While the high-yield forward calendar has burgeoned to roughly $11 biLlion, analysts don't see supply pressures weighing down the market anytime soon.
"There's an awful lot of cash out there," said Brian Doyle, vice president and director of high-yield research at Citicorp Securities Inc. "We just had a blowout deal."
Citicorp was sole manager Friday on Affinity Group Inc.'s $120 million of 11 1/2% senior subordinated notes due 2003 at par. Noncallable for five years, the notes were rated B2 by Moody's Investors Service and B by Standard & Poor's Corp.
Doyle said that Affinity's deal is not alone.
"There have been a string of deals that have really been blowouts," he said. Doyle noted that 14 deals were priced last week, totaling $2.3 billion.
Doyle said the money that exited the high-yield funds in late September and early October started gushing back in two weeks ago and continued to stream in last week.
"I think the market timers might be quiet for a while," Doyle said. "I think they'll stay in for a while."
According to AMG Data Services in Arcata, Calif., $332 million of new money flowed into high-yield funds last week. During the previous week, AMG showed $761 million flowing into high-yield funds. Together, the two weeks total $1.1 billion.
Marty Fridson, managing director of high-yield research at Merrill Lynch & Co., said prior to this year, there were only five months since roughly 1984 when junk fund inflows hit $1 billion in a given month.
Fridson also does not envision supply problems.
"I don't think the market is being overwhelmed with supply at the moment," Fridson said.
One high-yield portfolio manager, however, did seem a bit overwhelmed yesterday by the number of deals circulating.
~My head is spinning there are so many deals," he said.
Among the deals the portfolio manager found "interesting" are Cencall Communications' $175 million of senior discount notes and Eckerd Corp.'s $100 million of senior subordinated notes.
Both 10-year deals are expected to arrive this week through sole manager Merrill Lynch.
"I hear the Eckerd deal is pretty hot," the portfolio manager said. The company has a large market share in Florida and is in a growing industry, the source said.
In the high-grade market, Philadelphia Electric Co.'s two-part competitive bidding offering totaling $475 million is expected today.
The offering is expected to consist of $225 million of 31-year first and refunding mortgage bonds and $250 million of eight-year first and refunding mortgage bonds.
In addition, three or four banks are expected to be looking in the 15-year area. A Household Finance deal is also rumored, a high-grade trader said.
In secondary activity, spreads on high-grade issues were unchanged in a quiet session. High-yield bonds ended 1/4 point lower over all, while cable issues ended unchanged. Dial Page bonds gained about four points Friday following news of an agreement in principle that has Motorola Inc. acquiring an interest in the company.
Standard & Poor's has placed Computervision Corp.'s B-plus senior debt and B-minus subordinated debt on Creditwatch for a possible downgrade.
The rating agency's action followed the company's announcement of a $543 million third quarter loss. Approximately $300 million of debt is affected, according to a Standard & Poor's release.
Computervision's third quarter results include a $516 million nonrecurring charge relating to its decision to exit the hardware resale business, write-down of goodwill, employee layoffs, and plant closings, the release says.
Based in Bedford, Mass., Computervision supplies CAD/CAM software and services to the mechanical design automation markets.
"The company has been experiencing declining revenues and operating losses as a result of reduced hardware revenues and economic weakness in Europe and Japan," the release says. "S&P will assess the cash implications of the restructuring actions, as well as the company's strategic business changes, before making a final rating determination."