With new scandals and financial troubles announced almost daily, it is no wonder that the secondary market for distressed bank loans has been a hotbed of activity over the past few weeks. And so far, this week has been no exception as the paper of Qwest Communications and Crown Cork & Seal are rumored to have changed hands.
Earlier in the week, $5 million and $10 million pieces of Qwest's bank debt were believed to have traded into the buyside in the high 60s. But with the bonds on the decline following Qwest's announcement that it incorrectly accounted for more than $1.1 billion in transactions, traders said the paper has sunk to the 55-60 range. Crown Cork initially was down on news that it had pulled its spin-off of Constar, but the paper rebounded to the high 80s by midweek on news that its refinancing was proceeding. Some $10 million of Crown Cork was believed to have traded hands in that context.
Meanwhile, distressed names like Xerox, Gentek and even Global Crossing saw movement in their levels based on recent news. Xerox was up a couple points based on its latest quarterly results, while Gentek's paper was sinking quickly based on its numbers and at last check had fallen into the 60s, traders said. And Global Crossing's paper experienced a slight uptick to the high teens on news that Hutchinson Whampoa is back in the hunt to purchase the company out of bankruptcy.
The par market, however, has been a different story. Conservative investors, plentiful new issuance and the summer doldrums have combined to pretty much paralyze trading activity, traders noted. This has caused the spread between bid and ask prices to widen noticeably over the past week or so, they explained. Still, the market did displays some signs of life this week as small pieces of Nextel Communications and Adelphia Communications' Century Cable paper traded in the Street. Nextel was said to have traded up one point to the 83 1/2 level, while Century was believed to have traded within the bid-ask spread at 69.