Banking & Capital Markets

Heavy Choices Coming…

The start of the new quarter, coupled with Wednesday's holiday, will keep most senior financial executives from major market moves this week.
Ed ZwirnJuly 2, 2001

Market participants are likely to face some heavy choices in the week ahead.

Like between golf, barbecue, beer, or “all of the above.”

The confluence of the beginning of a new quarter, with the imminence of earnings statements, and Wednesday’s Fourth of July holiday, means that many decision makers are either out of town or constrained from tapping the debt or equity markets.

Tuesday will see an early bond market closing, while just about everything will shut down Wednesday.

In addition, the markets are apparently less-than-thrilled with last week’s Federal Reserve action. The decision to cut rates by 25 basis points this time around, rather than what has become the obligatory 50, left virtually no one pleased.

The Dow Jones Industrial Average finished the week in another dead heat. Treasurys, which had been rallying, backed off, with the 10-year note yielding about 5.35 percent, off more than 20 basis points.

Corporate bonds generally followed suit, with yields, still low by recent standards, rising sharply on the week.

In the Pipeline

Look for a dry period ahead in terms of new issues.

Perusal of news reports and calls to investment grade syndicate desks yielded no word of any upcoming bond issues.

Junk, on the other hand, shows a smattering of new borrowing ahead.

  • Michael’s Stores plans to sell $150 million of eight year senior notes via Merrill Lynch. The new debt, which is rated Ba2 by Moody’s Investors Service and BB by Standard & Poor’s, will be used to repay 10.875 percent senior notes due 2006.
  • Maria Healthcare is preparing $135 million of seven-year senior notes for private sale, according to a company Securities and Exchange Commission filing. The (B2/B+) notes, which will be handled by UBS Warburg, will also be used to repay existing debt.
  • Paxson Communications Corp., in a holdover from last week’s pipeline, will also use a bond issue, along with an outstanding senior credit facility, to refinance debt. The television station operator is said to be readying about $200 million of senior subordinated notes. The firm’s existing 11.625 percent senior subordinated notes due in 2002 are rated B3 by Moody’s and B- by S&P.

Click here for last week’s Capital Markets column.