West Corp. heads south on earnings; Swift falls quickly; raid roils Pilgrim's Pride; funds gain $59 million

By Paul Deckelman and Paul A. Harris

New York, April 17 - West Corp.'s bonds were seen bouncing around at sharply lower levels in active trading Thursday after the Omaha-based outsourced-communications solutions provider slid to a first-quarter loss versus its year-ago profit and cut its estimates of likely full-year revenues.

Another big loser on the day was Swift Transportation Corp., although nobody saw any specific negative news out on the Phoenix-based trucking company that might explain the 6 or 7 point drop in its bonds.

There was also no fresh news out on Georgia Gulf Corp., although its bonds were among the most actively traded issues of the day.

Pilgrim's Pride Corp.'s bonds were being quoted down a point - although its stock was up - in the wake of the massive federal raids that resulted in as many as 400 of the Pittsburg, Tex.-based poultry company's employees being taken into custody on immigration- and identity theft-related charges.

Traders were calling Six Flags Inc.'s bonds either unchanged or up a little after the theme park operator reported strong first-quarter revenue figures.

After two straight sessions in which upsized junk offerings priced - no small achievement in this year's considerably more quiet primary market - activity in the new-deal arena was on hold Thursday.

There are no issues on the forward calendar expected to price before the Friday close.

Funds up by $59 million on week

And as trading was winding down for the session, market participants familiar with the high yield mutual fund flows statistics generated by AMG Data Services of Arcata, Calif. said that in the week ended Wednesday, $59.239 million more came into those funds than left them. It was the third consecutive inflow, following cash infusions of $716 million in the previous week, ended April 9, and $442 million in the week ended Apr. 2.

Over that three-week stretch, inflows have totaled $1.217 billion, according to a Prospect News analysis of the figures, far outweighing the $409.6 million of net outflows which had been seen over the three weeks before that.

The results over the past three weeks have represented a sharp break away from the negative fund-flow trend which had dominated for most of this year. With 16 weeks now in the books, outflows have been seen in nine of them, versus seven inflows, according to the Prospect News analysis.

According to market sources, net outflows from the weekly-reporting funds since the start of the year are now estimated at $74.239 million, up from around the $15 million neighborhood the previous week, which had been the first time all year that the cumulative fund-flow figures had been in the black.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

Market indicators seen better

A trader saw the widely followed CDX index of junk bond performance up 3/8 point at 95½ bid, 95¾ offered on Thursday. Meanwhile, the KDP High Yield Daily Index, after a little early-day weakness, came off its intraday lows to end up 6 basis points at 74.67, while its yield narrowed by 1 bp to 9.50%.

In the broader market, advancing issues led decliners by about a 10-to-seven margin. Overall activity, reflected in dollar volumes, rose nearly 5% from Wednesday's levels.

A trader said that "at one point, there was an overall better tone," although he was "not sure whether we closed that way."

"There was nothing new or exciting in this market," a second trader said. "It was pretty dead."

"It was a pretty dead day," agreed another trader, who said that the major news in the corporate bond world Thursday was over on the investment-grade side of the fence, where Lehman Brothers Holdings "came with a big deal" of $2.5 billion of 10-year notes, "and that was it."

West Corp. heads south

West Corp.'s bonds fell sharply in active round-lot trading after the company reported a first-quarter loss versus a year-earlier profit and cut its revenue guidance.

"This was one of the major losers on the day," a trader said, "along with Swift." He characterized dealings in the company's two issues of junk bonds "active."

He saw its company's 11% notes due 2016 down 5 to 6 points on the session from Wednesday's close at 91.5 bid. On Thursday, he said, the bonds had opened at 87, dropped to about 85.875, blipped back up to 87.75, and then went out at 86. He saw its 9½% notes due 2014 down 3 to 4 points on the day at 92 bid.

West's bonds were "lower by a decent amount" after the numbers, another trader said, pegging the 9½% paper at 92.5 bid, 93.5 offered and the 11s at 85 bid, 87 offered, calling that a 5 point loss.

A market source at another desk quoted the 11s off 5½ points on the day at 86, while yet another source echoed that assessment. The 91/2s, meantime, had gyrated even further, at one point in the morning seen down around 9 points to the 86 level on a couple of large-block trades, before bouncing up from that nadir to finish at 92, down more than 3 points on the session.

West, which handles telephone customer assistance, technical support, telemarketing, order processing and debt collection functions for other companies on an outsourced basis, reported a first-quarter loss of $1.2 million versus year-ago earnings of $9.02 million, even though revenues for the period rose 3.4% to $525.8 million from $508.6 million a year ago. It attributed the sharply lower results in part to a $24.2 million reduction in revenue in its Receivables Management segment, due to "reduced liquidation rates on existing portfolios associated with weaker economic conditions for consumers which resulted in a weaker than expected collection environment."

Citing "anticipation of a difficult economic and operating environment," the company also cut its 2008 full-year revenue forecast to a range of $2.19 billion to $2.23 billion from its previously projected range of $2.2 billion to $2.28 billion.

Swift gets swatted

A trader called Swift Transportation the other big loser of the day, while another characterized its 12½% notes due 2017 "the bonds of the day," seeing them at 38 bid, 39 offered, well down from 45 bid, 46 offered previously. "They were on a wild ride," he said, "with lots of trading." He did not know of any news that might have pushed the bonds down so badly.

