Market; Mixed Bag in Secondary, Mostly Losers

The secondary high yield market last week was essentially a continuation of the previous several weeks. A few issuer-specific stories, but not much else. And most of the issuer-specific stories last week were disappointments, traders said.

Trump Castle was down about eight points on its 11.75% issue, falling to 70 from 78; and Trump Atlantic City lost about eight points on its 11.25% issue, falling to about 70 as well. Both issues are part of the legendary financier's gaming and hotel empire.

Paracelsus Healthcare Corp., which owns and operates hospitals and nursing homes, watched its bonds fall dramatically to the low 30s from about 61 after the issuer announced it would not make its next coupon payment. The notes actually rebounded slightly to the low 40s, for a net loss of about 20 during the week.

The $16.25 million coupon payment, which was due Feb. 15, was for the outstanding $325 million, 10% issue. The company has hired Chase Securities as an advisor to explore alternatives and plans to negotiate with the bondholders soon.

Afterward, Moody's Investors Service downgraded the company's 10% notes to Caa3 from B3. The senior implied rating was lowered to Caa1 from B1, and the senior unsecured issuer rating was downgraded to Caa2 from B2.

On the upside, U.S. Home Corp. saw an increase of about 12 points to trade at 99 on the news that it would be acquired by Lennar Corp., the fifth-largest homebuilder in the country.

Lennar was placed on CreditWatch by Standard & Poor's Ratings Service with negative implications. Lennar will pay $36 per share for U.S. Home, or $476 million.

Another high yield winner last week, one of the few, was Carmike Cinemas Inc. The notes were up about five points to 79, a trader said, on a relatively good earnings announcement.

Ebitda decreased slightly to $88 million for the year from $89 million the year before, but results were still better than had been expected, the trader said. The company had revenues of $487 million for the year, up slightly from $482 million in 1998.

High yield mutual funds saw a cash inflow of $118.1 million for the week ending Feb. 9, according to AMG Data Services, reversing slightly the massive outflows that have hammered the funds for several months.