Secondary Flat Last Week; Nextel Offers Bright Spot

The secondary high yield market last week was soft, losing about a point, traders said. And in fact, it has created some buying opportunities that have not escaped the attention of investors.

The outstanding paper is generating interest from buy-siders that normally take part of the new issues market, according to one market observer. Instead of buying what few new issues are actually pricing, some investors are simply waiting to buy the same credit in the secondary at a cheaper price.

One trader said that the general consensus among his trading brethren is that there is a lot of money in the form of cash that is waiting to be put to work; it's just that portfolio managers are not buying anything yet.

The good news in the market came from Nextel, which saw its stock go on a tear and its bonds firm one or two points as well. Traders said that the increase stems from rumors that have re-surfaced about a possible merger for the telecom issuer.

The cable sector was trading comparatively well, traders said, with Avalon Cable's $150 million, 9.375% issue at 101, up a couple of points. The issuer also has an outstanding $196 million issue with a coupon of 11.875%.

Falcon's 8.375% issue was trading between 98 and 99, according to traders. In addition to that $375 million issue, Falcon also has a $435 million transaction with a 9.285% coupon.

Fruit of the Loom decreased again last week, losing another two points to end up at 32. The company did not announce bad news last week, traders said, but the lack of good news continued the downslide in the apparel manufacturer.

Allied Waste Industries' 10% issue of senior subordinated notes, a $2 billion issue, fell to about 95, after trading at 99.5 in late August, traders said.

Derby Cycle traded at a bid/offer of 70/71 (see story on page 1).

High yield mutual funds lost $185 million in the week ending Sept. 15 to redemptions, according to AMG Data Services. The previous week ending Sept. 8, mutual funds lost $259 million.