B of A High Yield Large-Cap Index down 0.42% in week; YTD return cut to 0.23%

By Paul Deckelman

New York, March 26 - The Banc of America High Yield Large Cap Index fell 0.42% in the week ended March 21, its first setback after three consecutive weekly advances. The retreat followed a gain of 0.67% in the week ended March 14.

The latest week's loss sharply cut the index's year-to-date gain to 0.23% from 0.66% in the previous week. The index had started the year strongly, with three consecutive weeks of sizable gains swelling the year-to-date return, before the market gauge first turned uncertain for several weeks and then, solidly negative, before going back on the upside over the prior three weeks.

In the most recent week, the index's spread over Treasuries narrowed slightly to 781 basis points from 783 basis points the week before, while its yield-to-worst widened a bit to 12.73% from 12.71%.

Even with the latest setback, the index continues to show a significant overall improvement from where it stood at the end of 2001, when it lost about 3% overall for the year and posted a spread at year's end of over 900 basis points off Treasuries and a yield-to-worst of over 13.50%. Banc of America sees the index, which tracks issues of $300 million and over, as a reliable barometer of trends in the overall high yield market of around $600 billion.

In the most recent week, the index tracked 365 issues with a total market valuation of $148.862 billion, versus 358 issues worth $15.08 billion in the week ended March 14.

The best performer among the three credit tiers into which B of A divides its index was the top credit tier - issues rated BB+ and BB (21.48% of the index) - with a gain of 0.44%, Next was the middle tier (issues rated BB-, B+ and B, comprising 55.04% of the index), which was off 0.17%. The lowest tier - bonds rated B- and below (23.68% of the index) - brought up the rear with a 1.65% loss.

In the most recent week, domestic wireline issues were the worst performers, losing 9.09%, with Metromedia Fiber Network leading the way downward as it issued a barrage of negative news - it missed a March 15 interest payment on its 6.15% subordinated convertible notes issued to Verizon Communications, withdrew previous guidance regarding revenue, EBITDA, capex, and its March 31 expectation of reaching normalized EBITDA positive, and stated it may need to seek Chapter 11 protection, which pushed its 10% notes due 2009 down 16 points.

The big loss for the domestic wirelines represented quite a turnaround from the previous week, when the group had led all of the others with a 4.07% gain and was in the Top Five group of the strongest performers for a second consecutive week. The worst performer in the previous week had been finance, down 2.64%.

Also on the downside, international cable issues lost 3.45%, on weakness in Telewest Communications plc, whose 11% notes due 2007 fell 3 points when Moody's Investors Service downgraded Telewest's senior unsecured rating to Caa3 from B2 on concerns of the company's ability to generate cash, and on a three-point drop in NTL Inc.'s 0%/9¾% notes due 2008. The cablers were among the strongest finishers the week before, when they were up 1.76%. PCS/cellular (down 2.87% as Fitch lowered its outlook on Nextel Communications Inc. to negative from stable, causing its 0/9.95% due 2008 to drop 2.5 points), steel issues (down 1.99%) and international wireless (off 1.45%) rounded out the Bottom Five list of the week's worst-performing sectors; the week before, PCS/cellular had been in the Top Five, up 2.08; international wireless was among the worst losers, down 0.68%.

On the upside, consumer non-durables companies led the way, up 1.66%, on strength in textile names like Westpoint Stevens Inc. and Levi Strauss & Co. The week before, the group was in the Top Five with a 1.62% return. As noted, the domestic wireline names had been the best finishers the week before.

Chemicals were the second-strongest grouping, up 1.32% on strength in Lyondell Chemical Co.'s 10 7/8% notes due 2009 and Huntsman ICI Chemicals' 10 1/8% notes due 2009, each up about three points. Utilities (up 1.15%) "took the bronze this week as speculation lingered for potential consolidation within the industry," B of A analysts noted, with AES Corp's 9 3/8% notes due 2010 trading up 2 points. Entertainment (up 1.13%) and transportation (up 1.03%) rounded out the Top Five; transportation had been among the best finishers the prior week, when it was up 1.72%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.