Biomet gets a boost on sales numbers; Qwest bonds moving higher; GM retreats, Ford continues to gain

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., April 8 - With the bond market closing on a mostly firmer tone Wednesday, Biomet Inc.'s debt got a boost as well.

The company's bonds - and its term loan - moved higher following the company's release of its third quarter numbers, traders said.

Meanwhile, Qwest Communications Inc.'s bonds continued to feel better, gaining at least ½ point on the day. The move came a day after the company released a new issue that earned so much popularity it was upsized to about twice the original amount.

General Motors Corp.'s bonds started to retreat some, though rival Ford Motor Co.'s debt remained positive. News reports indicated that a big GM bondholder sold off a majority of its holdings, which could have sparked the movement. However, GM's bank debt got a slight boost.

The bond market will close early on Thursday and will be closed entirely on Friday in honor of Good Friday.

Market indicators mixed

The CDX Series 12 High Yield index slipped ¼ point, a trader said, to 73.5 bid, 74 offered. The KDP High Yield Index was meanwhile better at 54.35, yielding 13.06%, compared to Tuesday levels of 53.96, with a yield of 13.15%.

Still, traders across the board noted that activity was relatively thin, which was likely due to the upcoming holiday.

The primary market remained quiet on the final full day of the pre-Easter week.

Some players filed out early ahead of Thursday's Passover celebration, and the abbreviated Thursday session which is not expected to produce any primary market news, sources say.

Biomet gets a boost

Biomet's bonds got a boost after the company released sales numbers for the third quarter.

A trader deemed the 10 3/8% notes due 2017 better by 4½ points at 90.5. Another trader placed that issue around 90 - up from 87 - and called the 10% notes due 2017 higher by 3 points at 101.75.

Biomet's term loan B was also stronger in trading as investors reacted positively to the company's quarterly sales results, according to a trader.

The term loan B was quoted at 92½ bid, 93½ offered, up from 91½ bid, 92½ offered on Tuesday, the trader said.

Early Wednesday morning, Biomet revealed that, for the third fiscal quarter, its net sales increased 2% to $615 million from $603.1 million for the third quarter of fiscal year 2008.

Biomet is a Warsaw, Ind.-based designer, manufacturer and marketer of products used primarily by musculoskeletal medical specialists in both surgical and non-surgical therapy.

Qwest bonds move higher

Qwest Communications' bonds traded actively and ended the session higher, traders reported.

A trader said about $21 million of the 8 7/8% notes due 2012 traded at 100.25, a gain of about ¼ point. He also saw the floating rate notes due 2013 at 89.5, which was up over a point, while the 7 7/8% notes due 2011 and the 6½% notes due 2017 each gained ½ point to 99.25 and 85, respectively.

Qwest's recent new issue, the 8 3/8% notes due 2016, also traded higher, according to a source, but no levels were given.

Among other new issues in the telecommunications sector, Frontier Communications Inc.'s 8¼% notes due 2014 moved up to 93 bid, 93.25 offered.

These bonds had held steady in trading Tuesday at the 92 level, compared to the original pricing of 91.805 on Friday.

GM retreats, Ford continues climb

General Motors' bonds began to fall once again, though Ford Motor's paper remained on an upward track.

A trader saw GM's debt falling ½ to ¾ point, the 8 1.4% notes due 2023 at 9.5 and the 8 3/8% notes due 2033 at 10 7/8. The trader also saw Ford's 7 3/8% notes due 2009 about ½ point better at 95.25.

"People have been scrambling trying to find them," another trader said of Ford's bonds and the resulting hype from its recently completed tender offer. "Anybody that was short now can't find them."

The trader called the 7 3/8% notes unchanged and placed the 8 7/8% notes due 2022 at 34, up from the low 30s.

He also said GM's debt remained the 10 bid, 12 offered range, "all of them pretty much."

At another desk, Ford's 7% notes due 2013 were seen over a point firmer at 69.5 bid, while another source called the benchmark 7.45% notes due 2031 unchanged at 37.5 bid, 39.5 offered. The second source also saw GM's 8 3/8% notes at 10 bid, 12 offered, calling that a point weaker.

Though investor interest in Ford has grown since the company announced that it reduced its debt by $9.9 billion earlier in the week, interest in GM continues to plummet.

The New York Times reported on Wednesday that Southeastern Asset management had divested itself of the majority of its GM series B convertible bonds. The company now holds about 9.6% of the debt, down from 33% in September 2008. Those bonds are convertible into about 13.2 million shares of common stock.

Automakers GM and Ford are based in Detroit and Dearborn, Mich., respectively.

Extra B's

An asset manager whose portfolio includes high-yield bonds, high-grade bonds and stocks, but whose primary focus in the bond market is junk, has spent considerable time during recent weeks shopping in the high-grade bazaar, and is largely ignoring the high-yield new issue market.

This investor even passed on both of Tuesday's five-B deals, from Ventas Realty, LP/Ventas Capital Corp. and Qwest Corp.

However the predominantly high-yield investor recently did play the ConAgra Foods, Inc. 7% 10-year notes (Baa2/BBB/BBB), a $500 million tranche which priced on Monday, and was multiple-times oversubscribed.

It likely did not see extensive play from high-yield accounts because the interest rate was not that attractive, and there were not that many bonds to be had, the investor said.

Lately high-yield has had a pretty mixed performance, the buy-sider added.

"Some deals have gone to premiums while others have not.

"Investment grade deals have tended to go to better premiums, and they are better companies," the source remarked.

Prospect News asked this asset manager if investments in high-grade bonds can generate returns sufficient for a high-yield fund.

"First of all, there is nothing like losing money in distressed high-yield to make investment grade look attractive," the buy-sider reasoned.

"And if you look at the top-tier double-B names they aren't really even offered. And those yields are right on top of some of the high-grade new issues that are coming.

"So if you are buying the better quality you are not giving up as much as you might think.

"And the money that is coming into high-yield is more likely to be directed into the top half of the universe than the bottom half."

Biding time

Potential issuers facing maturities in the vicinity of two years out are lately staying their hands, waiting for less volatile markets and for lower rates, an investment banker said on Wednesday.

"They are keeping in close touch with their bankers, in case an opportunity presents itself," the sell-sider said.

A case in point is Qwest Corp., which priced a massively upsized $810.5 million issue of 8 3/8% seven-year senior notes at 92.498 to yield 9 7/8% on Tuesday.

The split-rated deal (Ba1/BBB-/BBB-) was priced off the high-yield syndicate desk.

Qwest, which an informed source described as extremely rate-sensitive, initially went out with just $300 million. However when the company became satisfied that it could price the deal in line with its interest rate targets, it upsized the face amount by more than half a billion.

Qwest had been the subject of reverse inquiry since early in 2009, according to the informed source who added that the company had no desire to price a deal at stratospheric rates.

The investment banker who spoke Wednesday, and was not involved in the Qwest deal, said that the company bided its time in bringing the long-expected issue.

And in this case it was right.

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