Mixed Secondary with Some Big Losers


The secondary high yield market last week was, in a word, mixed. While some investors spoke of a "whiff of a recovery," there were some names falling to the single digits in one day.

Overall, the market was little changed, traders said. But that is according to the various indices, and once you look past the indices at the underlying issues in the market, there were some dramatic moves.

One of the bigger falls in secondary trading came from Integrated Health, which saw its bonds fall to 6 after it tried to sell its Rotech division.

Rotech had been viewed as the crown jewel of the company, said portfolio manager Dick Cryan at Evergreen Investments. As others in the industry saw their securities fall, the division helped keep Integrated going. When even that did not generate as much interest as the company expected, however the bonds tumbled.

Integrated has more than $1 billion outstanding in the high yield market.

This is just the latest development in the long healthcare saga that has seen issuers such as Sun Healthcare and Vencor file for bankruptcy this fall.

Genesis, another well-known healthcare provider, was trading in the 40s last week; it was at par last year.

Rite Aid saw its bonds fall dramatically after its debt was downgraded by Moody's Investors Service to Ba2 from Baa3. The 7.7% issue was in the 73 to 75 range, down six points.

There was a hint of a recovery in the air last week, though, as some of the benchmark names in telecom and cable firmed up slightly, traders said.

The equity markets were thought to be close to a bottom, and if there is some upside to the stock markets, high yield will follow, traders said.

According to AMG Data Services, cash continued to bleed from the mutual funds, as $77 million was pulled out for the week ending Oct. 13, the latest time frame available. That marked the sixth consecutive week of losses, totaling $1.14 billion.

The last weekly cash inflow, to the tune of $2.5 million, came the week of Sept. 1.