Short Takes On High Yields


High yield default rates inched down in January, according to Moody's Investors Services. In terms of total issuance, the default rate dropped from 5.6% in December to 5.5% last month, while defaults in terms of total dollar value held steady at 7.8% of outstanding debt. Eight issuers, with 11 high yield issues, joined the list of defaulted names last month. These included: AmeriServe Food Distribution Inc., with $850 million outstanding; Paging Network Inc., with nearly $1.2 billion outstanding; and Safety Components International Inc., with $90 million in outstanding debt...

Williams Communications finalized a $120 million, 20-year contract to provide voice, data and capacity services to Compass Telecommunications, a competitive local exchange carrier. This comes just a few weeks after Williams penned a 20-year deal with Montreal-based Teleglobe. Both of the contracts illustrate Williams' long-range plans, as it emerges at the forefront of the long-term strategy in terms of broadband capacity. On the other end of the spectrum, Enron Corp. is leading the charge on the short-term front, buying up capacity and then re-selling it on a short-term basis, sometimes as short as one day (HYR 01/31/2000). Meanwhile, Williams said it will spend $421 million in the next three years to improve its fiber-optic network in 50 large U.S. markets...

Hicks, Muse, Tate & Furst Inc. said it plans to raise up to $2 billion for the burgeoning Internet and communications sectors in the U.S. and Europe. The Dallas-based buyout firm simultaneously announced some specific investments it plans to undertake. It will take a $250 million stake in Internet access firm Rhythms NetConnection to allow the issuer to expand services. When that deal is complete, Hicks Muse will own about 8% of Rhythms. And Hicks Muse also announced that it will lead a group of three investment firms to take a $51 million position in paging company Metrocall Inc. (see separate story on page 4)...

United Pan-Europe Communications plans to pay 2.35 billion Dutch guilders ($1.04 billion) for K&T Group, the cable assets of Eneco NV. UPC is the largest cable operator in Europe. This move adds 590,000 cable subscribers as well as 6,000 broadband Internet subscribers...

High yield airline Trans World Airlines posted a $353.4 million loss in 1999, most of which came in the fourth quarter. The loss - the company's 11th consecutive annual loss - is more than double 1998's $120.5 million mark. Revenue increased in the fourth quarter to $801.7 million from $747 million in the year-ago period, but like other airlines, TWA was hurt by increasing fuel prices. After the announcement, stock prices hit a 52-week low of $2.75 a share...

Standard & Poor's Ratings Service revised its outlook for Ocean Energy Inc. to positive, based on Ocean's improving prospects for stronger operational and financial positions. The agency said an upgrade is possible over the intermediate term if management is able to de-leverage the company and realize its production and reserve targets. For now, S&P has a corporate rating of double B-plus on the company's senior unsecured debt and bank loans, and a double B-minus rating on its subordinated debt...

Exodus Communications Inc. filed two registrations with the Securities & Exchange Commission. One was to resell $500 million of outstanding 4.75% convertible subordinated notes due in 2008 and the converted common shares from those notes. The other registration covers the exchange of the outstanding $375 million and the 125 million euro, 10.75% senior notes due in 2009 for identical registered notes...

Liberty Cable plans to sell its cable assets in the Los Angeles area to Adelphia Communications Corp. The purchase price was not disclosed, but Liberty's system has about 12,700 subscribers. The deal marks the third time that Adelphia has ventured into the southern California market, and is illustrative of its clustering efforts, a source said...

Nextlink Communications Inc. announced the closing of a previously announced $1 billion senior secured credit facility that was said to be sold to a broad group of buyers, including 50 banks and institutional investors. The deal was composed of a $387.5 million senior secured multi-draw term loan, a $225 million senior secured term loan, and a $387.5 million revolver. The telecom issuer drew down $375 million of the term loan borrowing at closing...

RCN Corp. said its fourth quarter loss widened stemming from increased costs to build a fiber optic network in the Northeast and California. The loss increased to $136.7 million from $65.4 million in the year-ago period. The per share loss was $1.78, higher than the expected $1.01 loss per share...

Qwest Communications International announced that Richard Cantin was named regional president for the company's Internet and multimedia services. He will be responsible for establishing partnerships and alliances that will increase the company's presence in Canada...

Vodafone AirTouch may now be setting its sights on the U.S. for takeover targets, after it bought Mannesman AG, Germany's largest cellular company, in a $192 million acquisition. Newbury, England-based Vodafone may now be looking at U.S. assets including VoiceStream Wireless and Nextel Communications...

Bell South, the last remaining Baby Bell that has not merged with another company, is considering a move to unlock the value of its Latin American assets. It said it may issue a tracking stock that specifically follows those assets because the company feels that markets are not recognizing their real value. This follows a much-publicized move in which AT&T Corp. is considering a tracking stock for some of its wireless assets.