TXU trades around after second-lien plan nixed; Verso gyrations continue after ratings cut

By Paul Deckelman

New York, June 24 – Activity in the distressed-debt market was seen as sparse and mostly directionless on Tuesday, as new-issue news continued to dominate the larger junkbond market, traders said.

There was some trading in the various bonds of Energy Future Holdings Corp., as investors tried to analyze the latest developments in the bankrupt company’s ongoing saga.

Specifically, the company formerly known as TXU Corp. rejected a $2.3 billion strategic financing and restructuring proposal from investor NextEra, Inc. and a group of second-lien noteholders, opting instead to pursue the proposal submitted by holders of its unsecured senior toggle notes.

There was also some activity – with some bonds higher and others lower – in Verso Paper Corp. paper in the continued aftermath of Friday’s move by Moody’s Investors Service to downgrade its debt by three notches, as the company struggles to complete its planned acquisition of NewPage Holdings Inc.

And traders saw continued erosion of the bonds of Caesars Entertainment Corp.

In the convertibles market, Web.com Group Inc.’s 1% convertibles due 2018 slid about 13 points against a 20% plunge in the company’s underlying shares, which tanked on news that Google is entering the domain registration business with an invitation-only beta website.

However, on a dollar-neutral, or hedged, basis, the bonds expanded by about 0.5%, assuming a 70% delta, a trader said.

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