Wind PIK see-saws as refi jitters fuel conspiracy theories
* PIK falls on fear senior notes to be refinanced first
* Reports that VimpelCom will hold notes spook investors
* PIK recovers but investors warn of asymmetric returns
By Robert Smith
LONDON, Sept 20 (IFR) - Italian telecom company Wind's Payment-In-Kind bonds dropped sharply on Tuesday on concerns that the deeply subordinated notes would not be refinanced as quickly as some bondholders had expected.
Talk that Russian owner VimpelCom would launch a jumbo refinancing has been building for weeks, partly because market participants do not believe the company's structure will allow it pay the first cash coupon on PIK notes due in July 2014.
Those notes traded up on reports earlier this month that VimpelCom would refinance the PIKs with a USD4bn-equivalent loan facility.
"There was leakage from the loan side that this new facility was being put together, and the PIK traded up like a shot, as everyone just assumed the proceeds would be applied to the PIK," said a high-yield investor.
The bonds neared 106 by Tuesday morning, but plummeted almost five points later that day to 100.8 on speculation that the loans would repay the company's EUR2.7bn-equivalent 11.75% 2017 senior notes instead. Continua...