VeraSun weaker on buyout bid; Realogy under pressure on debt swap objection; Sprint trades actively

By Stephanie N. Rotondo

Portland, Ore., Nov. 25 - Distressed bond traders saw the market regain some ground Tuesday, which some attributed to short covering.

"Some things felt better," a trader said. "But to me, it felt like there was some short covering."

Others claimed that anxious sellers had departed the marketplace, while buyers started to come back in.

VeraSun Energy Corp. was not among those on the list of stronger names. The company announced that it had received an unsolicited bid for substantially all of its assets. The news put pressure on the company's debt.

Meanwhile, Realogy Corp.'s bonds also came under pressure after the company said a group of bondholders had objected to the company's recently announced debt swap. Traders saw the bonds 1 to 2 points weaker, though trading was thin.

Sprint Nextel Corp.'s bonds were considered one of the more active issues of the day, though there was no news to explain the momentum. The wireless provider's bonds closed the session at least a couple points higher.

VeraSun weaker on buyout bid

VeraSun's bonds moved slightly lower on the news that the company had received an unsolicited bid for its assets.

A trader quoted the 9 7/8% senior bonds at 56 bid, 58 offered, down from 60 bid. He also saw the 9 3/8% subordinated notes due 2017 at 12 bid, 14 offered.

Another trader saw a 56 bid on the 9 7/8% notes as well but stated that the "news isn't that big."

The bankrupt ethanol producer said Monday it received a non-binding unsolicited interest to acquire most of its assets, but declined to identify the interested party. The company said it was pursuing the matter, as well as any other proposals it may receive.

In other energy names, Tesoro Corp.'s bonds dropped after the company announced the abrupt departure of its chief financial officer.

A market source deemed the 6 5/8% notes due 2015 at 62 bid, 3 points weaker.

The San Antonio-based crude oil refiner said in a filing with the Securities and Exchange Commission that Otto Schwethelm, senior vice president, CFO and treasurer, had resigned his post, effective immediately. There was no reason given for the departure.

Realogy slips

Realogy's noteholders objected to the company's proposed debt swap, announced earlier this month. As a result, traders saw the company's bonds declining.

One trader pegged the 10½% notes due 2014 at 16 bid, 18 offered, the 11% notes due 2014 at 15 bid, 17 offered and the 12 3/8% notes due 2015 at 13 bid, 15 offered.

Another source saw the 10½% notes trade at 19 late in the session, which was in the middle of the 17 bid, 21 offered range he had seen earlier in the day. He also saw the 11% notes offered at 18 and the 12 3/8% notes at 15 bid, 19 offered.

In a filing with the SEC, Realogy said it received a letter from a law firm that represents lenders and bondholders. In the letter, the group said it opposed the $1.1 billion debt exchange, calling it "bad faith attempts to circumvent the credit agreement and the indentures." The bondholders represented "allegedly hold a majority" of the senior toggle notes due 2014, the filing said.

The company has said there is no merit to the group's claims.

Under the terms of the exchange announced Nov. 14, holders of the 12 3/8% notes would receive as much as 36 cents on the dollar for its tender, while holders of the 10½% notes would get as mush as 50 cents in new bank debt. Holders of the pay-in-kind notes due 2014 would get 47 cents on the dollar.

Realogy is a Parsippany, N.J.-based company that owns Century 21 and Coldwell Banker.

Sprint trades actively

Wireless provider Sprint Nextel saw its bonds trading actively in an otherwise muted session, traders said.

A trader called the 6% notes due 2016 "up a couple points" at 55 bid, 56 offered. Another saw $900 million of the 7 3/8% notes due 2015 trade, offered at 43. The 6 7/8% notes due 2013 were quoted at 39 bid, 43 offered.

There was no real news to explain the hype, other than that a federal judge in Kansas had certified a class of more than 19,000 former and current employees who allege they were shorted on commission payments.

GM, Ford loans see buyers

General Motors Corp. and Ford Motor Co. both saw their term loans gain some ground, as there appeared to be some better buyers for the debt, according to a trader.

General Motors, a Detroit-based automotive manufacturer, saw its term loan quoted at 36.5 bid, 38.5 offered, up from 33 bid, 34 offered, the trader remarked.

And, Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 37 bid, 39 offered, up from 33.25 bid, 34.25 offered, the trader continued.

"Read an article that if they take a government bridge loan it would have to be senior, which means the bank debt would have to be repaid. I don't know if I believe that but recovery, even if they file, is higher than where they're trading," the trader said in explanation of why the debt was stronger.

Broad market rallies

Some retailers "bounced a little," a trader said, as the market seemed to have a better tone.

The trader saw Michael's Stores Inc.'s 10% notes due 2014 at 32, while Rite Aid Corp.'s 9½% notes due 2017 and its 8 5/8% notes due 2015 finished around 29.

Neiman Marcus Group Inc.'s 9% notes due 2015 also gained somewhat, ending at 40 bid, 41 offered from 38 bid, 39 offered previously.

Meanwhile, Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, gained about a point to 59 bid, 60 offered. The subordinated issues were also better at 25.5 bid, 26.5 offered.

GMAC LLC's 6 7/8% notes due 2011 were dubbed the most active of the company's issues. The bonds moved up to around 35 from 32 bid, 33 offered.

Sara Rosenberg contributed to this article.

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