Traders say last week was extremely quiet in the secondary junk market, with most of the trading centered on new issues. Secondary spreads were flat overall through Thursday, the traders say.
Telewest Trades Down; Rating Downgrade Expected
Telewest's 11% notes of '07 (B2/B) dropped two points on Thursday to a 51.5 bid at the close of the day. Aryeh Bourkoff of UBS Warburg, urges caution. "While we like the long-term fundamentals for European cable, including NTL Corp. and Telewest, Telewest is close to a downgrade by Moody's [Investors Service] of likely more than one notch." He says a restructuring is also possible, and that investors should wait for a downgrade before investing.
New Issues Jump Out Of The Box
Dana Corp's $250 million 10.125% senior notes of '10 (Ba3/BB-) priced at 98.659 the week before last and had traded all the way up to 103.5 at Thursday's close. Magnum Hunter's $300 million 9.60 % senior notes of '12 (B2/B) priced at par last Wednesday, and closed at a 103.25 bid on Thursday.
New issues performed so well during the week that traders questioned whether issuers should be happy about the pricing of their deals. "A deal should trade up a point to a point and a half after a deal, but when it gets to two, three, four points, you have to wonder whether the issuer got screwed," said one trader
Lucent Seesaws
Lucent Technologies' 7.25% notes of '06 (Ba3/B+) had a volatile week. The bonds dove from an 85 bid to 81 after the company released lower-than-expected earnings. However, after the company priced a convertible bond deal, the bonds traded back up to their original levels.