New Issues Market Hits the Doldrums

The primary high yield market slowed to a halt last week as the holiday season officially kicked off. Most of the market participants who were even in the office last week were looking forward to next month.

And already there seems to be different opinions on just how good December will be. Earlier in the year, most market participants predicted a very slow fourth quarter and an especially slow December. But then in November, the market picked up to much applause from both the buy-side and sell-side, and some started adjusting their opinions of the last month of the century.

But last week, when the slowness of Thanksgiving week finally hit home, the naysayers were out again, with the consensus opinion calling for a dry December. In fact, one portfolio manager said that the best bet for a new offering is not from the official forward calendar, but instead from a future "drive-by" from a company that isn't yet on anybody's radar screen.

The only deal that had priced by press time last week was cable issuer NTL, which sold a 775 million euro offering on Friday, Nov. 19, in three tranches, all of which were rated B3 by Moody's Investors Service and B- by Standard & Poor's.

The 175 million euro, zero-coupon piece priced at 57.33 at a spread of 680 basis points over Treasurys. It is initially callable in 2004 at 105.75, and then prices fall in subsequent years to 103.833, 101.917 and par. The 350 million euro piece, which carried a coupon of 9.875%, priced at par to yield 509 basis points over Treasurys. It is first callable in 2004 at 104.938, and then prices fall in succeeding years to 103.292, 101.646 and par. And the final piece, worth 250 million euros, carried a 9.25% coupon and priced at par to yield 476 basis points over Treasurys.

The only other deal in the market at press time was PSINet, which was shopping around a $500 million deal, its second sale in four months. The underwriter on the new sale, as well as PSINet's $1.2 billion offering in July, was Donaldson, Lufkin & Jenrette.