Distressed debt stays positive, volume 'steady'; Realogy bonds keep climbing on debt swap news

By Stephanie N. Rotondo

Portland, Ore., Dec. 2 - The distressed debt market continued its upward course on Thursday - in line with the equities - leaving one trader to describe the marketplace as up half a point and "kind of steady" in terms of volume.

Realogy Corp. remained an attractive credit to investors, resulting in the bonds adding another 1 to 2 points to their value. Those gains were on top of the 7 to 9 points gained on Wednesday after the company announced a debt swap.

Meanwhile, Sprint Nextel Corp. paper got a bit of a boost on news its network partner Clearwire Corp. was planning a debt sale. Sprint is also reported to be encouraging a partnership agreement with rival T-Mobile.

There still hasn't been any news out on OPTI Canada Inc., but that hasn't stopped the name from trading in decent size. Without any news, the bonds have been fluctuating with the market, and Thursday's session was no different.

Realogy gaining more ground

Realogy bonds continued to trade actively - though "definitely not as much as yesterday," a trader said - just one day after the company announced a debt-for-debt exchange.

The trader saw the 10½% notes due 2014 gaining another point - that was on top of the 7 points earned on Wednesday - to 941/2, on about $25-odd million" traded. The 12 3/8% notes were meantime up "almost 2 [points]" at 923/4.

At another desk, a trader called the 10½% notes 1½ points better at 943/4.

On Wednesday, the Parsippany, N.J.-based real estate services company announced it would exchange three series of its notes - the 10½% notes, the 11%/11¾% senior toggle notes due 2014 and the 12 3/8% notes - for new senior notes or new convertible debt.

The company said the offer was being done in an effort to "provide the company with a more flexible capital structure through the extension of maturities of its existing notes and by giving eligible holders who receive convertible notes the ability to exchange debt for equity in the future."

Realogy is also soliciting consents from noteholders to remove "substantially all" restrictive covenants and certain default provisions from the existing notes.

The company has already received support from investors such as Paulson & Co. Inc. and Apollo Management VI. Those two investors alone hold about $1.95 billion of notes.

Both Moody's Investors Service and Standard & Poor's cut Realogy's rating after the news, deeming the exchange a default.

Sprint up on Clearwire news

Sprint Nextel debt was "up a bunch today," according to a trader, on the news that its 4G network partner Clearwire Corp. was planning a $1.1 billion debt sale.

The trader said the bonds were "generically up a point or 2," seeing the 8¾% notes due 2032 at 102¼ - on some $50-odd million traded - the 8 7/8% notes due 2017 around 108 and the 6 7/8% notes due 2028 at 881/2.

The trader also noted that Clearwire bonds ended better, though its stock was down on the day.

Another trader said long Sprint paper was up 2 to 3 points, like the 8¾% notes, which he saw around "102 and change," compared with levels around par on Wednesday. Shorter debt, he said, was up only about half a point to three-quarters.

Last month, Clearwire said it might not have enough funds to keep operating, leaving Sprint investors wondering what it might to do keep its partner afloat.

"In terms of Sprint, we believe this is the best resolution one could hope for," Jennifer Fritzsche, a Wells Fargo & Co. analyst, wrote in a note to clients. "It does not have to put up capital at this time - which had been a huge concern for investors - but has the right to keep its ownership stake down the road."

But Dave Novosel, an analyst with Gimme Credit LLC, holds a different view.

Holders of voting stock, he explained, have a right to participate in Clearwire's debt sale. Those holders represent about 85% of "total voting power," he said. Of those, 31% has already waived their rights to participate.

"That leaves 54% to purchase the notes," he said. "By the way, Sprint happens to own 54% of the stock. Hmmm? Wonder who those holders might be."

Novosel went on to say that the sale "would be good news for Clearwire bondholders as it provides funding for the buildout of its network." For Sprint noteholders, however, "it is potentially bad news...depending on the extent of its participation in the offering."

Sprint is also reportedly encouraging Clearwire to form a network accord with T-Mobile USA. The agreement would allow T-Mobile access to its 4G network as well.

Sprint is an Overland Park, Kan.-based wireless telecommunications provider. Clearwire is based in Kirkland, Wash.

OPTI trends up with market

A trader said OPTI Canada remained a busy credit, as the positive tone of the market helped the company's debt gain about half a point on the day.

"Everything is up to a certain extent," he said.

He pegged the 8¼% notes due 2014 at 71½ and the 7 7/8% notes due 2014 at 70¼ bid, 70½ offered.

OPTI Canada is a Calgary-based oilsands producer.

© 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.