CIT Group steady on CEO exit; YRC notes improve after amendment; Claire's bonds strengthen

By Stephanie N. Rotondo

Portland, Ore., Oct. 13 - The distressed debt market traded in a mixed fashion throughout most of the session, traders reported Tuesday.

Still, volumes were somewhat lower than expected after a three-day weekend.

"There are a lot of people cheating and making the weekend a little longer," said another source.

Even volume in CIT Group Inc. was thin, despite news that the company's chief executive officer would be leaving the company by the end of the year. The reaction in the bonds was minimal, as traders saw most issues ending basically unchanged.

YRC Worldwide Inc.'s bonds were meanwhile 1 to 2 points better, according to sources. The gains came as the company secured an amendment to its credit facility.

Elsewhere, traders had little explanation for the activity in Claire's Stores Inc.'s debt. The bonds traded rather active and better, they reported.

CIT steady on CEO exit

CIT group debt held its ground, despite news that the company's top executive planned to exit his post by year-end.

However, traders reported that the trading volume in the name - which has been significant lately - was not nearly as much as it had been in recent weeks.

A trader saw $12 million of the 4½% notes due 2010 at 62. Another trader said short paper - specifically the 2010 maturities - was "rather unchanged" trading between 62 and 64. He noted that that level was the company's "recent lows."

Another trader saw CIT bonds "a little heavy again," quoting its 4 1/8% notes maturing Nov. 3, 2009 at 64 bid, 66 offered, which he said was "down a couple of points." He saw the company's 7 5/8% notes due 2012 at 60 bid, 62 offered on "not much volume, pretty much unchanged."

"It looks like there's a sort of convergence, with that kind of paper down around 60," he said.

The trader opined that "by the looks of the quotes, you would say" that the company's debt exchange offer is not going well, leading some observers to speculate that CIT may instead have to opt for a bankruptcy restructuring of some kind, although he quickly added that he did not know "for sure."

The New York-based lender announced Tuesday that Jeffrey M. Peek, chairman and chief executive officer, was resigning, effective Dec. 31. The company is already searching for his replacement, though it is Peek's intention of staying through the end of the year in order to lead the company's restructuring efforts.

"CIT's recently launched restructuring plan is designed to enhance its capital levels, bolster liquidity and return the company to profitability," said Peek in a press release announcing his departure. "By strengthening CIT's financial position, the company will advance its bank-centric model and invigorate its market-leading franchises which support the small business and middle market sectors of the economy.

"Now is the appropriate time to focus on a transition of leadership, and I look forward to working closely with our board during that process."

"We are grateful for Jeff's many contributions to the company," added vice admiral John Ryan, lead director of the company's board, in a news release. "He has exhibited remarkable commitment and resolve while also providing invaluable leadership during a challenging period. We are pleased that Jeff has committed to remain fully engaged as CEO through the end of the year, and he will continue to have our complete support as we conduct the search for his successor."

Peek's exit comes as CIT is attempting to restructure its debt through a debt exchange of certain unsecured notes. The company previously announced the swap intended to reduce its overall debt by $5.7 billion on Oct. 2. CIT is also soliciting votes for a potential bankruptcy filing in the event the exchange does not reach the overall goal.

Word on the street is that the debt exchange is receiving very little interest from investors, making a Chapter 11 filing more and more likely.

In 2008, CIT received $2.3 billion in bailout funds. This past July, a group of bondholders loaned the company another $3 billion. That group is also reported to be considering providing debtor-in-possession financing should the company file for bankruptcy.

YRC improves following amendment

YRC Worldwide's bonds moved up 1 to 2 points, according to market sources, just as the company secured an amendment to its existing credit facility.

One source saw the 5% notes due 2023 at 51½ bid, 52½ offered, while the 3 3/8% convertible notes due 2023 ended at 44¼ bid, 45¼ offered. Another source said there were "a lot of odd-lot trades" in the high-50s to low-60s.

On Tuesday, YRC said it had altered the terms of its credit facility, which again extended its liquidity requirement to Oct. 30. The amendment also extended to Oct. 30 the day on which the facility would be reduced by an amount equal to the then-current revolver reserve amount.

"We believe we will have a long-term solution with our lenders in the very near term," said Bill Zollars, chairman, president and chief executive officer, in the release. "By extending the revolver reserve, we retain the flexibility needed to reach an agreement with the lenders that will fully support our comprehensive plan. We are also continuing active dialogue with our bondholders who remain an important part of our plan."

YRC Worldwide is an Overland Park, Kan.-based transportation services provider.

Claire's sees some action

Claire's Stores' notes were seen trading actively and better, but there was no news to explain the movement.

A trader pegged the 9 5/8% notes due 2015 at 68 5/8.

"That's not bad, considering they were at 12 not that long ago," he said.

Another trader placed the 9 5/8% notes at 68½ bid, 69 offered and the 10½% notes due 2017 at 66 bid, 68 offered.

"That might be a little better than last week," the trader said. "It looks up a couple points."

Claire's Stores is a Pembroke Pines, Fla.-based retailer of fashion accessories geared toward school-age and tween girls.

Tronox gains continue

A trader said that Tronox Worldwide LLC's 9½% notes due 2012 were "up a lot earlier," continuing the sharp rise in the bankrupt Oklahoma City-based chemical pigments manufacturer's issue seen last week.

He quoted the bonds as settling in at 57 bid, 58 offered, which he called a 3- or 4-point gain on the day, on "a lot of trading."

That came on top of the roughly 10-point jump those bonds took last Thursday - a day after the company released favorable financial projections for the next several years - which took them up to around 47 bid from the mid-30s, and then the 6- or 7-point rise into the lower 50s seen on Friday, both in busy dealings.

Tronox was again fairly active on Tuesday, with a market source, quoting the bonds at 58, seeing over $12 million having traded hands as of mid-afternoon, making it one of the 10 most active issues up to that point of the day.

"These things just keep running," another trader said, commenting on the wide trading range seen Tuesday of 54½ to 58, with the bonds ending around the latter level. "They've come back pretty nicely."

Paul Deckelman contributed to this article.

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