None of the traders interviewed by BondWeek reported a single high-yield bond that was better on the week as of Thursday afternoon. Damage was relatively contained in sectors such as gaming, healthcare, chemicals and industrials. Holders of a certain $30 billion telecom issuer were not so lucky.
WorldCom: The Best Of The Rumors
If all the rumors I've heard this week are true, the buy-side didn't lose any money on WorldCom, said one inter-dealer broker. He argues that because risk was spread among high-yield, distressed and investment-grade desks, the damage was less than it might have been. Among the more detailed rumors circulating about dealer desks were that Bear Stearns lost $200 million, largely on the 7.375% notes of '03, which dropped from a bid of 73 to 18 by last Thursday afternoon. Greg Hanley, head of high-yield at Bear Stearns, did not return calls. Goldman Sachs was also rumored to have traded a lot of paper early Wednesday morning trying to get out from under long positions. Kevin Corgan, Goldman's head high-yield trader, declined comment.
Cable, DISH, Hit Hard
The cable industry was also hit hard last week. Charter Communications' 8.625% notes of '09 (B2/B+) were down 13 points on the week to a 63 bid Thursday afternoon. Adelphia Communications' 10.25% notes of '11 (B2/CCC) dropped 10 points to a 42 bid. EchoStar Communications' 9.375% notes of '09 (B1/B+) slipped 3.5 points to a bid of 93.5.
The accounting irregularity concerns hit close to home in the cable industry putting it under particular scrutiny by investors, says Bob Berzins, high-yield media analyst at Lehman Brothers. He expects debt and equity security prices will appreciate only when the cable industry posts strong operating results or if there is an injection of capital into the industry by a prominent investor.
Berzins is more positive on EchoStar. We have no reason to believe there are any accounting irregularities. It is close to self-funding. But for acquisitions, it doesn't need access to the capital markets. Berzins has changed his recommendation from core holding to buy.
Wireless, Towers Stumble
Nextel Communications 9.375% notes of '09 (B1/B) were down 11 to a 49 bid. American Tower's 9.38% notes of '09 (Caa1/B-) fell four points to 54.5 Thursday afternoon.
It's essentially been a broad sell-off, said one analyst. When you've got mature companies with names like Enron and Tyco having severe problems, the market's appetite for a start-up wireless name talking about future earnings potential is not too great.