Distressed buyers outnumber sellers; Icahn throws wrench in Dynegy sale; Harrah's debt active

By Stephanie N. Rotondo

Portland, Ore., Oct. 13 - The distressed debt market continued to see more buyers than sellers on Wednesday, resulting in an active marketplace, a trader reported.

"It was pretty active," he said. "There are still people reaching for paper."

Traders gave mixed reviews of Dynegy Inc.'s performance, calling the bonds unchanged to somewhat better on the day. The action came as investor groups - including one led by Carl Icahn - seemed poised to block the company's acquisition by Blackstone Group LP.

In the gaming arena, Harrah's Entertainment Inc. was dubbed the day's volume leader, even without any name-specific news.

Among new bankruptcy filings, Hines Nurseries LLC filed for Chapter 11 protections yet again, marking the second such filing in two years. There was little to no trading in the bonds, however, and one market source deemed the debt "worthless."

Obstacles abound for Dynegy sale

Dynegy debt was unchanged to better after it was reported that a group led by billionaire investor Carl Icahn was buying up shares of the Dallas-based power producer.

One trader called the 7¾% notes due 2019 "virtually unchanged from [last] Thursday" at 67¾ bid, 68½ offered. The 8 3/8% notes due 2016 meantime gained a smidge, ending at 78½ bid, 78 ¾ offered.

The 7½% notes due 2015 were "probably unchanged" at 79 bid, 79½ offered.

At another desk, a trader said Dynegy paper was up "half a point to three-quarters overall," the 7¾% notes around 68, the 8 3/8% notes around 78¾ and the 7½% notes around 793/4.

On Tuesday, it was reported that Icahn and his affiliates had incurred a nearly 10% stake in Dynegy, resulting in speculation that the investor intended to upset Blackstone Group LP's $4.7 billion bid for the company.

The investor group said that Dynegy shares were "undervalued" and that Blackstone's $4.50-per-share offer was not "adequate."

Dynegy stock (NYSE: DYN) closed Wednesday's session at $4.96.

Icahn is not the only one who might be staging an attack on the Blackstone bid. Seneca Capital LP recently said it had acquired a 9.3% stake in the company as well.

"While this sets up a game of chicken between the arbs and Blackstone (who could conceivably raise its bid without taking a big risk since the sale of the plants to NRG will garner over $1.3 billion in proceeds, a substantial amount of which could go to the equity owners) we don't see how bondholders are helped by any of this action," wrote Gimme Credit LLC analyst Kim Noland in an afternoon note to clients.

"However, if the company were to remain independent and the sale to NRG did not go through, bondholders would be better off in our view as their debt would be supported by more asset value."

Last week, a top Blackstone executive said the $4.50 per share price was "fair and final." Dynegy had previously shopped itself around to other potential buyers, but found no interest.

Shareholders will vote on the Blackstone proposal on Nov. 17.

Harrah's sees 'big volume'

A trader said Harrah's Entertainment's 10% notes due 2018 were the "big volume bond on Trace," though there was no name-specific news out.

He said the paper started out the day 3 to 3½ points higher, but came back just a bit, closing around 86¾ bid, 87½ offered, "still up a good 2 points or so."

Another market source pegged the notes at 87 bid, up nearly 2 points on the day.

The first trader said there was no news out on the company and speculated that the debt had been "dragged up with the market."

News that MGM Resorts International Inc. was planning a stock offering might have also played a role, he said.

"It's one of the few double-digit coupons trading at a discount," the trader added.

MGM's 6 5/8% notes due 2015 meantime jumped 3 points to 91¾ bid.

MGM announced it would sell 47 million of new common shares at $12.65 per share in a public offering. The Las Vegas based casino operator also said it expected to report a third-quarter loss.

Hines files again

Irvine, Calif.-based Hines Nurseries filed for Chapter 11 protections for the second time in two years, the company announced late Tuesday.

The company's 10¼% notes due 2011 did not trade Wednesday, according to a trader, as "they are worthless. They are literally marked at a penny I think."

The plant provider said the bankruptcy filing was due to "greater than expected declines in revenue," stemming from weak demand and economic conditions.

Black Diamond Commercial Finance, which took over the company in April 2009 upon its emergence from its first bankruptcy case, had provided a $5 million interim debtor-in-possession loan and intends to as for court approval to give up to $20 million more.

As of the date of the failing, Hines Nurseries had about $80 million in debt. Last year, the company reported annual sales to $123.5 million. Through the second quarter of 2010, sales were $69.7 million.

Broad market gains weight

Among other distressed issuers, a trader said that papermaker bonds were up pretty much across the board.

He said that Catalyst Paper Corp. "really moved up," quoting the Richmond, B.C.-based paper manufacturer's 11% notes due 2016 at 87 bid, up 1 point on the day, while its 7 3/8% notes due 2014 were at 51 bid, "up a couple of points."

He also saw NewPage Corp.'s 11 3/8% notes due 2014 up 1 point to 1¼ point as well, ending at 95 bid, 95½ offered.

Another trader said the 11 3/8% notes closed "up a couple," at 95 bid, 96 offered.

First Data Corp.'s 10.55% notes due 2015 also inched up, though more modestly, closing around 85.

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.