960405

Corporate bonds lower

in thin trade

NEW YORK: US high-grade corporate bonds closed weaker on Thursday in thin trade, with ITT Corp and Bally Entertainment once again hogging the limelight, dealers said.

Early trading saw ITT slip and Bally rise for the third straight session on rumours ITT might acquire the gaming concern. Concerns surfaced in the afternoon that the deal may not materialize, giving ITT a boost.

ITT closed tightening against US Treasuries by about three to four basis points, paring almost all of the losses endured after the acquisition rumours.

Rumours that ITT was in talks to acquire Bally for as much as $1.5 billion, excluding debt, caused ITT debt to widen five basis points in the last few days.

Bally, which trades in the junk bond market, slipped a point Thursday after jumping about five points in the past few days.

Philip Morris consolidated Wednesday's gain, outperforming Treasuries by about two basis points.

Most other high-grade issues were untraded but spreads underperformed Treasuries by one or two basis points on slack demand from retail accounts, traders said.

In the primary market Thursday, Chesapeake Energy issued $120 million Ba3/B-plus 10-year senior notes via Bear Stearns to yield 287.5 basis points over comparable US Treasuries.

A little more than $1.5 billion in new corporate debt was priced this week, including $600 million of junk deals.

A class action lawsuit filed by Fleming Cos bondholders failed to affect Fleming debt prices as the damage was already done by an earlier suit, experts said.

"It's not really a surprise," said Shelia McNeely, vice president at Duff & Phelphs.

McNeely said the suit is a natural reaction to a March 14 ruling against Fleming in a lawsuit over a supply arrangement with former customer David's Supermarkets. News of that suit sent debt prices plunging, dulling the affect of today's lawsuit.

The latest lawsuit was filed by buyers of Fleming 10.625 percent senior notes and floating rate senior notes due Dec 15, 2001. The suit alleges Fleming repeatedly misrepresented and failed to disclose the existence of the David's lawsuit.

Before the March 14 ruling Fleming debt traded near par. Feb 29, Duff & Phelphs quoted Fleming at 99.5. After the news, Fleming debt fell as low as 82 before rebounding to 90 and slipping again.

This morning Fleming was bid at 87.75, traders said. Following the news the issue slipped to 86 bid, but dealers said the effect was lessened because many dealers had already gone home for the Easter holiday weekend.

In the government securities market, the benchmark US 30-year bond closed down 18/32 at 91-10/32 to yield 6.67 percent.-Reuter