Icahn Enterprises, TXU, Edgen active in short pre-holiday session; Dish continues to trade

By Paul Deckelman and Paul A. Harris

New York, Dec. 23 - The high-yield market had one of its lightest sessions - if not the lightest - of the year on Friday as what little activity there was took place during the morning and then people started to leave already half-staffed desks ahead of the pre-Christmas early close.

Traders saw no real features in the market.

There was some scattered activity in several names, which don't normally trade around that much - Icahn Enterprises, LP, Energy Future Holdings Corp. and Edgen Murray Corp., although no news that might have explained the stepped-up activity levels was seen on any of those credits.

There was also continued activity in a name seen often over the last few days: Dish DBS Corp. The issuers' bonds have gotten a boost from speculation that the company might sell a big chunk of communications spectrum space it controls - or even sell itself altogether - to spectrum-hungry AT&T, Inc.

Sprint Nextel Corp., whose bonds have also recently traded around off the news that AT&T had abandoned its spectrum-driven efforts to acquire T-Mobile USA, was also seen trading around a little Friday, though little changed on the day.

Traders said that although volume was very light, Friday's market had a good tone to it.

Secondary market statistical performance indicators were little changed on the day, but were seen having firmed notably from where they were at the end of last week.

In the junk primary, not a creature was stirring, not even a mouse, as participants - in the poetic seasonal words of Clement C. Moore - had just settled their brains for a long winter's nap.

No issues were priced during the week to Friday.

Throughout the week, market sources expressed the belief that the year 2011 can now be entered in the book, with the extreme unlikelihood of any new issue activity taking place between Christmas and the new year, a typically dormant week in the high yield market.

Should that be the case, 2011 will close having seen $255.3 billion of issuance in 547 junk-rated, dollar-denominated tranches.

It is the second-biggest year ever in the junk market. However, 2011 issuance came in $37 billion short as compared to the 2010 all-time yearly issuance record of $291.95 billion in 656 tranches.

The last deal of the year came on Dec. 14, when 99 Cents Only Stores Inc. priced a $250 million issue of 11% senior notes due 2019 (Caa1/CCC+/).

Heading for the exits

In the secondary market, a trader suggested that Friday was "certainly the lightest day, other than the day after Thanksgiving," and then corrected himself: "No, it was probably busier even then, than today."

He said that it seemed as though "people don't feel compelled to do anything; they're not compelled to sell and they're not compelled to buy."

He further said, "Generally across the board, it looks like buyside accounts were only about one-third staffed. I was expecting it to be a little higher than that."

He added that it seemed like most people didn't show up today, and the ones that showed up are [at mid-morning] already heading for the door."

A second trader said the session was characterized by "very thin volume," which he estimated to be only about 10% of the norm.

Speaking at around midday, he said that there was "not a lot of action today. Most places have shut down already. Only one of my brokers is left in the Street, while everybody else is gone, and all of my salesmen just left too."

A third, when asked when things began closing down at most shops, quipped, "Maybe yesterday."

Yet another trader flatly declared that there was "nothing" going on.

Indicators flat on day

One of the traders said that the market "generally felt better."

Statistical measures of junk market performance, which had scored a hat-trick by firming solidly over the previous three sessions, were seen slightly higher on Friday.

However, reflecting the week's generally bullish performance, they were notably up from week-ago levels.

A trader saw the CDX North American series 17 High Yield index up 1/8 of a point, at 92½ bid, 92 7/8 offered, after having gained 9/16 point on Thursday.

The index was well up from its reading of 90½ bid, 90¾ offered, at which it had closed out the previous week on Dec. 16.

The KDP High Yield Daily index gained 7 basis points on the day to close at 71.97, after having risen by 9 bps on Thursday. Its yield came in by 2 bps to finish at 7.59%, after having declined by 3 bps in each of the previous two sessions.

Those levels contrasted with last Friday's 71.61 index reading and 7.73% yield.

And the widely followed Merrill Lynch High Yield Master II Index, which posted a sixth consecutive gain on Thursday to lift its year-to-date return to 3.786%, showed improvement from the 3.259% cumulative return recorded at the previous week's close. This was despite the year-to-date returns remaining below the recent peak level of 4.28% recorded on Oct. 28 and well below the index's high-water mark for the year of 6.362%, which was set on July 26.

However, they are still well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

Icahn is active

Among specific issues, a trader said that there was "a little bit of trading" in Icahn Enterprises' 8% notes due 2018, although he added: "I don't think that anything is going on" with the New York-based diversified holding company 87% controlled by billionaire investor Carl C. Icahn.

