Energy Future gains on exchange offer extension; Spansion ends higher; MGM unchanged to better

By Stephanie N. Rotondo

Portland, Ore., Oct. 20 - The distressed debt market ended with a firm tone Tuesday, according to traders.

Energy Future Holdings Corp., for one, moved up at least a point on the day. The gains came as the company extended the deadline on its previously announced debt exchange.

Spansion Inc. paper was also better, traders said. Traders cited news regarding a possible asset sale, but there was also news out late Monday regarding the company's pending bankruptcy case.

Meanwhile, MGM Mirage's debt shook off news that its majority stakeholder, Kirk Kerkorian, was considering selling off some of his holdings in the credit. The bonds finished the session unchanged to "up a tad."

After losing some ground in the previous session, Rite Aid Corp.'s term loan regained some strength. The loan had lost ground on Monday after the company announced an add-on to the debt.

TXU extends tender deadline

Energy Future Holdings - or TXU, as it is most commonly known - saw its bonds improving as the company extended the early consent and solicitation deadlines for its previously announced tender offer.

A trader quoted the 10¼% notes due 2015 at 71.5 bid, 71.75 offered, up from 70.5 bid, 71.5 offered on Monday. The 10 7/8% notes due 2017 were likewise better at 71 bid, 71.75 offered, versus 69 bid, 69.5 offered previously.

Both deadlines were extended to 5 p.m. ET on Oct. 23.

As previously reported, TXU launched a debt swap for several series of its notes, including the 10 7/8% notes. Holders who tender their debt will receive up to $4 billion of new senior secured notes.

The power producer is attempting to cut its debt incurred in a 2007 leveraged buyout.

Spansion ends mostly higher

Spansion's debt was moderately better following news out late Monday that the senior notes bankruptcy trustee was asking that noteholders be paid first before any other distributions are made.

Trades also reported that there was news the Sunnyvale, Calif.-based company was looking to sell of its Japanese factory.

"That should stir things up a little bit," said one trader.

But another trader said the sale news "shouldn't affect the bonds.

"If they get cash, it's not going to flow into these guys," he said, referring to bondholders.

Nevertheless, the bonds were seen moving higher, the 1¼% notes due 2016 opening at 91 bid, 93 offered and then closing at 92 bid, 94 offered. The floating-rate notes due 2013, however, were unchanged at 94 bid, 96 offered.

Also, a trader said that the flash drive manufacturer's convertible debt was "up a lot." He pegged the 2¼% notes due 2016 at 37.5 bid, 39.5 offered, compared to 33 bid, 35 offered earlier in the day.

U.S. Bank NA, acting as trustee for the senior noteholders, requested that the bankruptcy court overseeing the case rule that the debtholders are entitled to be paid before holders of the convertible debt. The trustee asked that the senior noteholders be paid in full, plus interest, before any other distributions are made.

Both senior noteholders and convertible debtholders will receive 39.55 million shares of stock in the newly reorganized company, according to Spansion reorganization plan.

MGM unchanged to better

MGM Mirage's notes finished the session unchanged to "up a tad, depending on which issue you're talking about," a trader said.

The movement came as news outlets reported that Kirk Kerkorian was considering selling off parts of his stake in the Las Vegas casino operator.

The trader saw the 7 5/8% notes due 2013 trading actively at 80.5 bid, 81 offered, compared to levels around 79 "a couple days ago." The 8 3/8% notes due 2011 were also "busy," ending at 95.5 bid, 96.5 offered, up from 94.5 bid, 95.5 offered previously.

The 6¼% notes due 2012, however, ended unchanged at 88 bid, 89 offered.

On Tuesday, Tracinda Corp., which is owned by Kerkorian, said that it is considering "strategic partnerships" or other alternatives for MGM. Kerkorian said that he "believes there is substantial unrecognized value in MGM Mirage and CityCenter that is not reflected in the market value of MGM Mirage's stock."

Still, Tracinda noted it would enter into any deal until CityCenter opens, which is expected on Dec. 16.

Rite Aid loan improves

Rite Aid's tranche-4 term loan was a touch better in trading after a bit of a rocky day on Monday when news of an add-on was released, according to a trader.