Another trader quoted the bonds at 38.5 bid, down 6 points on the day, suggesting that in the lack of specific news, perhaps there was negative transportation news out, or just investor angst with the sector - a primary victim of the potentially deadly combination of a slowing economy and swiftly rising fuel prices.

An e-mail to the company seeking comment or clarification on its bond movements had not been answered as of press time Thursday evening.

Georgia Gulf gyrates on no news

There was likewise no specific news seen out Thursday afternoon on Georgia Gulf's bonds. A market source saw the Atlanta-based chemical manufacturer's 10¾% notes due 2016 off more than a point on the day in very busy size trading, finishing just below the 71 level.

The company's 9½% notes due 2014 meanwhile were seen ending ½ point down at 81 bid, also on quite busy dealings.

Chickens coming home to roost for Pilgrim's Pride?

Traders were split over the impact which news of a big federal crackdown on illegal immigration and related problems of alleged document fraud and identity theft had on Pilgrim's Pride's bonds, since as many as 400 of its assembly-line workers were arrested in raids Wednesday on five company plants in Texas, Florida, Arkansas, Tennessee and West Virginia - about 4.3% of the workforce at those facilities and nearly 1% of the company's overall employee roster.

Perhaps on the theory that the best defense is a good offense, the company sought to distance itself from the negative publicity surrounding the widely reported raids, declaring that it - not the government -had taken the first step and set the wheels in motion for Wednesday's sweep after it discovered instances of identity theft at its Arkansas plant, and maintained that it had terminated all the employees who were arrested.

"We share the government's goal of eliminating the hiring or employment of unauthorized workers," the company said in a statement following the raids, vowing to fire anyone else who may be engaging in providing or using stolen or phony Social Security numbers or other bogus identification for the purposes of getting jobs for the undocumented there.

"They claim that they severed their ties with these people," a trader said. "But that may not be the case." He saw the company's 8 3/8% notes due 2017 down a point at 86 bid, 87 offered.

Another trader was skeptical of the notion that the raids had nothing to do with the company itself. "Of course it does. First, it's their workforce. Second, what if there are fines levied against them?"

However, Pilgrim's Pride said Thursday that it will not incur any civil or criminal charges.

It explained at length that it voluntarily screens all new employees using the E-Verify program under the jurisdiction of the federal Department of Homeland Security.

The second trader saw "quiet a few" of the bonds traded at lower levels, pegging the 8 3/8s in a bid range between 84.75 and 86 - down from around 87.5 two days ago, "so I'd characterize them as lower."

Yet another trader disagreed, seeing the bonds at 86 bid, 87 offered and its 7 5/8% notes at 93.25 bid, 94.25 offered, "not much different from where they already been."

Pilgrim's Pride stockholders, meantime were apparently not worried about possible bad publicity or other legal repercussions; they took its New York Stock Exchange-traded shares up $1.39 Thursday, or 6.63%, to $22.37. Volume of 1.6 million shares was about 1½ times the usual turnover.

"That's wild," one of the traders who saw the bonds lower said in response.

Six Flags boosts revenue; did that boost bonds?

A trader said that Six Flags "had big [first-quarter revenue] numbers, but the bonds didn't go anywhere."

He saw the New York-based theme park operator's 8 7/8% notes due 2010 staying at 72.5 bid, 74.5 offered, the 9¾% notes due 2013 at 59 bid, 60 offered and the 9 5/8% notes due 2014 at 58 bid, 59.5.

He opined that "despite the good numbers, the bonds really didn't move up," theorizing that "they moved up before the numbers, then when the numbers came, it was kind of already priced into them."

Another trader saw the 9 5/8s up "maybe a point" at 58 bid, 60 offered, although he sounded doubtful.

However, a market source at another desk had the 93/4s up more than a point at just under 60 bid.

The company announced that revenues rose a robust 35% year-over-year in the first quarter to $68 million, up from $50.7 million a year before. That also beat Wall Street expectations of around $53 million. Six flags attributed the big gain to increased attendance and heavier guest spending.

Its chief executive officer, Mark Shapiro, noting that airline ticket prices are on the rise and the "hassle and frustration" of air travel is also rising - meaning people may opt to stay closer to home and drive to their local theme parks rather than fly off to exotic destinations like Six Flags rival DisneyWorld - predicted that his company's 21 theme, water and animal parks located across the country are "well positioned to be a preferred entertainment option this summer."

Smurfit-Stone off slightly

Elsewhere, Smurfit-Stone Container Enterprises Inc.'s 8% notes due 2017 were seen having eased to 82 bid from 82.375 on Wednesday, in fairly active size trading. The Creve Coeur, Mo.-based containerboard manufacturer said Thursday that it now expects to report a first-quarter adjusted loss of 9 cents a share - a far cry from the penny-per-share profit analysts had been expecting.

It also said that it will take a 90% stake in one of its customers, the money-losing Fresno, Calif.-based packaging manufacturer Calpine Corrugated LLC.

Smurfit-Stone's upcoming results, in fact have been severely impacted by its so-far unprofitable dealings with Calpine Corrugated; it plans to record a charge against earnings of 5 cents a share in its first quarter to reserve for amounts due from the company.

Berry Plastic bonds hang in there

Apart from the established bonds, Berry Plastics Corp.'s new floating-rate notes due 2015 - which priced on Wednesday at 94.25 bid and then firmed to 95.5 bid, 96 offered - were anchored only a smidge higher, a trader said, quoting them at 95.75 bid, 96.25 offered, "just where they were all day. They didn't move at all."

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