Distressed debt hit by broad market weakness; Dynegy falls as Blackstone ups bid; GM softens

By Stephanie N. Rotondo

Portland, Ore., Nov. 16 - There was "lots of market meltdown," a distressed trader reported Tuesday.

He also noted that there was "lots of volume," adding that it was "interesting to see this much trading into the down. It was good.

"Everything got hit a little bit," he remarked.

"Some things were whacked pretty good," another trader said. "The market definitely still seems weaker."

Even news that could be seen as positive did little to help amid the broad market weakness. Dynegy Inc., for example, saw its bonds drop as much as 2 points on the day, even as Blackstone Group increased its per-share price in a previously reported takeover bid.

General Motors Corp. debt also ended down from the day's highs, despite news that the Detroit automaker had increased the share price of its planned initial public offering. Harrah's Entertainment Inc., which is also planning an IPO this month, also went negative during Tuesday trading.

And, First Data Corp. and Rite Aid Corp., both of which tend to trade steadily, finished the day on the weak side, though there was no news - either good or bad - to cause the declines.

Dynegy takes a hit

Dynegy bonds dropped a couple points, even as Blackstone Group upped its takeover bid to $5-per-share ahead of a shareholder vote on Wednesday.

One trader saw the 7¾% notes due 2019 falling 2 points to end around 68, while another market source called the paper just over a point weaker at 68¾ bid.

Another trader called the bonds down "1½ points, roughly" at 681/4, with about $15 million changing hands.

Shareholders will vote on the proposed takeover on Wednesday. Though Blackstone had previously said it would not raise its bid, many market players believed it would in reaction to objections from billionaire investor Carl Icahn and Seneca Capital. Icahn even went so far as to offer a $1 billion line of credit so that the Houston-based power producer could deal with its near-term liquidity issues.

Still, Dynegy's management has remained adamant that the Blackstone path is the way to go in order for the company to continue as a going concern. It has repeatedly struck down claims by Icahn and Seneca that the deal was undervalued, pointing to the fact that it had searched for a buyer for two years before receiving the bid from Blackstone. During a 40-day "go-shop" period after the bid was announced, no other potential bidders stepped up.

GM dips ahead of IPO

General Motors' debt gyrated in Tuesday trading, following news the company had boosted the price per share in its initial public offering and that it would sell more share than originally planned.

A trader said the benchmark 8 3/8% notes due 2033 traded up to 37¼ before they "settled in" around 36. He also pegged the 8¼% notes due 2023 around 35.

Another trader, however, called the 8 3/8% notes up half a point at 37, while the 7.20% notes due 2035 and the 8¼% notes closed softer, at 35¾ and 35, respectively.

GM is now intending to sell 478 million common shares in its IPO, as the U.S. Treasury Department and the United Auto Workers' received more demand for their holdings than expected. GM also expects to sell the shares at $32 to $33 each, up from the original guidance of $26 to $29.

The IPO is slated to launch on Wednesday.

Harrah's bonds fall

Among news for other IPO planners, Harrah's Entertainment's 10% notes due 2018 "got hit a little bit," according to a trader.

He saw the notes ending the day around 87, down from levels around 90.

Another trader echoed that level, deeming the debt down a deuce.

Last week, the Las Vegas-based casino operator - which will change its name to Caesars Entertainment Corp. upon completion of the IPO - increased the amount of the offering to $610.9 million, based on a per-share price of $15 to $17. About 31.3 million shares are expected to be sold, plus an option for another 4.69 million shares.

The shares being sold in the IPO are in addition to shares owned by Paulson & Co., owned by John Paulson.

First Data, Rite Aid drop

Among market mainstays, First Data and Rite Aid saw their debt getting whacked along with the rest of the market.

A trader pegged First Data's 9 7/8% notes due 2015 at 85, down 2 points on the day. He also saw the 11¼% notes due 2016 falling to 73½ from 75 bid, 76 offered.

Another trader saw "$20-odd million" of the 9 7/8% notes trading down "a couple points," also around the 85 mark.

The second trader also said Rite Aid's bonds were "still lower," the 7½% notes due 2017 at 94½ and the 8 5/8% notes due 2015 at 86 5/8. He called the former down "a point and change" and the latter "down another half."

At another shop, a trader quoted the 8 5/8% notes at 85½ bid, 86½ offered.

Broad market slides

The rest of the distressed debt market closed on the lower side, following the trend of the day, according to traders.

A trader said Clear Channel Communications Inc.'s 10¾% notes due 2016 fell "a few points" to 77 bid, 77½ offered. He added that the bonds had been closer to 79½ previously.

NewPage Corp.'s 11 3/8% notes due 2014, however, were one of few credits that managed to hold their ground, another trader said. He said the debt was "unchanged, but pretty active," around 92.

© 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.