The tranche-4 term loan was quoted on Tuesday at 104 bid, 104.75 offered, up a quarter of a point on the day, the trader said.

On Monday, the loan hit a low of 103 bid, 104 offered after the add-on was first announced. It then climbed back up but still ended lower when compared to Friday's closing levels of 104.25 bid, 105.25.

The company held a conference call on Monday morning to launch a $125 million add-on to the tranche-4 term loan due June 2015 priced at Libor plus 650 basis points with a 3% Libor floor, and carrying call protection of 105, 103, 101.

Market chatter is that the add-on to the tranche-4 term loan may be issued at a premium of 103 but nothing official has been announced as of yet.

In addition to the term loan add-on, Rite Aid is doing a $175 million senior secured revolver add-on priced at Libor plus 450 bps with a 3% Libor floor.

Proceeds from the additional term loan and borrowings under the upsized revolver will be used to help repay and cancel the company's accounts receivable securitization facilities.

Other funds for the refinancing will come from a $270 million senior secured notes offering.

As of Oct. 16, there was $475 million outstanding under the securitization facilities.

Upon successful completion of the transactions, the company will have refinanced all of its September 2010 debt maturities.

Citigroup Global Markets Inc. is the left lead bank and a bookrunner on the incremental bank debt, and Banc of America Securities LLC, Wells Fargo and Goldman Sachs & Co. are joint bookrunners as well.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

CIT active, WaMu holds steady

In the world of financials, CIT Group Inc.'s debt remained active, according to market sources. The sources also said that the debt - which had run up on Monday by as much as 4 points - was largely unchanged on the day.

A trader saw the benchmark 4¼% notes due 2010 at 67 bid, 67.5 offered, while the 4 1/8% notes due 2009 ended at 72 bid, 72.5 offered.

Some notes did lose some ground, however. The 5 1/8% notes due 2014 declined about half a point to 65 bid, 65.5 offered, while the 5.60% notes due 2011 slipped to around 88.

Also, Washington Mutual Inc.'s bonds were little affected by news the company had requested an exclusivity extension, as its case was "fraught with unresolved contingencies relating to the ownership of certain of the debtors' significant assets."

A trader said there were few trades in the name, placing the 4% notes due 2009 at "92 and change."

Tronox turns south

A trader said it looks like "the party's over" for Tronox Worldwide LLC'S 9½% notes due 2012. He said that during the morning, the bonds had traded in a 54.5 to 57 context - well under the upper-50s levels seen Monday.

Those Monday levels, in turn, were themselves were in considerably from last week's peak levels in the mid-60s, which had represented a nearly 30-point jump from the upper-30s, where the bonds had traded before the Oct. 7 release of positive financial projections setoff the surge.

The trader said he head heard the bonds offered around 58 around mid-day; around 1 p.m. ET, he said, the bonds were trading around 55 to 56.5, on "pretty good size." He saw a total of about $15 million having traded, mostly between 54 1/8 on the low end and 57.5 on the high side.

Visteon continues to climb

Visteon Corp.'s 12¼% notes due 2016 were trading around a 42 to 44 context, a trader said. He noted that the company's paper "has been creeping up over the past two weeks."

Two weeks ago, the bonds "were trading around either side of 25," while on Oct. 9, for instance, he said the bonds had traded between 26 and 30. They have been going up since then, even on no firm, fresh positive news about the bankrupt automotive parts supplier.

He meantime saw Visteon's 7% notes due 2014, which two weeks ago had been in the 25 bid area, trading at 31.25 bid, 32.5 offered on Tuesday, although that was a little down from recent peaks in the lower 30s.

Visteon's 8¼% notes due 2010 traded at the 31 to 31 3/8 level Tuesday, also up from around 25 earlier in the month.

With no real positive news seen out on the company, the trader agreed with the suggestion that Visteon bondholders anticipate that the company will continue to get assistance as it restructures from its former corporate parent and still its biggest customer, Ford Motor Co.

Sara Rosenberg and Paul Deckelman contributed to this article.

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