Action in Junk Bond Market Resumes as 8 Issues Are Priced

Junk bond issuance began to stir last week as issuers and investors picked up where they had left off before the holiday season.

At least eight new high-yield issues had priced by Thursday. And underwriters were predicting that the market would shortly see about 40 new issues, valued at $6 billion, as companies that delayed transactions in December finish up road shows and hit the market.

The environment continues to welcome companies seeking funding in the high-yield market. Given low interest rates and an abundance of cash-rich investors, "issuers have the opportunity to lower the cost of their debt," said Richard Miller, head of high-yield research at BancBoston Securities Inc., the investment banking unit of BankBoston Corp.

"There's a very good market tone," said investor Gary Goodenough, who manages the New England High-Income Fund.

In fact, Merrill Lynch & Co. completed a $150 million offering for Allbritton Communications Co., a Washington-based owner of television stations with just a phone call-no road show was needed. BancBoston co- managed the deal.

With the market so hot, this kind of quick execution is popping up more and more, especially for issuers already in the market or doing add-on financing.

Collateralized bond obligations, pension funds, and insurance companies are allocating more money to buy high-yield bonds, continuing to drive immense demand for the securities. Foreign and investment-grade investors are also developing a larger appetite for high-yield, Mr. Miller said.

Still, some clouds are gathering. Though interest rates are not a worry for the time being, there is concern that the domestic economy will slow, Mr. Miller said.

"We've had seven great years of economic activity," he said, "and there is a lot of uncertainty about what the emerging-markets currency crisis is going to do to corporate earnings and cash flow."

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