WorldCom excepted, the high-yield market was flat to slightly improved overall. Issuance continued to be solid, with two or -three European deals performing well (see story, page 1). Canadian telco Call-Net Enterprises' 10.625% notes were a big loser, dropping 20 points on poor numbers. Here was other selected action.
Tesoro's Bonds Plummet Two Weeks After Issue
Tesoro Petroleum Corporation saw its 9.625% notes of '12 (B1/B+) drop from a 102 bid to 94.5 just two weeks after issue. At -$43 million EBITDA was well below the company's $20 million projections. The company announced that it may have to call off a planned purchase of a refinery due to its sudden liquidity shortfall, and the fact that the purchase would violate a bank covenant agreement.
While one sell-side trader accused Tesoro of misleading investors, a portfolio manager who owned up to buying a piece of the deal was more philosophical. He says volatile prices both for the raw materials refiners use and their end products make earnings notoriously difficult to project in the sector. The best outcome now, he says, would be for the company to call off the purchase of the refinery. Barring a lawsuit, Tesoro would then tender for the bonds at 101. The bonds had climbed back to a 96 bid late last Thursday.
Aurora Foods Drops On Poor Numbers
Poorer than expected numbers from Aurora Foods sent the company's 9.875% notes of '07 (Caa1/CCC+) down to an 87 bid--some 10 points lower than where it started the week ahead of a conference call scheduled for late Thursday. With $40 million in bank debt amortization and $25 million in free cash flow, leverage concerns were paramount, said traders.
Adelphia Rollercoaster Continues
Adelphia Communications 10.875% notes of '10 (B2/CCC) dropped from an 89 bid to a low of 85, before recovering to 87 late last Thursday. Joe Galzerano, analyst at CIBC World Markets, says the firm's debt to EBITDA ratios still appear to be good, and the company still has valuable properties, particularly its Los Angeles assets. Though nervousness remained after the company's announcement that it would restate three years of financial results, some investors appeared relieved that they would at least receive information from the cable company.
JL French Revs Up With Increased Auto Production
JL French Automotive saw bids on its 11.5% notes of '09 (B3/CCC+) move north from 40 to 45. Nate Hudson, analyst at Banc of America Securities, says increased production from automakers, after several quarters of decline, will benefit parts suppliers as a whole, but particularly for credits perceived as lower quality such as this one.