U.S. JUNK BONDS UNAFFECTED BY TEXACO <TX> FILING
Despite a sharp early fall in Texaco
Inc bonds, the 125 billion dlr U.S. junk bond market was
largely unaffected by Texaco's weekend filing for protection
under Chapter 11 of the Bankruptcy Code, analysts said.
    "Texaco's filing had little, if any, effect on junk bond
prices this morning. It should not spill over to the overall
market like LTV Corp's <LTV> bankruptcy filing did last
summer," said one analyst.
    Traders said some Texaco debt issues fell over 30 points
this morning in thin trading, but recouped about half that.
    "Because of the Texaco filing, some investors bid down its
paper to the mid-60 area (around 650 dlrs per 1,000 dlr face
value) from around 95 Friday," said a dealer in high-yield, low
rated bonds.
    "But sellers could not be found at those levels and the
bids soon rebounded to the 75 to 85 area," he added, referring
to such issues as Texaco's 13 pct notes of 1991, the 13-1/4s of
1999 and 13-5/8s of 1994. All were in the mid-90s Friday.
    The rebound occurred after Standard and Poor's Corp
downgraded the debt ratings of 8.4 billion dlrs of debt of
Texaco and its subsidiaries to D, traders noted.
    S and P cited the weekend bankruptcy filing. The agency
said it uses the D grade for securities issued by companies in
Chapter 11 reorganization.
    Moody's Investors Service Inc followed suit, cutting most
of the debt of Texaco and its units to Caa.
    The junk bond market experienced a short-lived downturn
last summer when LTV's bankruptcy filing sparked worries that
credit conditions of other steel companies would also worsen.
    "This is clearly not the case with Texaco," said one
trader. Because of their high yields, junk bonds have lately
outperformed investment grade corporates, he and others said.
    Analysts and portfolio managers said they viewed Texaco's
bankruptcy filing as a defensive move.
    Indeed, a Texas State Court of Appeal this morning said the
bankruptcy petition effectively stays Texaco's obligation under
Texas law to post a bond in its 10.53 billion dlr litigation
against Pennzoil Co <PZL>.
    "The filing was not the result of credit weakness. The
company got through the oil crisis alright," said one portfolio
manager.
    Others who run junk bond portfolios agreed with that
assessment and said they would still buy high-yield issues.
 Reuter
