Company-Specific Stories Drives Secondary
October 11, 1999
The high yield secondary market was fairly uneventful last week, traders said, with most of the bond moves coming on specific company news, mostly in the media and telecom sectors.
Metromedia Fiber had the biggest news of the week when Bell Atlantic announced on Thursday it would buy as much as 19% of the high yield issuer. Metromedia saw its bonds rally an impressive four points on the news.
Investment-grade issuer Bell Atlantic will pay $700 million for a 9.9% stake in the company plus another $975 million for convertible notes. It also will spend $550 million for a portion of Metromedia's fiber optic capacity over the next 20 in return for access to Metromedia's networks in 50 cities worldwide. All told, Bell Atlantic could end up with a 19% stake in the firm.
And a few days before that, RCN Corp. received a $1.65 billion equity investment from Paul Allen's Vulcan Ventures.
Allen, co-founder of Microsoft and owner of high-profile junk company Charter Communications, is building a broadband empire; this is just the latest in a long spree of acquisitions. The cash will help RCN build its network of cable, telephone and Internet services.
Level 3 Communications and Williams Communications also saw increases along with much of the industry.
Williams recently priced its deal that was increased by 54% to $2, billion and last week those notes increased about two points. Level 3 saw an increase of about a half-point on its 9.125% notes
The cash continued to bleed from high yield mutual funds, which gave portfolio manager less to work with. Institutional investors have conceded in recent weeks that the individual buyers of their funds seem to be pulling out in anticipation on the year-end, and on top of that, some of the managers themselves are keeping a higher portion of their assets in cash for continued redemptions in the coming weeks.
According to AMG Data Services, cash outflows totaled $293 million for the week ending Sept. 29, the latest time frame available at press time.