Capmark Financial debt holding ground; Nortek notes moves up; Blockbuster bonds ratchet higher

By Stephanie N. Rotondo

Portland, Ore., Sept. 4 - Friday's distressed debt market ended largely steady, according to traders, given that many players were away from their desks or at least leaving early ahead of the holiday.

"Obviously it was kind of a ho-hum day," said one trader.

Capmark Financial Group Inc.'s debt traded some, however, though as with the broader market, the bonds remained unchanged. During the day's session, the Horsham, Pa.-based company received two downgrades following Thursday news about an asset-put agreement.

Meanwhile, news of a near-term bankruptcy filing did little to upset Nortek Inc.'s debt. The company's notes were seen climbing just one day after it was learned that Nortek had reached a restructuring agreement with its bondholders.

Blockbuster Inc. was also moving upward, continuing its climb from earlier in the week. A trader said there was no fresh news, just "more of the same."

The market will be closed Monday in observance of Labor Day.

Capmark holding its ground

Capmark Financial Group's bonds remained unchanged, traders reported, despite a round of downgrades.

A trader said the 8.3% notes due 2017 were basically unchanged, though "off the bottom," at 19¾ bid, 20 offered. That compared with 19 bid, 19½ offered previously.

At another desk, the 8.3% notes were quoted at 19 bid, 20 offered, as were the 5 7/8% notes due 2012.

Both Standard & Poor's and Moody's Investors Service dropped their ratings on the financial services company. S&P cut its rating to CC from B-, while Moody's placed Capmark at C, down from Caa1.

Both agencies said the downgrade reflected the announcement Capmark had entered into an asset-put agreement with a new subsidiary of Berkshire Hathaway Inc., as well as its recently reported $1.6 billion loss in the second quarter.

"In Moody's view, the sale of the servicing and mortgage banking businesses would remove key sources of income needed to service and repay unsecured debt obligations, while impairing the value of its franchise and remaining businesses," the agency said in a statement.

"We expect Capmark either to enter Chapter 11 bankruptcy proceedings or to negotiate a distressed exchange outside of bankruptcy, which most likely would affect most of its debt. We will consider either of these events to be a default," said S&P analyst Jeffrey Zaun in a statement.

Nortek moving up

Nortek's debt continued to move higher, for the most part, following Thursday's news that the company's bondholders had agreed to a restructuring that will include a bankruptcy filing.

A trader called the 10% notes due 2013 up at 99 bid, 99.5 offered, compared to 97.25 bid, 98.375 offered Thursday and Monday levels around 95.

Another source saw the 10% notes inching half a point higher to 99 bid, 99.5 offered. However, the 8½% notes due 2014 were seen unchanged at 60 bid, 61 offered.

Under the agreement between Nortek and its bondholders, the company will eliminate about $1.3 billion in debt.

"This transaction will immediately rebuild Nortek's financial strength, providing us the flexibility for growth and a solid foundation for long-term stability," chairman and chief executive officer Richard L. Bready said in the release issued Thursday.

To help eradicate the debt, Nortek will tender for its 8% notes in exchange for nearly all the equity in the company. Other noteholders can also tender their holdings for stock.

On the news, S&P cut Nortek's rating to D from CCC.

Blockbuster ratcheting higher

After an onslaught of positive news in the last week or so, Blockbuster's bonds "traded up again," a trader said, on "more of the same."

The trader pegged the 9% notes due 2012 at 60 bid, 61 offered, a market echoed at another desk.

"So that one continues to move up," the trader said.

On Sept. 2, Blockbuster said it reduced its letters of credit with former parent Viacom Inc. by about two-thirds to $25 million from $75 million. That was in addition to news on Aug. 28 regarding the sale of the company's Ireland unit, Xtra-Vison, for cash proceeds up to $45 million.

Broad market steady

In the rest of the distressed market, Ford Motor Co.'s 7½% notes due 2012 were seen moving higher just one day after the company got upgraded.

A trader deemed the issue up about half a point at 94 bid, 95 offered and noted that it was one of the day's biggest traders, volume-wise.

Meanwhile, CIT Group Inc.'s bonds were "trading a little bit, but not that much," a trader said. He said the "shorter-dated stuff" was "still in the low-60s, pretty much unchanged."

A trader saw some Energy Future Holdings Corp. bonds - the old TXU Corp. - "trading up a little bit. I'm not sure why."

He saw the company's Texas Competitive Electric Holdings unit's 10¼% notes due 2015 - which on Thursday had been trading between 64 and 66.25 - trading at 67 on Friday.

"It's up a little bit - I'm not sure what's going on," he said. Volume in the credit was light - $1 million, "and that was it," he declared.

Paul Deckelman contributed to this article.

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