Bonds were "trying to edge higher" last week, according to the head of one high-yield desk. Charter Communications continued to move north on news that Paul Allen's long-rumored debt repurchase had taken the form of a Securities and Exchange Commission filing. American Tower's bonds rose five points after a positive earnings call, but at least one telecom analyst believes the move was unwarranted. Here was other action.
Qwest Bankruptcy Rumors Spur Volatility,
Finger-Pointing
Bonds of Qwest Communications dropped five points Tuesday afternoon on rumors that the company might be filing for bankruptcy. Distressed players and a junk telecom analyst say the rumors were an obvious ploy to drive down the bonds, which came back after Thursday's earnings call. The operating company 8.875% notes of '12 were bid at 78 at Thursday's close.
"Nobody who knows anything at all gave any credibility to these rumors," said one distressed sell-side player. He notes that Qwest paid down $800 million in maturing debt in July, and made $120 million in coupon payments the previous Friday. "You don't let all that cash go out the door if you're gonna file," he added.
The distressed desks of UBS Warburg and Morgan Stanley, as well as Morgan Stanley's equity desk, were cited most frequently as the originators of the rumors. Morgan Stanley's equity research group has been one of Qwest's most vocal critics over the past two and a half years.
Drew Doscher, who runs the distressed desk at UBS Warburg, vehemently denies the accusation that his desk was starting false rumors and insists that Qwest's bonds trade exclusively on the firm's high-grade desk. Distressed players at other firms were incredulous. "That's idiotic. They have a distressed desk," said one analyst, adding "If you have a distressed desk, you trade Qwest on it." He said it was possible, even desirable, that Qwest would trade on both desks, but says if UBSW "has any idea how to run a fixed-income business," distressed would be involved. The implication from Doscher is that if they believed bankruptcy were imminent, it would be traded on the distressed desk. Morgan Stanley's traders could not be reached for comment.
Conseco Short Paper Drops As Filing
Appears Imminent
Conseco Inc. saw its 8.5% notes of '02 drop from the 80s to the 60s, with no bid. Bonds maturing in 2004 and beyond have traded at 15-20 for several weeks. The fact that the short term paper moves more in line with the long term paper indicates that the end is near, says Brendan White, portfolio manager at Fort Washington Investment Advisors. "We all knew the end was inevitable, but the capital structure seems to be indicating it will be sooner rather than later," he says.