He saw the bonds trading at bid levels around 104 to 104¼ versus a range of 103 to 103¾ on Thursday and a wider 103 to 104 context on Wednesday.

"It's not a lot, but it does seem a little bit better."

Icahn was also the first bond named by another trader, likely based on volume; in a generally light day, nearly $9 million of the bonds was seen having traded around by the close, although another market source pegged them at about 103 3/8.

TXU powers up

A trader saw "a couple of trades" in Energy Future Holdings' 10% notes due 2020, locating the Dallas-based utility operator formerly and more familiarly known as TXU Corp. at 105 ¾ bid, 106¾ offered.

A market source at another desk said that more than $8 million of those bonds traded, with a final level around 1061/4.

He did not see "anything special" going on with the company.

Edgen edges up

There were also "a few trades" in Edgen Murray's 12¼% notes due 2015, although a trader saw no fresh news out on the company, a Baton Rouge, La.-based manufacturer of steel piping and other specialty steel products for the energy, chemical and construction industries.

He quoted the bonds as having recently been trading below 90, and on Friday, he said it looked like there was "a number of trades today" in an 88½ to 88¾ range, up perhaps a quarter-point.

While calling the bonds kind of unchanged, he said that there's been a flurry of activity there."

He said, "We usually see it trading in smaller pieces, but it looks like some round lots have been active today."

He added that Edgen Murray was in third place on the Junkbondland most-actives list, with about $6 million of turnover.

Dish climb continues

For yet another day, the bonds of Dish DBS were among the most active junk issues, capitalizing on the speculation that the company might sell communications spectrum space, or even sell itself, to AT&T.

A trader saw "a couple of trades" in Dish's 6¾% notes around 107¾ bid, 108 offered He noted that a few days ago, the bonds traded around 106½ to 1063/4, "so that might be higher yet - this is the highest they've been."

He said that Friday's gain amounted to over 1 point.

A market source at another shop saw the bonds as high as 108 bid, with over $3 million traded, putting it among the most-active junk issues of the day.

Earlier in the week, those Dish bonds were trading around 104 bid, but they have been given a boost on speculation that AT&T may be looking to either buy unused broadcast spectrum from the Englewood, Colo.-based satellite television broadcaster - or even buy the company outright to also obtain a platform for offering television and video services to its wireless customers.

Dish's 7 7/8% notes due 2019 were trading above the 113 level on volume of over $5 million, making them the fourth-busiest junk bond traded

But while the Dish bonds have been generally firming all week on the AT&T news, a market source said the latter issue was actually off slightly on the day.

Sprint little seen

While Dish's bonds continue to firm on acquisition or asset-sale speculation in the wake of AT&T's abandonment of its effort to acquire T-Mobile, traders saw less activity Friday in Sprint Nextel, whose bonds had also been firmer and somewhat busy this week - although on nowhere near the Dish trading volume - on the demise of that T-Mobile deal, which Sprint had opposed.

A trader said that he didn't "see much" going on in the company's bonds. He quoted its 8¾% notes due 2032 at 80½ bid, 80 5/8 offered, which "sounds like exactly where they have been." He saw only one trade all day in the credit.

At another desk, those bonds were seen going out at 81 bid, a half-point gain on the day, with volume of about $2 million.

Another trader quoted Sprint's 6 7/8% notes due 2013 trading at par on Friday, but he said that only $1 million had traded, "so it doesn't mean a whole lot."

At another desk, a market source quoted the Sprint 6% notes due 2016 perhaps a quarter-point better, at 82½ bid, in light trading.

The Overland Park, Kan.-based No. 3 U.S. wireless carrier's bonds firmed smartly earlier in the week as the company saw its vocal objections to the combination of AT&T and T-Mobile vindicated.

Sprint had vehemently opposed the efforts of No. 2 industry player AT&T to buy T- Mobile, now the No. 4 U.S. wireless firm, in hopes of being able to leapfrog the current industry leader, Verizon Wireless.

Sprint, already far back of both Verizon and AT&T in terms of subscribers and revenues, feared that letting AT&T buy T-Mobile would put it at an even greater competitive disadvantage

Federal authorities agreed with both the Justice Department and the Federal Communications Commission filing objections on antitrust grounds that threatened to derail the whole deal, ultimately causing AT&T to pull the plug on the transaction, pay a $4 billion break-up fee to T-Mobile and walk away.

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