Market weakness pressures distressed debt; Blockbuster play big gamble, trader says; GM active

By Stephanie N. Rotondo

Portland, Ore., Nov. 30 - Distressed debt remained "soft," according to one trader, as the general market remained depressed in Tuesday trading.

Another trader said the distressed arena was indeed weak in early trading, but "it ended the day getting some of it back.

"It was definitely busier today than yesterday," said another source.

Distressed, another trader said, "is kind of dying these days," with relatively few issues actually trading at the 1,000 bps spread over comparable Treasuries that was the traditional demarcation line, and relatively few trading at dollar prices down in the '70s or below.

"But it is what it is."

Blockbuster Inc. saw its debt trade in good size, though traders didn't agree whether the bonds were up or simply unchanged. One trader remarked that the trading might have been due to short veering or possibly someone taking a gamble on the debt.

It was General Motors Corp. debt, however, that took the day's most actively traded award. Traders saw the bonds drifting in early dealings, though they managed a bit of a rally by day's end.

Meanwhile, Clear Channel Communications Inc. continued to be active, but mostly weaker. There was no news out, leaving one source to opine that the movement was a result of end-of-the-month adjustments.

In keeping with the softer tone of the market, NewPage Corp.'s notes also closed out the day at lower levels than those seen on Monday.

Blockbuster a 'long shot'

A trader said Blockbuster's 9% notes due 2012 traded "up a little" at 1½ bid, 2 offered.

Still, "I don't think there is any reality there [at that level]," he said. "I don't think there is any possible value there."

He added that the slight gain could have been caused by "people covering" or possibly someone "trying to buy a really long-shot lottery ticket."

Another trader said the paper was "active" around 11/2. However, he said the trades were "kind of in the same range" they had been, which he said was 1½ to 1 5/8.

On Tuesday, Blockbuster's debtor-in-possession lenders agreed to extend the reorganization plan filing deadline to Dec. 15 from Nov. 30. A group of bondholders meantime amended their filing deadline to Dec. 15 as well.

The Dallas-based movie rental chain was also given until Dec. 10 - from Nov. 30 originally - to get a supermajority of noteholder votes in order to approve the company's business plan.

GM day's most active

Traders saw active dealings in Motors Liquidation Co.'s 8 3/8% bonds due 2033 - the benchmark bonds issued by the "old" General Motors which reorganized last year, separating the profitable car production operations that became the "new" GM from the debt, other liabilities and unprofitable operations and unwanted assets which stayed at the renamed "old" company.

One said that over $40 million of the bonds had traded by mid-afternoon, far more than the next most active issue.

By the end of the day, another trader said that at least $49 million of the bonds had changed hands, and probably more than that, because the Trace system counts any transaction over $1 million simply as "$1 million-plus," whether its $1,001,000, $2 million or $10 million.

A trader saw the benchmark bonds at 32 bid, which he called up a point on the day on "a lot of volume."

"That was a lively one today."

A second trader also saw the bonds at 32, up half a point. But at another desk, a trader said that they were unchanged at 31 bid, 32 offered.

The company's 7 1/8% notes due 2013 ended at 31 5/16.

At another shop, a trader said the notes moved down to 31 in early trading, only to rally by the afternoon to 31¾ bid, 32 offered.

Meanwhile, Motors Liquidation's Pink Sheets-traded shares jumped by 2 cents, or 27.33%, on the day to 10 cents per share, on volume of 10 million, about twice the norm.

There was no specific news seen out on either GM or Motors Liquidation that might explain the activity. While the bondholders and other creditors of the pre-bankruptcy GM are expected to get 10% of the new company's recently issued shares in exchange for their claims - and hold warrants to buy even more of the shares, potentially increasing their take, the Motors Liquidation penny shares will not be converted into GM shares and are considered essentially worthless.

Clear Channel active, mixed

Clear Channel Communications' 11% notes due 2016 were "fairly active," according to a trader, though about 1½ points lower around 74.

The 10¾% notes due 2016 were also weaker, he said, but only by about half a point around 75.

Another trader saw about "$20 and change" million of the 11% notes turn over at 74 bid, 74½ offered. He called that down "a point and change," while the 5¾% notes due 2013 gained a tad to end around 911/2.

All told, the trader said about $75 million to $80 million of Clear Channel debt changed hands during the session.

He noted that there was no news out to explain the activity, but speculated that "people are just trading more."

"It's end of the month adjustments," as accounts get "poised for December," he opined. "It's not necessarily news-based."

Clear Channel is a San Antonio-based multimedia company.

NewPage dips with market

NewPage bonds fell in line with the overall market trend of "everything was a little bit weaker," in the words of one market source.

He pegged the 11 3/8% notes due 2014 at 90¾ bid, 91 offered. Another source placed the bonds at 903/4, down nearly a point.

NewPage is a Miamisburg, Ohio-based coated papermaker.

Broad market feeling weak

Elsewhere in distressed debt land, First Data Corp.'s 10.55% notes due 2015 dropped almost a point, closing around 863/4.

Dynegy Inc.'s 7½% notes due 2015 lost as much as 1½ points, a trader said, finishing around 74 bid, 74½ offered. The trader also saw the 7¾% notes due 2019 falling 'another point" to 65 bid, 65½ offered.

Also, a trader said that "it seemed like there was a lot going on" in Lehman Brothers Holdings Inc.'s paper.

He saw the bonds of the failed New York-based investment bank "quoted all day long," with a 211/2-22 range covering most of the dollar-denominated bonds, like the 6-handle issues.

"There were big trades, a lot of volume," he said, seeing brisk activity in Lehman's euro-denominated issues as well. In fact, "it seemed like the euros were trading more" than the dollar bonds.

He quoted the 5 5/8% notes due 2013 finishing right around the 22 range.

Paul Decklman contributed to this article

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