Holiday, new issues drive focus from distressed; CIT loses some gains; Bon-Ton bonds give back

By Stephanie N. Rotondo

Portland, Ore., Nov. 20 - The distressed debt market "was a shrug," a trader said Friday, as new issues and a looming holiday took the focus.

CIT Group Inc. remained in the news, as the company's credit default swaps were set at auction. The bonds ended up giving back some of the gains from the previous session, though still above the CDS value.

Bon-Ton Stores Inc. also came in some. The notes had run up on Wednesday ahead of earnings and on Thursday following the official report. Friday's losses came even as the company received an upgrade and was on tap for another.

Meanwhile, Sprint Nextel Corp.'s debt dipped during trading. The decline was attributed to news that the company had been downgraded.

Holidays, new issues drive focus from distressed

With the Thanksgiving holiday - and then Christmas - just around the corner, market sources are predicting even lighter volumes than normal.

"It was pretty subdued," a trader said of the last Friday trading day before the turkey-centric holiday. "I expect it will remain a little bit quiet."

The market will close early next Wednesday, but the trader speculated, "It will be an early close all week.

"From everyone I have talked to, that seems to be the game plan," he said.

However, though activity is expected to be quiet in existing debt, the focus that has driven the new issue market is expected to remain the same.

"This whole week has been new issues," the trader said. "The bulk of business is not just people flipping new issues, but collecting new issues. So it is really driving the market."

CIT loses some gains

CIT Group's bonds came in a little from Thursday's highs, but still ended above the value set at a CDS auction.

"They've been creeping up," a trader said, placing the majority of issues at 69.5 bid, 70 offered. However, he noted that 2014 paper got as good at 70 bid.

"They seem to be more bid for," he said of the New York-based lender's bonds. "I guess they are getting closer to settling this thing."

Another trader said the debt was "pretty volatile given the news." He saw the notes closing at 70 bid, 71 offered, down from 71 bid, 72 offered.

At an auction to settle its credit default swaps, CIT's bonds were valued at 68.125 cents on the dollar. That was down from the initial price of 70.25 cents on the dollar.

On Friday, CIT had released updated results of its tender offer, which showed that a majority of those bondholders participating in the debt swap had approved the company's plan of reorganization. That helped the company's debt improve form the high-60s to the low-70s.

Bon-Ton bonds give back

Bon-Ton Stores' bonds gave back some of the gains they had posted over the last few sessions, even as rating upgrade chatter emerged.

A trader said about $12 million of the 10¼% notes due 2014 traded down a point to 91 bid, 91.5 offered.

"That seems kind of light to me," he said, though he wasn't all that shocked as most of the day was monopolized by new issues.

Another trader said the notes were "a little bit off from yesterday's highs" at 91 bid, 92 offered. Yet another source echoed the 91 bid, 91.5 offered market.

After Bon-Ton's earnings release Thursday, Fitch Ratings came out Thursday to up its outlook on the York, Pa.-based retailer to stable. Moody's Investors Service also issued a statement, saying that it was considering upgrading the credit.

Sprint falls on downgrade

Sprint Nextel's debt lost some ground as Moody's cut its rating on the telecommunications company.

A trader called the bonds down a point, quoting the 7 3/8% notes due 2015 at 91 bid, 92 offered, while the 8 3/8% notes due 2017 ended at 97 bid, 98 offered.

At another desk, the 6% notes due 2016 came in 1.5 points to 86½ bid.

On Friday, Moody's dropped its corporate family and probability-of-default ratings on the Overland Park, Kan.-based company to Ba2 from Ba1. The senior unsecured bonds were lowered to Ba3 from Ba2.

The rating agency said the downgrade was a result of continued concerns about Sprint's ability to stabilize its post-paid wireless segment, as well as its ability to steal market share from AT&T and Verizon.

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