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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (22644)	5/15/2003 6:16:05 PM
From: Ed Ajootian	Read Replies (1) \| Respond to of 206095

WSJ - 1.2 Billion Bond Issue - 1/2 by: ariescaz Long-Term Sentiment: Buy 05/15/03 06:05 pm Msg: 59951 of 59953 US Junk Bonds Strength Tempts El Paso To Try Its Hand By RICHARD A. BRAVO Of DOW JONES NEWSWIRES NEW YORK -- The steady flow of new supply in the high-yield bond market has continued unabated this week, with voracious investor appetite allowing many companies to come to market at very favorable levels. Investors, ignoring mixed signals on economic prospects, are snapping up the bonds, although some are warning that the riskier issuers now heading to the market need to be priced carefully in order to find takers. Nothing illustrates the junk market's current strength better than news Wednesday that El Paso Corp. (EP) is planning a $1.2 billion issue of 10-year senior, via its El Paso Production Holdings unit. Just three months ago, El Paso was hit with a dramatic five-notch downgrade from Moody's to Caa1 from Ba2, with the agency citing high debt, strained liquidity and the risk asset sales won't cover the company's cash deficit. "There has been a tremendous amount of cash that has gone into high yield funds for the past couple of months and they are looking for possibilities to invest that money," said Cindy Cole, portfolio manager at National City Investment Management Co, with $5.5 billion in assets. But Cole qualified the exuberance in the junk arena by saying that for "El Paso's deal to get done, it would have to be priced properly. Some pricing seems to be a little on the aggressive side." The roadshow for the El Paso issue started Thursday. Pricings on new issues coming to market have been fairly aggressive recently. Wednesday, junk-rated L-3 Communications Corp. (LLL) priced $400 million of 10-year senior subordinated notes at 99.544, or a spread of 261 basis points over Treasurys. By comparison, high-grade rated Ford Motor Credit Company's 7.25% issue due 2011 recently traded at 336 basis points over Treasurys, according to data supplied by MarketAxess. L-3's deal softened up in the secondary market early Thursday morning, trading down half a point, but has since rebounded and is currently quoted at new issue price. "Deals are not blowouts anymore but are one to three times oversubscribed," said Eric Misenheimer, portfolio manager at Northern Trust High Yield Fixed Income Fund with $470 million under management. "It's indicative of a marketplace that still has cash and thinks yields and spreads are not great but reasonable." Recently, junk funds saw an inflow of $1.33 billion in the week ended May 7, according to AMG Data Services in Arcata, Calif., marking the eleventh straight week that voracious demand for yield has brought significant cash to this outperforming asset class. In the eleven-week run, about $11.8 billion has come into the market, according to AMG data of funds that report on a weekly basis. In seven of those eleven weeks, inflows have surpassed $1 billion. Riding On AES's Coattails? News of El Paso's planned bond issue came a day after the company reported sharp losses for the first quarter, swinging to a net loss of $394 million, or 66 cents a share, from net income of $383 million, or 72 cents a share, a year ago. On an operating basis, the natural-gas pipeline company earned $140 million, or 24 cents a share, excluding $534 million in charges on asset writedowns. That was well below $502 million, or 93 cents a share, reported a year earlier, and it also fell short of a consensus forecast among analysts of 29 cents a share. El Paso is relying on cost-cutting efforts, from the elimination of key executive positions among other things, and asset sales to reduce debt and other obligations by roughly $7.5 billion by the second half of 2005. With its bond issue, El Paso is hoping to tap into some of the momentum seen by another energy concern that came to market recently. Just last week, AES Corp. (AES) sold $1.8 billion second priority senior secured notes, almost double the initially offered $1 billion, making it the second-largest deal of the year after Crown Holding Inc.s (CCK) offering, which was equivalent to $2.1 billion. -By Richard A. Bravo, Dow Jones Newswires; 201-938-2087; richard.bravo@dowjones.com ********************************************************* Guess its no rumor! Hell even if they had to pay 300-400 basis points over treasuries they should do the deal.