Spheris gains, new bidder emerges; U.S. Concrete paper picks up; General Growth stays unchanged

By Stephanie N. Rotondo

Portland, Ore., Feb. 23 - The distressed debt market "felt like it wanted to do better" on Tuesday, according to a trader, but declining equities "cast a pall on the market."

"It's not getting carried away," he said, noting that there was still cash to be put to work and bids circulating.

Still, Spheris Inc. debt managed to gain some ground. The movement came as a new bidder entered the auction arena for the bankrupt company's assets.

Meanwhile, U.S. Concrete Inc. paper ended the day unchanged, though activity picked up some. However, a trader noted that while markets were showing the bonds as flat, he was not sure if they were actually trading that way. Another market player speculated that the recent restructuring news was not a good sign for bondholders.

General Growth Properties Inc. got a bit busier in Tuesday trading, though like many other credits under the distressed umbrella, the bonds were essentially unchanged. According to news reports, the mall operator could be receiving yet another bid to rival last week's proposal from Simon Property Group.

Spheris gains, new bidder emerges

Spheris saw its bonds gaining some ground in Tuesday trading, as another potential bidder for the bankrupt company's assets emerged.

A trader called the 11% notes due 2012 "up a little bit" at 14 bid, 15 offered. Another placed the paper up 1 to 1½ points at 14¾ bid, 15½ offered.

Yet another trader said that the notes had moved up to 15¼ bid, which he called a better-than 15% rise on the day.

He said that credit had been "quietly trading" around the 12 to 13 level a week ago, but then "out of the blue, there was some pretty good-sized trading today." Two weeks ago, he said the bonds were trading well below current levels - they had fallen to 8¾ bid on Feb. 5, shortly after the company's bankruptcy filing, "so they've almost doubled in value in two weeks, on some good-sized trading. It looks like an interesting story."

Nuance Communications Inc. has expressed interest in purchasing some of the medical transcription company's assets. Nuance follows stalking horse bidders MedQuist Inc. and CBay Inc.

Franklin, Tenn.-based Spheris filed for Chapter 11 protections on Feb. 3. At that time, the company also announced it had entered into an agreement with MedQuist and CBay to sell its U.S. operations, as well as its India-based unit, for $75.2 million.

But, as with all bankrupt companies, in order for the sale to go through, an auction must first be held. A sale hearing is scheduled for April 15.

Also in the health care sector, a trader said that Plano, Tex.-based hospital operator Lifecare Holdings Inc. is "a name you don't see too often" - but he reported that its 9¼% senior subordinated notes due 2013 were being quoted in a very wide 60 bid, 80 offered market.

"Will the next trade be closer to 80, or to 60?" he inquired rhetorically. He said that at the beginning of January, the bonds had traded around 55 bid, and last week, there was some size trading around 60½ bid.

U.S. Concrete: Not enough cake?

U.S. Concrete's bonds were unchanged from Monday levels, but more active than in the previous session, according to traders.

A trader quoted the 8 3/8% notes due 2014 at 56¾ bid, 57 offered.

"The markets I am seeing are flat, but I am not sure if they are trading flat yet," he added.

Another trader said the debt "looks like it was active around 57," deeming that "up from the mid-50s last week."

On Monday, a market source told Prospect News that the bonds were being quoted flat, or without accrued interest. That followed news out Friday that the company had hired financial advisors to explore its restructuring options.

The company also said on Friday that it had secured a waiver to skip its April 1 coupon and had also amended its credit facility.

"There is some sort of restructuring in the wind," a trader said.

"U.S. Concrete seems to be running out of time," wrote Gimme Credit analyst Vicki Bryan in an afternoon note to clients. Bryan explained that the company's liquidity has been declining since March of last year and that the value of the company "no longer supports the debt outstanding.

"The situation has worsened and now the chickens have come home to roost," she said in the report.

The problem, as she sees it, is that the banks holding the company's credit facility have cut their exposure to the company, as well as set it up so that they are the first to get their money in the event of any restructuring - "which supports our view that there is not enough cake to go around."

GGP more active, still unchanged

Activity in General Growth Properties' debt picked up some on reports that Canadian real estate firm Brookfield Properties was considering making a bid for the bankrupt mall operator.

Still, traders said the bonds remained largely unchanged.

"There was some activity, but not much price movement," one trader said.

Another trader said the bonds were steady overall, but that the 5 3/8% notes due 2013 "might be off a little bit" around 1081/2. He also saw the 6¾% notes due 2013 at 108 bid, 110 offered and the 3.98% exchangeable senior notes due 2027 at 102¼ bid, 102 5/8 offered.

At another desk, the 8% notes that were to have matured last year were pegged at 109 bid, 110 offered, while the 7.20% notes due 2012 were seen at 112 bid, 113 offered.

According to a report from The Wall Street Journal, Brookfield is preparing a bid that would allow GGP to emerge from Chapter 11 protections as a standalone company - which was a sticking point in the $10 billion bid made by Simon Property Group last week. That offer was rejected by Chicago-based GGP.

Chatter is that the Brookfield bid would only give the company a 30% stake in GGP.

ILFC unfazed by loan news

A trader said International Lease Finance Corp.'s bonds were "up a touch" on the day, though he "didn't see much reaction" to news the American International Group Inc. subsidiary was planning to launch a $750 million term loan on Thursday.

The trader placed the 5.65% notes due 2014 around 85.

ILFC is the aircraft leasing unit of New York-based insurance giant AIG.

Paul Deckelman contributed to this article.

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