In the words on one trader, last week's tone was very "stinky." Bonds of Conseco Inc., Echostar Communications, Regal Cinemasand Lyondell Chemical Companywere all off a point to a point and a half.
Wireless Hit After Poor Numbers From AirGate PCS
Wireless issues came under severe pressure last Thursday after AirGate PCS cut its subscriber growth forecast. AirGate's 13.5% notes of '09 (Caa1/CCC) dropped from 65 to 40, Dobson Communications' 10.875% notes of '10 (B3/B-) were down five points to an 83 bid, Triton PCS 9.375% notes of '11 (B2/B-) dropped 4 points to 84.
Adelphia Parts Company With Century Affiliate
Worries over what to do with the widely held bonds of Adelphia Communications dominated portfolio managers' time again last week, and the parent company's 10.875% senior notes of '10 (Caa2/C) were up about two points, to a 74.5 bid. That was in spite of a research note published by Steve Schutzman of Salomon Smith Barney, a third teamer in the high-yield cable sector in the 2001 Institutional Investor All-America Fixed-Income Research Team, entitled, Adelphia: It's Over--Sell the Bonds Now.
However, research commentary accompanying a downgrade from Moody's Investors Service argued that recoveries on the 8.875% notes of '07 (Ca/C) issued by Adelphia's Century Communications unit could be far lower than those of the parent company. Those bonds dropped from 73 to 64 after the downgrade, even as the parent company's bonds maintained their two point increase from earlier in the week.
Illinois Gaming Cos. Weather Tax Increase
Bonds of Illinois riverboat casino companies dropped initially after state legislators passed legislation that was far tougher on the industry than had been expected. While stock prices remained lower, the bonds bounced back. Argosy Gaming's 10.75% notes of '09 (B2/B+) dropped to 108 before returning to 110, while Hollywood Casinos' 11.25% notes of '07 (B3/B) were off a point to 108, but then back up to 109.
John Kempf, gaming analyst at Goldman Sachs, says the companies are well-diversified enough to be able to withstand the effects of the legislation, which included a 50% tax hike.