Market: Paging Sector Surges in Flat Market
February 14, 2000
The secondary high yield market last week was flat for the most part, largely because of a Morgan Stanley Dean Witter conference in Florida that took many of the participants out of action for the week.
One trader said the market was uneventful, with the one notable exception: paging.
The paging sector, an area that had been left for dead in the minds of some portfolio managers, has been making some impressive gains over the past couple of weeks. Last week, Metrocall and Paging Network were leading the charge.
Metrocall's equity shares surged on the announcement that it will receive a cash infusion of about $51 million from a group including buyout firm Hicks, Muse, Tate & Furst, Internet access provider PSINet, and Aether, which provides wireless data services.
Paging Network, or PageNet, took a big upswing in the secondary two weeks ago, followed by a sharp decline when it announced it would not make a coupon payment. But it is apparently back in the good graces of high yield investors.
The company has two outstanding issues, a $400 million 10.125% deal, and a $300 million 8.875% transaction.
And those notes were in the low 60's last week, up dramatically from the high 30s in recent weeks, one trader said.
Investors apparently were still hoping to see PageNet undertake a spin-off of its wireless unit, Vast Solutions.
For other weekly trading, Trans World Airline's 11.5% notes gained a point last week to trade at 62, while Fruit of the Loom's 7% notes lost about a half point to slightly more than 32.
High yield mutual funds saw cash outflows of $66.3 million for the week ending Feb. 2, the latest time frame available, according to AMG Data Services.
Over the past eight weeks of consecutive outflows, high yield mutual funds have lost more than $2.3 billion.
The AMG numbers, however, have recently come under scrutiny as portfolio managers have wondered whether it is an accurate gauge of the market. (HYR 02/17/2000).
Several portfolio managers said that they didn't think the market was as bad as the AMG numbers have been reflecting over the past several weeks. They said between CBOs and other new money being put to work in high yield, the weekly reporters to AMG are not capturing the true buying power of the market.