Last week was mildly positive for high-yield through Thursday. Bigger liquid names saw a bit of a bounce, and a pair of new issues with hefty coupons came to market. Here was some notable action.
Merchant Energy Companies Recover Slightly
Merchant energy traders had their most positive week in several months. Mirant Corp.'s 7.625% notes of '06 dropped from 52 to 45 after reporting weak earnings on Tuesday, but then rallied to 55 on Thursday. AES Corp.'s 9.375% notes of '10 were up five points to 37. CMS Energy's 9.875% notes of '07 rose from 67 to a 71 bid.
Charter Rallies On Paul Allen Report
A Wall Street Journal report that Paul Allen, chairman of Charter Communications, was considering taking the cable company private sent the 8.625% notes of '09 (B2/B+) from 53.5 to 64. Other names in the sector also rallied on the news.
Oren Cohen, analyst at Trilogy Capital, was at least as encouraged by news that Bill Gates, chairman of Microsoft, took a $500 million stake in Cox Communications. "In an environment like this where the market is waiting for people to put their money where their mouth is to affirm cable valuations, it seems to me a $500 million investment in a public equity is pretty much equivalent to an actual sale of a cable system."
Avaya Continues To Plummet
Avaya's 11.125% notes of '09 dropped eight points on the week to 55. Ziki Slav, analyst at Dresdner Kleinwort Wasserstein-Grantchester, says a poorly-handled conference call in which management declined to make EBITDA projections caused investors to panic. However, he believes the company has a decent story to tell. Because most of its customers are Fortune 100 companies, Slav believes Avaya, a Lucent spin-off, which makes communications systems and software, should be able to raise cash by securitizing its receivables. He also believes it has a lot of cost-cutting potential.