Blockbuster, MGM paper soften; Nortek notes hold their ground; financials finish mostly better

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Sept. 21 - The distressed debt market ended Monday's session unchanged to slightly lower, traders reported.

"The market seems kind of unchanged from Friday," a trader said. But, another trader called the broad market a quarter-point to a half-point weaker.

Regardless, the overall sentiment was that the focus remained on new issues, though even some of those ended softer.

For example, Blockbuster Inc.'s new issue traded down some after running up right of the gate last week. Its existing debt also fell with the market, as did MGM Mirage.

Meanwhile, Nortek Inc.'s bonds held their ground as bondholders vote on a proposed restructuring plan. The plan includes a prepackaged bankruptcy filing. Bondholders have until mid-October to register their votes.

One sector that seemed to buck the steady-to-down-some trend was financials. Aiful Corp.'s debt gyrated throughout the session, but stilled ended firmer on the day, while CIT Group Inc.'s bonds also moved to higher ground.

Blockbuster, MGM soften

Consumer discretionary names, such as retailers and casinos, lost some ground during Monday trading, in line with the rest of the market.

The sectors had been on a run of late, pushed up further by new issues that have come to market.

Blockbuster, for example, hit a recent high around 73 last week and its new issue, a 11¾% five-year note, ran up to almost par versus its issue price of 94.

But come Monday, as the broad market lagged, Blockbuster's 9% notes due 2012 fell to 68 bid, 69 offered, down from 72 bid, 73 offered, a trader said.

Another trader placed the new issue around 96, "a little lower from Friday."

MGM Mirage's new 11 3/8% notes due 2019 were also lower, seen down a point at 96.25 bid, 96.75 offered, compared with its issue price of 97.375, according to a trader.

Another source saw the casino operator's existing debt weakening as well, the 6 5/8% notes due 2015 at 80.5 bid, about 1.5 points softer.

Among other casinos, Harrah's Entertainment Inc.'s 10¾% notes due 2016 were "bracketing where they went out on Friday" at 79.5 bid, 80.5 offered, the trader said.

Harrah's new issue, the 11¼% notes due 2017 were quoted at 103 bid, 103.5 offered.

Still, some are seeing a bit of upside in casinos.

"Despite continued revenue declines in major gaming venues like Las Vegas and Atlantic City, the high yield market has been receptive to MGM and Harrah's as they both accomplished new high yield issuance in September," wrote Kim Noland, Gimme Credit LLC analyst, in a morning report.

Nortek notes hold tight

Nortek's bonds were largely unchanged following news Friday that the company had sent out a proposed restructuring plan to debtors.

The plan includes a bankruptcy filing.

At one desk, a trader saw the 8½% notes due 2014 steady at 70 bid, 70.5 offered. Another source echoed that market.

Under the proposed restructuring plan, Nortek would eliminate about $1.3 billion of its $2.05 billion in debt. Earlier in the month, Nortek said "a substantial portion" of its bondholders had agreed to the deal, though that did not include holders of $750 million of 10% notes due 2013. Those holders expect to have their claims reinstated or possibly modified.

The bondholders have until Oct. 16 to register their votes on the plan.

Nortek is a Providence, R.I.-based manufacturer and distributor of building products.

Financials mostly better

A trader saw Japanese consumer lender Aiful's 6% notes due 2011 start the day off around 32 then trade "all the way up" to a 43ish level, and then back down a little to around 40, where the bonds went home.

That was still well improved from Friday's levels, which saw the paper trading as low as 29 bid, 32 offered, finally going out around 32 bid, 33 offered, down about 14 points from levels earlier last week around 46 to 48. This was after Japan's second-largest consumer lender by assets announced that it will try to delay debt repayments after being shut out of the credit markets and forced to refund interest charges to customers.

The trader said Monday that there had been "a lot of quotes - I don't know how many actual trades took place," since it's a 144A issue which does not show up on Trace, "but I did see real markets."

Also among the financials, a trader said that CIT Group's bonds, which had traded around actively on Friday, "did seem like they were a little better" - although he said that for issues like the 7 5/8% notes due 2012, there was "not a lot of trading." He saw those bonds at 61 bid, a little better than where they were.

Among the really short CIT bonds, such as the 6 7/8% notes and 4 1/8% notes, both coming due in November, the issues were in a 78 to 80 context, but on "not that much volume on either side of that." He said there was "some activity, [but] I didn't see a lot."

Meanwhile, a trader called American International Group Inc.'s bonds, and those of its affiliated companies, "very actively quoted" after a key congressman suggested that the terms of the insurance giant's bailout might be changed.

The American General Finance 5.85% notes due 2013 were trading between 75 and 76.25 on Monday, on "some volume," although he characterized that as "pretty much where they were last week." There was "some activity, but they were sort of unchanged," he said.

However, at another shop, the 5.85s were being quoted down nearly four points on the day, at 75 - although parent AIG's 5.45% notes due 2017 were seen to have gained about a point to end at the 76 level.

Chemtura stronger

Chemtura Corp.'s bonds saw some active trading, with a market source pegging the bankrupt chemical company's 6 7/8% notes due 2016 trading above the 101 level, on "decent-sized" volume of more than $10 million. Its 7% notes due 2014 originally issued by predecessor company Great Lakes Chemical Co. were trading around 94 bid, on volume of about $5 million.

Another trader said that Chemtura's 6 7/8% notes due 2026 were "a little bit better" on the day, trading between 77 and 79, with the last trade at 77, "up a little, but on not a lot of activity." He saw the 7% notes open at 93.5 but move up to 97 bid, which he called up a point from where they had been last week, on "some activity."

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