CIT lower on bankruptcy buzz; Smurfit Stone paper trades actively, better; broad market mixed

By Stephanie N. Rotondo

Portland, Ore., Sept. 30 - CIT Group Inc. once again dominated the market Wednesday, as reports surfaced that the company was about to begin a debt exchange.

The reports also indicated that the company was asking debtholders to vote on a potential pre-packaged bankruptcy option. As a result of the news, CIT's short-dated paper dropped as much as 5 points, though longer-dated issues were largely unchanged.

Meanwhile, Smurfit Stone Container Corp.'s bonds continued to gain ground and in rather heavy trading, according to traders. Still, market sources were not sure what was causing the interest in the name and there was no fresh news to explain it.

The market ended mostly mixed overall, traders said. Players were also kept busy with month-end pricing.

Bankruptcy buzz hurts CIT

CIT Group's short-dated paper fell as much as 4 to 5 points on the day as the company struggles to stay afloat.

A trader said the 5.20% notes due 2015 were the "most active" with about $30 million changing hands. He said the issue was "fractionally better" around 78.5.

But shorter maturities, such as the 4¾% notes due 2010 were weaker, he said. That issue closed around 69.375, on $20 million traded. The 5.02% notes due 2014 were also softer around 64, on volume of about $15 million.

"CIT was obviously one of the more active names," said another trader. "The short paper got knocked down a bunch."

The trader saw the November 2009 maturities around 80, which he called down 4 to 5 points. But longer issues were unchanged, he added, trading between 62 and 64.

At another desk, a trader said the bonds were down, "but nothing crazy, only like 1 to 2 points." He pegged the 4¾% notes at 68 bid, 70 offered, down from 70 bid, 72 offered, while the 5.20% notes were "not much different" at 78 bid, 79 offered.

Yet another source saw "a lot of volume" in the credit, with the most movement on the short end of the curve.

The shorter issues "obviously were where the most volume was." He saw the company's various issues of paper maturing this year all in the high 70s, or perhaps around 80, with, for instance, the 4 1/8% notes slated to mature on Nov. 3 "like 79ish - that's down 3 or 4 points." He saw the 6 7/8% due on Nov. 1 around that same level.

"They're all in the same range and on a lot of volume," he said. "It's all on the news - there's a pre-packaged bankruptcy going through [or] there's a swap - that's what it's all about."

He said that the somewhat longer issues "were not down as much," with the 7 5/8% notes due 2012 in a 65 to 67 context, "about where they ended up [Tuesday]. They didn't have as much activity."

"The longer ones," he continued, "might be pretty much unchanged from [Tuesday], right around the mid-60s - but all of the activity is in the shorter paper."

Early in the session, reports started to emerge that the company was once again struggling. That followed reports from Tuesday that CIT was considering merger possibilities, though that was later refuted by "people familiar with the matter."

Other unnamed sources were cited Wednesday in articles claiming that the New York-based financial lender was planning a debt exchange. However, it was also reported that CIT was asking debtholders to vote on a pre-packaged bankruptcy option, in the event that the debt swap was not successful.

CIT is also reportedly looking to obtain a credit line for as much as $11 billion. Bondholders have already given about $3 billion to the company and are said to be considering another $2 billion loan.

Under the terms of the initial loan, CIT had to submit a restructuring plan to the group by Thursday.

Smurfit notes active, better

Smurfit Stone Container's debt traded actively throughout the session, but market sources were not sure what had caused the activity.

A trader said about $50 million of the 8 3/8% notes due 2012 traded with a 71 handle. He deemed that up a point.

When asked what had caused the movement, the trader said simply "I have no idea."

Another market source saw the 8¼% notes due 2012 gaining just over a point to 71.5 bid.

And, yet another trader saw the bonds "moving up" to around "71-ish," while another quoted the 8 3/8% notes at 70 bid, 71 offered.

"They kind of grind up higher every day," he said.

There was no fresh news out on Smurfit, which is currently in bankruptcy. However, the equity committee was expected to be appointed on Wednesday.

Smurfit Stone Container is a Creve Coeur, Mo.-based manufacturer of integrated paperboard and corrugated cardboard.

Broad market mixed

Among other distressed issues, Blockbuster Inc.'s 9% notes due 2012 were down "a few points" at 62 bid, 63 offered, according to a trader.

The trader said he had not seen any news to explain the move, but did note that the company's top executives were scheduled to speak at the Deutsche Bank leveraged Finance Conference in Scottsdale, Ariz., on Wednesday.

Park Ohio Holdings Corp.'s 8 3/8% notes due 2014 ended unchanged at 77 bid, 79 offered, another trader said.

Meanwhile, FairPoint Communications Inc.'s 13 1/8% notes due 2018 shook off a rating downgrade from Moody's Investors Service to end a tad higher at 11.25 bid, 12.25 offered. Trading, however, was thin.

A trader saw Six Flags Inc.'s bonds "maybe a little higher," with the 9 5/8% notes due 2014 "starting to tick up at the end of the day" to around 17.5 to 18.5 and then, by the end of the session, to 18 to 18 1/3. He called those levels "pretty much unchanged - up maybe a half-point from [Tuesday], which was when they had their bigger move, up 3 or 4 points."

At another desk, a market source saw the 14s up nearly a full point, to the 18.5 bid level.

Paul Deckelman contributed to this article.

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