US Corp Bonds - Telecoms, Lucent hurt; stocks weigh
By Jonathan Stempel
NEW YORK, April 4 (Reuters) - U.S. investment-grade
corporate bonds on Wednesday performed largely in line with
Treasuries, but junk bonds fell sharply for a second straight
day as weakness in stocks again weighed on bond investors.
In secondary trading, spreads, the yield difference between
corporate bonds and comparable-maturity U.S. Treasuries, were
unchanged, while junk bond prices fell about a point, traders
said.
TELECOMS WEAKEN. AGAIN.
For a second straight day, bonds of telecommunications
companies, among the big recent losers in the stock market,
fell hard.
Even bonds of benchmark issuers such as Global Crossing Ltd
, Level 3 Communications Inc. , Nextel
Communications Inc. and Williams Communications Group
Inc. have fallen 10 to 20 cents on the dollar in the
last few weeks.
"Everyone is watching the equity markets, and with the
Nasdaq trading down nearly 40 percent since early February,
until we see stability and upward trends in equities, it's
going to be difficult for high yield to rally significantly,"
said Brian Hessel, who helps manage $3 billion of junk bonds
for J&W Seligman & Co. in New York.
Managers are now seeing some investors just giving up on
telecoms, with bonds of companies such as PSINet Inc. ,
Rhythms NetConnections Inc. and WinStar Communications
Inc. , whose survival investors worry about, now
trading in the single digits.
It's capitulation, some say.
"That's accurate," said Kevin Perry, senior vice president
at Back Bay Advisors L.P. in Boston, where he helps manage more
than $5 billion. "It very much feels as though the rug is being
pulled out from under the telcos."
LUCENT
WinStar is a customer of Lucent Technologies Inc. ,
whose 7.25 percent notes maturing in 2006 were bid Wednesday at
71 cents on the dollar, down four cents from Tuesday, fora
yield to maturity of 15.5 percent.
Rumors swept the market that the struggling Murray Hill,
N.J.-based telecom equipment maker could be filing for
bankruptcy protection, which the company's chief financial
officer strongly denied.
"The rumors that Lucent is filing for bankruptcy are
baseless and irresponsible," said the CFO, Deborah Hopkins.
Meanwhile, Lucent, according to a securities filing, has
restructured a $425 million loan agreement with a customer,
TeleCorp PCS Inc. , giving Lucent more time to honor
its commitment to TeleCorp.
As part of the restructured agreement, Lucent will not be
trying to sell $425 million of TeleCorp junk bonds now.
Analysts had said Lucent had been struggling to sell the bonds,
despite offering yields of around 15.5 percent.
An analyst looking at the revised TeleCorp agreement said
the revision is not the worst thing for Lucent.
"The best scenario would have been for Lucent to sell the
bonds, and all its remaining funding responsibilities to
TeleCorp would have been satisfied," said Glenn Reynolds, an
analyst for CreditSights Inc., a New York-based fixed-income
research service. "The next best scenario is it can more
accurately predict the timing and amounts of commitments to
TeleCorp, which is what we have now."
BOND SALES
Wednesday'S bond sales included: Carolina Power & Light
, $300 million; Dresser Inc., $300 million, and Sealy
mattress Co., $125 million.
Meanwhile, price guidance emerged for the $1.6 billion
three-part sale by PSEG Power LLC, a unit of Newark, N.J.-based
Public Service Enterprise Group Inc. .
PSEG is now expected to sell five-, 10- and 30-year debt,
all rated "Baa1" by Moody's Investors Service and "BBB" by
Standard & Poor's, yielding a respective 2.5 to 2.6, 2.8 to
2.9, and 3.05 to 3.15 percentage points more than Treasuries.
It scrapped a three-year piece.
Ten-year Treasuries closed down 1/32, as their yield rose
to 4.929 percent.
859-1662,
jon.stempel@reuters.com ))
REUTERS
Rtr 19:39 04-04-01
Copyright 2001, Reuters News Service |
