Unusually wide spreads in the secondary market locked up trading for much of last week, but by Thursday paper was trading as the market began to find levels. Dealers noted that the typical gap between bids and offers is about two points, but that had ballooned to four or five points on many names last week, the first full week back from the terrorist attacks of Sept. 11. "Sellers don't want to feel they will get picked off or that they are panic sellers," one dealer said. "They say, 'the market shouldn't have moved back that much, so I'm not going to offer now.'" The result is bids that can back up as much as six points and offers that move down a point, which results in stagnant market.
However, as the week went on trading volumes reportedly picked up. One desk said it had traded $100 million in seven or eight names. Hot credits that were trading up were defense names, such as United Defense (see related story, page 4). Dealers were watching airline credits but did not report any trading. They said the biggest issue would be consumer confidence, not only in airline travel, but also in an economy that's preparing for war. Traders predicted energy credits and telecom credits would also trade up following the attack, but there was no activity reported in these names last week.
By Friday, Wyndham International's term loan "B" settled at 90-95 and the increasing rate loan was at 93-97. Both tranches had previously been roughly 98-99 bid-offer spread. Dealers said the hotel credit widened because it's in an industry directly impacted by a shaken travel sector. But the rest of the market also felt the effects, to varying degrees. Nextel Communications, one of the most liquid names in the market, was 88-90 last week. The credit was last at 911/ 2-92.
The Loan Syndications and Trading Association stepped in soon after the attack to meet with dealers and discuss liquidity and pricing issues (see related story, page 1).Allison Taylor, executivedirector, said the market fared well last week. Pricing levels were delivered on Monday with only a forty-five minute delay, she said, as displaced brokers had to often manually input pricing information.