray Broadcasting was expected to price last Friday or today. Here was selected action.
Fleming Cos. Drops On Headlines, Downgrade Rumors
Rumors of a possible downgrade sent the Fleming Cos. 10.625% notes of '07 (B2/B+) down two points on downgrade rumors to 87 last Wednesday. A Wall Street Journal article accusing the company of squeezing suppliers sent the bonds down to 82 Thursday morning. A conference call appeared to reassure investors, at least initially. The bonds were bid at 88 last Thursday afternoon.
Karen Miller, a retail analyst at Bear Stearns, expects the bonds to remain volatile due to negative event risks outweighing positive ones, at least through year-end. In particular, she cites uncertainty due to Kmart and a pending announcement regarding Fleming's retail strategy as negatives. She recently downgraded the bonds from "Hold" to "Sell."
Tech Weaker As Earnings Forecasts Dim
Technology issuers were weaker through last Thursday. Fairchild Semiconductor's 10.375% notes of '07 (B2/B) were down two points to a bid of 102.5. Solectron Corporation's 9.625% notes of '09 (Ba3/BB) were down a point to 92.
Ziki Slav, technology analyst at Dresdner Kleinwort Wasserstein-Grantchester, blames earnings warnings from Fairchild, as well as companies such as Intel and National Semiconductor, that have an affect on the health of the sector as a whole. Slav says the sector generally moves with the equity market, which had a poor week. "As much as we saw signs of a recovery three months ago, everything is on hold for now," he says.
Nextel Communications Sees Volatility As Market Weighs McCaw Moves
Nextel Communications' 9.375% notes of '09 (B3/B) were two points lower on the week at 75.5. They had been as low as 73.5 on news that wireless investing heavyweight Craig McCaw was hedging against further declines in Nextel shares. Traders and an analyst say the market apparently got comfortable with the notion that McCaw's hedging was related more to his personal financial situation rather than grave concerns about the company's imminent demise.