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To: Box-By-The-Riviera™ who wrote (91553)	4/8/2001 4:48:58 PM
From: JHP	Read Replies (1) \| Respond to of 436258

Junk bond investors throw in towel, sandblast telecoms 4/4/2001 2:57:00 PM 04-04 0877 Junk bond investors throw in towel, sandblast telecoms By Jonathan Stempel NEW YORK, April 4 (Reuters) - It's no longer just U.S. stock investors hanging up on telecommunications companies. Quite a few junk bond investors are unplugging as well. The plunge in many of these companies' stocks is now infecting the U.S. junk bond market, where many of the same names whose stocks are being immolated also reside. The often indiscriminate selling isn't pretty. It's known sometimes as "capitulation." "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." Telecom bonds once comprised more than one-third of what J.P. Morgan says is a $722 billion junk bond market. Experts said the bonds now comprise about 30 percent, plus or minus -- and by now perhaps minus -- after being battered by the slowing U.S. economy, heavy competition, plunging stocks and a marked tightening of capital markets. This has left many unable to raise cash they need to grow -- so easy to get in the late 1990s -- and left junk bonds, which carry high yields and low credit ratings, at their weakest overall since mid-January. "It's sort of a self-fulfilling prophecy," said Jonathan Savas, director of high-yield telecommunications research at Merrill Lynch & Co. "The stock market is averse to any company that is not cash-flow positive, there has been huge overextension of capital to telecoms, and ... you've seen companies very quickly spin out of control." REVERSAL OF FORTUNE It's not just the usual warnings of lower-than-expected earnings or revenues that are doing telecom bonds in. This week alone, PSINet Inc. (PSIX) , Rhythms NetConnections Inc. (RTHM) , Teligent Inc. (TGTN) and WinStar Communications Inc. (WCII) -- among other telecoms -- have either delayed filing annual reports or said their auditors are nervous. Investors, wondering whether the companies can survive, have dumped their bonds wholesale, and the bonds now trade for pennies on the dollar, often with triple-digit yields. WinStar's 12.75 percent 10-year notes, for example, are worth six cents on the dollar and yield more than 146 percent to maturity. "If a company can never access the equity or debt markets again, it's easy to assume it may not be able to survive, so its lights out for the stock, and in some cases for the bonds," said Brian Hessel, who helps manage $3 billion of junk bonds for J&W Seligman & Co. in New York. For many telecoms, there has been a "shift of investor sentiment toward fearing balance sheet leverage and disregarding management, sponsorship, and strategy," Goldman Sachs & Co. said in a new report.