CIT Group paper gyrates as bankruptcy fears persist; Harrah's, Wynn notes firm; NRG bonds dip

By Stephanie N. Rotondo

Portland, Ore., July 21 - Despite getting some rescue financing on Monday, CIT Group Inc.'s bonds remained under pressure Tuesday as bankruptcy fears persisted in the marketplace.

The bank's bonds traded all over the place, traders reported, after CIT said it would likely need more than the $3 billion bondholders provided. The company also remarked that if a tender offer for its floating rate notes coming due in August failed, a bankruptcy filing would likely follow.

Meanwhile, Harrah's Entertainment Inc. and Wynn Las Vegas LLC moved higher during the overall firmer session. Harrah's notes shook off word of a pending worker strike, while investors got wind of Wynn's plans to take its Macau unit public.

Exelon Corp. said it would not make another offer for NRG Energy Inc. after the latter's shareholders rejected the former's nominations to the board of directors. In response, NRG's bonds traded relatively actively - and lower.

CIT gyrates, bankruptcy fears persist

Though it received $3 billion in rescue financing from bondholders Monday, CIT Group said Tuesday that the funds might not be enough to keep a bankruptcy filing at bay.

As a result, traders saw the bank's paper "trading all over the lot," in the words of one source.

The trader said that short issues, such as the 2009 and 2010 notes, were down 5 to 6 points on the day. He saw the floating-rate notes coming due Aug. 17 opening around 82, running up to a high of 88 and then settling back in to 84 bid, 85 offered.

The 4¾% notes due 2010 were also "pretty active," he said. He quoted the debt at 58 bid, 59 offered, down from 65 bid, 66 offered.

But while the short paper got beaten up, "lower-priced items were probably only down a point or two," the trader added.

He pegged the 7 5/8% notes due 2012 at 53 bid, 54 offered, unchanged.

At another desk, a trader said it was "all CIT again, and what wasn't CIT was Citicorp."

The trader saw more than $150 million of the floaters due 2009 - "it remains the bonds of choice," the trader remarked - trading between 83 and 86, while the floating-rate notes due March 12, 2010 traded in a wide range between 55 and 61.

"Obviously the short ones still have some viability," the trader noted.

"It's kind of ironic actually," said another trader about the gyrations in the bonds. For example, he said the 5.2% note due 2010 opened near Monday's closing levels of 65 bid, 68 offered. During the session, the notes dropped to 58 bid, 60 offered before an end-of-day rally that left the bonds at 65 bid, 68 offered once again.

Yet another source said the short bonds "were under a fair amount of pressure," losing anywhere from 3 to 10 points, "depending on where you are in the curve."

Also, the source said that the longer issues were trading in the low- to mid-50s, adding that most issues were "compressing" into the 50 to 60 range.

"In general bondholders are not pleased or receptive with the way that deal was structured," the source speculated.

On Tuesday, CIT said it expects its second-quarter results to show a more than $1.5 billion loss and added that if its tender offer does not succeed, a bankruptcy filing might be imminent.

On Monday, CIT said it had received a $3 billion loan facility from a group of bondholders. The loan matures in 2½ years and $2 billion of the funds were available immediately. The last $1 billion is expected to become available within the next 10 days.

Also, the company announced a tender offer for its floaters coming due in August. The company is offering $825 for every $1,000 in principal amount tendered before July 31. Those that tender after that will receive $800 per $1,000 principal amount.

"We are pleased that CIT is in a position to continue to serve our valued small business and middle market customers," said Jeffrey M. Peek, chairman and chief executive officer, in a press release issued late Monday. "We appreciate the loyalty of our customers and the support we have received from numerous industry associations, particularly over the past few weeks. We are also extremely grateful to our employees for their continued hard work and dedication. With today's announcement, our board of directors, management team, advisors and a steering committee of bondholders, who are lenders under the term loan financing, are now actively focused on a restructuring plan that will better position our company for the long term. We look forward to continuing to work closely with the bondholders and all of CIT's key stakeholders to achieve our objectives."

