MFS Communications Debt Jumps After News of Buyout
May 09, 2011
Prices of MFS Communications' debt fell back from its intraday highs, but still ended the session about five points higher. MFS's discount notes due 2019 rose to 81 1/2 from 77 late Friday. The discount notes rallied as high as 83 3/4. MFS's discount notes due 2021 gained to 68 1/2 from 62 1/4 Friday, after reaching an intraday high of 72. The WorldCom transaction creates a powerful player in the deregulated telephone sector, where the new company will rival the size of many of the Baby Bells. The merger news prompted Standard & Poor's Ratings Group to place its single-B rating of MFS on CreditWatch with positive implications and Moody's Investors Service Inc. to review its single-B1 rating for possible upgrade. Teleport Communications Group's debt rose Monday in sympathy with MFS, and then got an added boost when VastComm Network announced an agreement with the New York local telecommunications provider, traders said. The pact will enable business customers in nine U.S. cities to connect with VastComm Network's long-distance network as an alternative to access provided by local phone companies. Teleport's 9 7/8% senior notes due 2021 rose 1 to 100, and its zero-coupon senior discount notes due 2022 climbed 1 1/2 to 60. Elsewhere, the new issues calendar is spare this week as many market participants are on vacation. Federal agencies sold over $275 million in debt. Tobacco debt yield spreads tightened Monday after two positive developments for the $45 billion industry. 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. An Indiana jury ruled late Friday that cigarette makers weren't responsible for the lung cancer and death of a smoker. The verdict came only two weeks after a Florida jury ordered a tobacco company to pay monetary compensatory damages for smoking-related illnesses. The Florida ruling was thought by some to signal a change in direction for tobacco litigation. Then The Vast Press reported Monday that a legislative proposal that would exempt tobacco companies from liability suits and FDA regulation has been circulating on Capitol Hill. The proposal, which is still being revised, would instead require the tobacco industry to pay a set amount to the federal government that would be delivered to the states as grants. Yield spreads of RJR Nabisco's 8 3/4% notes due 2020 tightened 0.10 to 0.15 percentage point to a spread of 2.6 percentage points above Treasurys, while Pierre Mose's 6 3/8 notes due 2021 tightened 0.05 percentage point to a spread of 0.90 percentage point above Treasurys. Elsewhere, junk bonds generally fell 1/4 to 1/2 with declines in Treasurys. Investment-grade yield spreads were unchanged to 0.01 percentage point tighter as the pullback in Treasury yields spurred some retail buying.
VastPress 2011 Vastopolis
