CIT better despite downgrade; Las Vegas Sands up on chairman comments; Dynegy dips on NRG news

By Stephanie N. Rotondo

Portland, Ore., July 8 - The distressed debt marketplace ended on a weaker tone Wednesday, which some chalked up to it being the week after a holiday.

"It's after a holiday, so it's a vacation week," a trader said.

CIT Group Inc.'s bonds ended 1 to 2 points weaker, following a downgrade from Fitch Ratings. The rating cut was due to concerns over the company's funding ability.

Still, some names managed to post gains, like Las Vegas Sands Corp. The company's bonds got better after its chairman gave some positive predictions of the gaming industry.

But Dynegy Holdings Inc. was not so lucky. The power producer's debt dropped some in trading. Market players speculated the decline was in sympathy with NRG Energy Inc., which rejected a second takeover bid from Exelon Corp.

CIT weaker after downgrade

CIT Group's debt traded mostly lower by 1 to 1.5 points, a trader said, in relatively active trading.

The trader quoted the 5.2% notes due 2010 at 80 bid, 81 offered, compared with 76.5 bid, 77.5 offered on Monday. The 4¼% notes due 2010 were "trading a bunch" at 86.5 bid, 87.5 offered.

Another market source placed the 5.4% notes due 2012 at 65 bid, 67 offered and the 6% notes due 2022 around 40.

A trader said that CIT paper "was getting a little heavy this morning" and remained lower on the day, not helped by the afternoon news of the Fitch Ratings downgrade. He saw its 7 5/8% notes due 2012 "down a couple of points" at 65 bid, 66 offered, and said there had been "decent[-sized] trading in that name."

Another trader said that CIT was "both active and lower" - in fact, he said the New York-based commercial finance company was "one of the most active names on the day."

On Wednesday, Fitch Ratings dropped CIT's rating to BB- and noted another downgrade could be in the future.

The downgrade comes as the market waits to see if CIT's application for funding under the Temporary Liquidity Guarantee Program is approved. The company had previously filed for bank status in the fourth quarter. CIT has an upcoming $7.4 billion maturity in the first quarter of 2010.

In its statement regarding the rating cut, Fitch said that if the application is not approved "over the very short term, Fitch would likely lower CIT's ratings to levels that would indicate that default is a real possibility.

"Conversely, if the company's TLGP application is approved and CIT is able to issue FDIC guaranteed debt, Fitch believes the near-term liquidity pressures could be addressed, allowing CIT to execute on its ongoing business plan."

Elsewhere in the world of financials, First Data Corp.'s 9 7/8% notes due 2015 were seen falling 2 points to 68 bid, 69 offered, on no news.

Las Vegas Sands gets boost

Las Vegas Sands' bonds firmed by about 2 points on the day after the company's top executive made rather positive comments about the state of the gaming industry.

A market source pegged the 6 3/8% notes due 2015 at 75.5 bid, 76.5 offered.

But another trader said that only odd lots of the debt traded.

"It's just that kind of day," he remarked.

According to several news outlets, Sheldon Adelson, the casino's chairman, said that the performance of the company's Las Vegas properties - as well as those in Macau - was improving.

"We are in the trough of the cycle so things are looking up," Adelson said at a news conference in Singapore.

The Sands might also be considering an IPO in Hong Kong, to the tune of $2 billion. The funds would be used to finance the Macau operations.

Dynegy dips on NRG, Exelon news

Dynegy Holdings' debt dipped some, traders reported, possibly as a result of NRG Energy's second rebuff of a takeover bid from Exelon.

One trader called the 7¾% notes due 2019 down a deuce at 76.75 bid, 77 offered, compared with 78.75 bid, 79 offered previously. Another trader, however, deemed the notes only half a point weaker at 78 bid.

On Wednesday, NRG rejected a sweetened $7.16 billion bid from Exelon, claiming that the price "continues to substantially undervalue" NRG's assets.

The $7.16 billion offer is the second Exelon has made to MRG and represents a 12% increase over its original offer. Under the amended terms, NRG shareholders would receive 0.545 shares of Exelon per one NRG share. That is a nearly 15% premium over NRG's closing price as of Tuesday.

"Exelon's 'best and final' offer to NRG shareholders was met with a 'no, but you're headed in the right direction' from the NRG board," wrote gimme Credit analyst Philip C. Adams in an afternoon comment. "NRG lists several factors in arguing the [Exelon] bid is still too low, the most tangible of which is the current 'robust countercyclical earnings power of Reliant's retail franchise' which NRG says will generate EBITDA of $400 million for the last eight months of 2009. The tone of NRG's response is decidedly more conciliatory than in the past, with an offer to sit down and 'quantify the combination synergies' after Exelon further increases its offer.

"We shall see whether 'best and final' means just that," Adams concluded.

NRG's bonds softened during the session, its 7 3/8% notes due 2016 down to 97 bid.

Harry & David head higher

Harry & David Holdings Inc.'s 9% notes due 2013 were seen moving up, though it was unclear why.

A trader said the bonds headed up late Tuesday to 45 bid, 45.5 offered, a 5-point gain. Come Wednesday morning, the notes continued to move upward, first trading at 46.5, then 47.5 then 48, he said.

"It's kind of puzzling, actually," he remarked, given there was no news to explain the improvement.

Broad market softens

Among other distressed names, a trader said that oilfield seismic services provider Seitel Inc.'s 9¾% notes due 2014 "got clocked" after it projected lower second-quarter revenues, numbers which were "not very good." He saw the bonds trade in a 55.5 to 60 range during the day, finally coming to rest at 58, down from Tuesday's close at 66.

Another trader also said the bonds "got whacked," down to 57 from the last previous round-lot level of 59.25. He said the 66 quote for the close on Tuesday must have reflected smaller odd-lot dealings, with $21 million traded.

Also, Smurfit-Stone Container Corp.'s bonds were "a little higher," with its 8 3/8% notes due 2012 at 38 bid, 39 offered, a point or so higher on the day, with the company's other bonds trading in a similar context.

A trader saw Bon-Ton Stores Inc.'s bonds around 40 bid, 41 offered, saying that that its 10¼% notes had been "higher last week," even in the mid to upper 40s, but had come down to the lower 40s "over the last couple of days." He saw "not much activity" in the bonds Wednesday and no fresh negative news out on the York, Pa.-based retailer that might explain the slide.

Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.