Interesting tidbit in Barron's this weekend. Jacqueline Doherty writing in her coloumn Trading Points leads with the title: Is BellSouth About to Buy Paging Network?...
The full article is on page MW9 available at your library or local news stand.
The interesting thing about the article involves the bond price of Bell South. Maybe they are looking to buy a pager network or not, maybe the markets think they may want all of QWST. Just a little factioid to store away.
"Recent action in the bond market suggests that a takeover may be afoot, perhaps one involving BellSouth and a smaller company called Paging Network. Reading merger prospects into bond-market movements is a little like reading tea leaves, but it has been known to work. The first indication comes from a triple-A-rated bond issued by BellSouth, which is now trading at an unusually high yield relative to Treasury bonds. That reflects expectations that the Baby Bell will soon launch a takeover, according to J. Curtis Shambaugh, corporate strategist at Credit Suisse/First Boston.
The BellSouth bonds in question, the 6 3/8% issue due 2028, have been trading at yields that are 1.2 percentage points above the yields on Treasury bonds. That means the Bellsouth bonds are considered just as risky as AT&T 6 1/2% bonds due 2029, which trade around 1.18 percentage points above treasuries. The relationship is odd because AT&T bonds have a much lower rating, at single-A1 by Moody's and double-A-minus by Standard & Poor's, than Bellsouth's debt. So AT&T's bonds shuld yield 0.10 percantage points more than BellSouth paper.
'"There's an expectation that BellSouth's credit will be hurt if and when they make an acquisition,"' explains Shambaugh. However, he believes the market may have overreacted. '"It would take an extraordinarily large transaction to lower the rating of a big player like BellSouth."' His recommendation: Buy BellSouth bonds, but carefully."
With all the QWST stuff swirling around and some of the scenario's we have considered on the thread, I found it interesting that no mention was made of QWST and the analyst just chalks it up to market overreaction to a potential takeover of Paging Networks. He could be correct, or the market may be factoring in the impact of a QWST takeover. I think that would qualify as "an extraordinarily large transaction"
Let's enjoy the fireworks this evening for the 4th and the rest to come in the QWST, GBLX saga.
Regards |
