New-Issue Business Is Slow On Corporate Bond Market
May 05, 2011
No corporate deals priced on Friday, although two junk telecommunications deals could come early next week. Radio Movil Digital Americas is looking to price $85 million of seven-year senior discount notes in the Rule 144a private-placement market. Lehman Brothers Inc. is the lead underwriter. Also in the rule 144a market, United USN, a local telephone-service provider based in Chicago, may price $155 million of eight-year senior notes via Smith Barney Inc.. Issuers of Rule 144a deals sell them privately on the primary market, but have the right to register them as public issues six months later. Meanwhile, federal agencies priced more than $400 million in debt Friday. For the week, despite predictions that volume would be minimal, more than $3.6 billion in corporate debt priced, led by a $1 billion Canadian global bond and a $1 billion Yankee issue from Israel. But most market players -- at least those who have not fled town on vacation -- were already looking forward to next month's activity. ``I would expect that a fair amount of issuance is coming in September, as long as rates hold,'' one investment-grade syndicate official said. ``But there's nothing firmly slated right now.'' Syndicate officials are expecting greater activity on the high-yield side, with at least $800 million in junk debt scheduled for road shows and a backlog of more than $4 billion of high-yield deals registered with the Security and Exchange Commission. In the secondary market, yield spreads on tobacco debt narrowed slightly as traders keep their eyes on jury deliberations in a tobacco case in Indiana. Spreads of RJR Nabisco Holdings' 8 3/4 notes due 2020, which had widened to 2.90 percentage point above Treasurys earlier in the week, tightened Friday to a spread of 2.75 percentage points above Treasurys. The yield spread is the difference in the yield of a given debt instrument and that of a similar-term Treasury issue, with a tightening of the spread suggesting a decreased perception of risk. Market watchers credited the rally to bottom-fishing, and to a sense of relief after the White House dropped efforts to ban the sale of cigarettes by mail and imposed milder restrictions on vending machine sales than had been feared. Still, tobacco bondholders are crossing their fingers while awaiting an impending decision from the Indiana jury. The jury will determine whether the tobacco industry should be held responsible for a smoker's death from lung cancer. Overall, spreads on investment-grade debt were unchanged in light trading. On the high-yield side, talk that Farm Fresh may try to restructure its debt has upset the entire supermarket sector. Farm Fresh's 12 1/4% notes due 2015 ended Friday at a price of 77, down about three points from end of the day Thursday and down about eight points from Thursday morning, when the company met with an analyst. Penn Traffic's 9.625% senior subordinated notes due 2020 fell about a point to 70. But Grand Union debt inched upward, with its 12% senior notes due 2019 ending at par, up about 1/4 to 1/2. One trader said that in a conference call Friday between Grand Union officials and analysts, the company offered reassuring remarks about its financial situation, ``comforting'' the market and keeping the price from dipping. On the whole, junk prices were unchanged to up 1/4.
