AIG paper steady on executive comment; Lyondell notes limp along; Spectrum Brands bonds weaker

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., June 30 - Trading in the distressed debt market continued to be subdued, as market players were kept busy with month-end pricing. The shortened holiday week and end of the quarter did not help either.

"There is zip-o volume and most of it is all pricing crap," said one trader.

American International Group Inc.'s debt closed the day mostly unchanged despite somewhat positive comments from management. At the company's annual shareholders meeting, outgoing top executive Edward Liddy said that there was an "excellent chance" AIG could repay the funds received in the government bailout.

Elsewhere, Lyondell Chemical Worldwide Inc.'s bonds fell 1 to 2 points after its parent company, LyondellBassel, held its monthly financial update call.

Spectrum Brands Inc. is reportedly marketing its exit loan facility, sources said. The news, however, did little to help the company's notes.

AIG steady on exec comments

American International Group's debt ended the day relatively unchanged after the company held its annual shareholder meeting.

A trader called the 6¼% notes due 2037 and the 4 7/8% notes due 2012 "right where they were" at 25 and 59, respectively.

Another trader said AIG paper was "not all that unchanged."

"I don't think any of that news was all that earth-shattering," he said, referring to reports of the annual meeting.

Still, he did see the 4 7/8% notes inching upward, ending at 60 bid, 60.5 offered.

During the meeting, Edward Liddy - the outgoing chief executive who has shouldered most of the blame for the company's performance - told investors that there was an "excellent chance" AIG could repay the funds borrowed from the U.S. government.

The struggling insurance company has already announced a plan to reduce its government debt by $25 billion by giving the United States a stake in two foreign life insurance units. AIG has also sold off assets and real estate to raise more cash.

"We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate and have specific plans for each of those nine," Liddy said. "We expect this process to advance steadily in the next six months and may involve public offerings."

Lyondell limps along

Lyondell Chemical's debt dipped following a monthly conference call to update investors on the bankrupt company's financial position.

A market source quoted the 10¼% notes due 2010 at 31 bid, 32 offered and the 9.8% notes due 2020 at 28 bid, 30 offered. He called the former down a point and the latter down a deuce.

The conference call held Tuesday was to discuss Lyondell's performance for May. For the month, the company posted EBITDAR of $203 million, above April's EBTDAR of $188 million. Year-to-date EBITDAR came to $740 million.

As of June 26, the company had more than $2.4 billion in liquidity.

Still, management warned that a $400 million covenant cushion could decrease as economic challenges continue. Jim Gallogly, chief executive officer, said that he believes that the company is currently operating in a cycle that could last through 2010, if not longer.

Elsewhere in the chemical sector, Chemtura Corp.'s bonds have been experiencing a rally, a trader said. He pegged the 7% notes due 2009 at 59 bid, 60, while the 6 7/8% notes due 2026 were "up another couple points" to around 38.

Spectrum slips as exit loan marketed

Spectrum Brands' $242 million three-year senior secured asset-based revolving exit facility is being marketed to some investors currently - mostly to those that are in the company's debtor-in-possession financing facility, according to a market source.

Depending on how things play out, syndication may remain club style instead of going out to a whole bunch of accounts, the source said, adding that nothing final on the syndication style has been decided at this point.

The facility consists of a $197 million revolver tranche priced at Libor plus 400 basis points with a 2.5% Libor floor and a $45 million first-in, last-out supplemental revolver tranche priced at and Libor plus 1,450 bps with a 3% Libor floor.

GE Capital is the lead bank on the deal.

Currently, Spectrum Brands is expecting to emerge from Chapter 11 in August as its plan of reorganization received the court's approval just a few days ago.

Upon its exit, the company will have reduced subordinated debt by $840 million and eliminated about $60 million of annual cash interest expenses for at least the next two years.

Under the plan, all of the company's $1.05 billion in existing note obligations will be exchanged for new common stock and a new series of senior subordinated notes, no distributions will be made to holders of current equity, and the claims of existing creditors other than the noteholders will be reinstated and unimpaired.

Spectrum's 7 3/8% notes due 2015 fell nearly 3 points to 68 bid, according to a market source.

Spectrum Brands is an Atlanta-based consumer products company and supplier of batteries, lawn and garden products, pet supplies, shaving and grooming products, household insect control products, personal care products and portable lighting.

Broad market mixed

Elsewhere in the world of distressed, TRW Automotive Holdings Corp.'s 7¼% notes due 2017 gained 5 points to close at 70 bid.

The increase came one day after a JPMorgan Chase & Co. analyst upgraded the company's equity, calling it a "survivor" among parts suppliers. But on Tuesday, Fitch Ratings downgraded the company's debt, citing uncertainty regarding order volumes from General Motors Corp. and Chrysler LLC.

Meanwhile, MGM Mirage's 6 5/8% notes due 2012 ended around 65 on 413 million traded.

A trader saw Rite Aid Corp.'s 8 5/8% notes due 2015 gain more than 2 points on the day to the 67 bid level.

Another trader saw those bonds at 66.5 bid, 67.5 offered, while pegging its 10 3/8% secured notes due 2016 at 89.25 bid, 90.25 offered, little changed from previous levels.

Fairpoint Communications Inc.'s 13 1/8% notes due 2018 ended at 18 bid, 20 offered, down from Monday's level at 19.5 bid. The bonds had been trading above 20 last week.

Smurfit-Stone Container Corp.'s were little changed on the day, despite active dealings in a few issues. Its 8¼% notes due 2012, with more than $10 million traded, held steady at 37.25 bid, 38.25 offered - the same level, a trader said, that its 8% notes due 2017 finished at.

Paul Deckelman contributed to this article.

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