Broad market firm; distressed ends mostly steady; Dynegy off on downgrade; Realogy active

By Stephanie N. Rotondo

Portland, Ore., Oct. 4 - The distressed debt market continued to be firm on Monday - "if you can believe that," a trader said - as credits held their ground.

Dynegy Holdings Inc., however, was unable to hold steady. The power producer's debt closed the day on the weak side, which traders deemed a delayed reaction to a downgrade that came Friday.

Meanwhile, there was a surge in investor interest for Realogy Corp. paper. Still, the bonds finished the session unchanged, and there was no news to explain why the notes traded in good size.

Dynegy notes fall

Dynegy debt was one of the few decliners on the day, traders reported.

"That's the only one that I have seen that's down a little bit," said a trader of Dynegy's 7¾% notes due 2019. He pegged the bonds around the 67 mark.

Another trader also saw the paper around 67, calling that down as much as a point. He also saw the 8 3/8% notes due 2016 around 77, though those were up about half a point.

Yet another market source placed the 7¾% notes at 67¼ bid, down as much as 2 points.

"The downgrade was on Friday afternoon, but probably [came] too late to see much affect until today," a trader said.

On Friday, Moody's Investors Service downgraded the Houston-based energy company to Caa1 from B3, citing the planned acquisition of Dynegy by private equity firm the Blackstone Group.

"Based on our assessment of these public filings, Dynegy's financial profile is expected to be quite fragile, particularly during 2011 and 2012, when the company is projected to generate both negative operating cash flow and negative free cash flow due to weak operating margins and the required funding of their capital investment programs," Moody's said in a statement.

Still, proceeds received from Blackstone's asset sale agreement with NRG could help, at least in the short term.

Realogy sees some action

A trader said Realogy bonds moved in good size during Monday's session, though the notes were unchanged.

He saw the 10¼% notes due 2014 at 853/4, which he said was "where they have been."

As for the debt's appearance during the trading day, he said, "eventually everything has to trade."

Another trader also placed the Parsippany, N.J.-based company's bonds around 853/4.

There was no fresh news out on the real estate services provider.

Catalyst up, NewPage steady

A trader said that Catalyst Paper Corp.'s bonds "inched up a little bit at the end of the day," quoting the Richmond, B.C.-based paper producer's 11% senior secured notes due 2016 at 82½ bid, 83½ offered.

The trader said that there was "not a lot of activity, but it's holding up half a point higher than what it was a couple of days ago," reiterating that there was "not much trading, though."

He meantime saw sector peer NewPage Corp.'s 11 3/8% senior secured notes due 2014 "a little higher earlier," around 91 bid, 92 offered, but said that after that, the Miamisburg, Ohio-based coated-paper producer's bonds "didn't go any further than that" and were "still hanging around" the 91 level. He said that there had been "some activity in that name today."

Broad market mostly firm

Elsewhere in the distressed arena, Harrah's Entertainment Inc. gained about half a point, in line with the market trend, according to traders.

Traders saw the ever-active 10% notes due 2018 around 81.

One trader noted that about $25 million of the paper changed hands.

Also, Takefuji Corp.'s 9.2% notes due 2011 were steady around 20.

Another trader also saw the paper around 20 but called that "maybe a touch lower."

A trader said that Blockbuster Inc.'s 11¾% senior secured notes due 2014 were finishing around 57 bid, 58 offered but said that the Dallas-based movie-rental company's bonds were pretty much unchanged versus Friday.

"There's been some trading in that name, but unchanged," he said.

Paul Deckelman contributed to this article

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