By Jonathan Stempel
NEW YORK, Dec 23 (Reuters) - Qwest Communications International Inc.'s bonds rose on Monday after the phone company announced completion of a debt swap, while Charter Communications Inc.'s bonds fell after the cable TV operator fired two top officers.
Other corporate bond activity was thin, with many traders and investors having completed their activity for 2002. Corporate bonds have rallied in the last two months as U.S. stocks rose from multi-year lows and investors grew more confident in a U.S. economic rebound.
"We may have taken some of the (traditional) January rally off the table, but that doesn't mean we won't still see improvement," said Jim Merli, global head of the fixed-income syndicate at Lehman Brothers Inc.
Corporate bonds performed in line with Treasuries on Monday, while junk bond prices were largely unchanged.
In late trading, 10-year Treasuries fell 1/32, as their yields rose to 3.967 percent. The U.S. bond market is scheduled to close at 2 p.m. EST /(1900 GMT) on Tuesday.
QWEST RISES, CHARTER FALLS
Qwest, the No. 4 U.S. local telephone company, said on Monday it cut its debt load by $1.9 billion, or nearly 8 percent, to $22.6 billion, in a tender offer that some bondholders labeled "coercive."
The Denver-based company, which has been trying to stave off bankruptcy, said it issued $3.3 billion of new bonds with greater seniority and in some cases longer maturities in exchange for about $5.2 billion of existing bonds.
"Whatever probability there may have been for a Qwest bankruptcy, and we believed it was very low, this lowers it," said Paul Wright, an analyst for Loomis, Sayles & Co. in Boston, which owns Qwest debt. Wright did not say whether Loomis, Sayles participated in the exchange.
Qwest Capital Funding's 7.25 percent notes maturing in 2011 rose about 2.5 cents on the dollar to 63.5 cents, traders said. Their yield fell to about 15.22 percent from 15.98 percent.
Meanwhile, Charter, controlled by billionaire Paul Allen, fired Chief Financial Officer Kent Kalkwarf and Chief Operating Officer David Barford, as a federal grand jury probes the company's accounting practices. Analysts called Kalkwarf's dismissal surprising, and Barford's less so because Barford had been on paid leave due to issues surrounding the probe.
Charter's 8.625 percent notes maturing in 2009 traded late Monday down 4 cents on the dollar at 44 cents, after falling to 41 cents, traders said. The yield rose to 28.09 percent.
Separately, Moody's Investors Service on Monday cut Fiat's debt ratings to junk status, saying the Italian automaker suffers from losses at its auto unit and a high, $15 billion total debt load.
Fiat has in recent days been on an asset-selling blitz. Previously it lined up a 3 billion euro ($3.08 billion) financing package from key creditor banks and committed itself to cutting its net debt load in half to 3 billion euros.
Fiat said the downgrade "appeared unjustified with respect to the group's true economic situation."
DATA
Last week, companies sold about $2.35 billion of investment-grade and $1.47 billion of junk bonds. They also sold about $250 million of convertible bonds, according to Morgan Stanley's ConvertBond.com.
Investment-grade corporate bonds yield an average of 1.85 percentage points more than Treasuries, down from 1.91 percentage points a week ago, while junk bonds yield 8.8 percentage points more than Treasuries, down from 8.81 percentage points, according to Merrill Lynch & Co.
For the month, investment-grade corporate bonds have gained 2.213 percent, junk bonds 1.116 percent and Treasuries 1.649 percent, Merrill Lynch said. For the year, investment-grade bonds are up 9.224 percent, junk bonds are down 2.222 percent and Treasuries are up 10.62 percent.
To see recent debt sales or upcoming offerings, please click on [nNEUBD4].