Still, CIT might need another $4 billion to pay its upcoming maturities.

"Late in the second quarter of 2009, our available liquidity dropped below the level necessary to operate our business," CIT said in a regulatory filing. "Even if the [tender] offer is consummated successfully, we will require significant additional funding during the remainder of 2009 and beyond to operate our business."

Nuveen active as loan prices

Elsewhere in the world of finance, Nuveen Investments Inc.'s bonds saw some trading after the company announced it had upsized its new second-lien term loan.

A trader quoted the 10½% notes due 2015 at 71 bid, 72 offered and the 5½% notes due 2015 at 50.5 bid, 51.5 offered.

Nuveen said it increased its new loan to $425 million from $350 million. The 12½% loan was priced at 90 to yield 15.082%.

A portion of proceeds will be used to pay off the company's 5% notes due 2010. The remaining funds will be used to repay the company's first-lien term loan.

Harrah's, Wynn firm

Harrah's Entertainment's bonds managed to shake off news of a pending dealer strike at its Atlantic City casinos, market sources reported.

One source called the 5¾% notes due 2017 more than 3 points better at 38.5 bid, whole another called both the 10¾% notes due 2016 and the 6½% notes due 2016 about a point better. The source pegged the former at 50 bid, 51 offered and the latter at 38.5 bid, 39.5 offered.

Card dealers at the Jersey Shore voted over the weekend to strike. Harrah's has reportedly initiated a contingency plan should the strike occur.

Meanwhile, Wynn Las Vegas' notes traded heavily after the company announced it would conduct an initial public offering of its Macau business.

A trader said he saw the 6 5/8% notes due 2014 offered at 91.5.

"Seemed like there was a seller," he said.

Another trader pegged the issue at 90.5 on "$20-odd million" traded.

News reports indicated that Wynn, like Las Vegas Sands, was considering an initial public offering for its Macau unit on the Hong Kong exchange. An application for the offering has reportedly been submitted, though not yet approved.

NRG dips as Exelon skips

NRG Energy's debt traded somewhat actively and lower after Exelon said it would give up its takeover efforts.

A trader called the bonds lower by a point.

"It was not huge movements, but there was definitely a lot of volume," he said.

The trader saw the 8½% notes due 2019 at 97 bid, 98 offered and the 7 3/8% notes due 2016 at 95.5 bid, 96.5 offered.

Exelon said it dropped its $7.5 billion bid for NRG after the latter company's shareholders rejected Exelon's pick for the board of directors. The collapse of the deal was in some ways expected, as NRG has repeatedly called Exelon's offers too low.

"The NRG shareholders have spoken, and Exelon will move on," said John Rowe, Exelon's chairman and chief executive, in a news release.

"While Exelon said it plans to move on, we wouldn't rule out a negotiated deal between the two companies in the future as both have acknowledged the potential benefits of a combination," wrote Gimme Credit analyst Carl Blake in an afternoon comment. "The issue remains price."

Smurfit remains on upward path

Smurfit-Stone Container Enterprise Inc.'s bonds continued to run up, according to a trader.

"They have been running up a bunch," the trader said, though he added there was "no specific news" to explain the move.

He saw the 8 3/8% notes due 2012, the 8¼% notes due 2012 and the 8% notes due 2017 all ending around 44.75 bid, 45.75 offered. That compared with levels in the mid-30s just last week.

"It just kind of feels like momentum is moving them up," the trader said. He noted that there was "a lot of buyers" during Tuesday's session, which might have accounted for some activity in the name.

"I wouldn't be surprised if there was something going on," he concluded.

Another trader saw Smurfit's bonds several points higher on "a lot of volume," with its 8¼%% notes starting the session at 42 bid, 44 offered and ending around 45 bid. He said its 8 3/8% notes had "not as much volume," but also ended at 45 bid, up 3 or 4 points on the day.

Paul Deckelman contributed to this article.

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