Synovus dips on debt swap cancellation; Blockbuster unmoved by sector news; GM steady on sales

By Stephanie N. Rotondo

Portland, Ore., May 3 - The distressed debt market was largely unchanged during Monday's session, which one trader characterized as "pretty subdued."

Synovus Financial Corp. saw its bonds falling as much as 5 points during trading. The declines came as the company announced it had terminated a previously announced debt-for-equity exchange.

In the retail arena, Blockbuster Inc. debt was unmoved by news that competitor Movie Gallery Inc. would close all of its remaining stores. The news was not a huge shock to those in the know, but one trader was surprised that there wasn't more activity in Blockbuster as a result.

General Motors Corp. released its latest sales report, which showed a 20% increase in retail sales from the same period of 2009. But even that wasn't enough to pique investor interest and the bonds remained mostly steady throughout the day.

Synovus dips on debt swap cancellation

Synovus Financial's bonds dropped 4 to 5 points on the day after the company said it would cancel a previously announced debt-for-equity exchange.

A trader saw the 5 1/8% notes due 2017 ending at 86¼ bid, 87 offered. Another placed the paper at 86 bid, 87 offered, down from 91 bid, 92 offered on Friday.

The Columbus, Ga.-based financial services holding company said that the exchange offer's termination was due to its $400 million public offering of equity being oversubscribed. All told, the company issued 293.25 million common shares in the offering, as well as 13.8 million tangible equity units.

"Given the substantial increase in the size of the common stock and tMEDS offerings from that contemplated on April 26, 2010, Synovus has determined to reduce the number of shares offered in the exchange offer to zero, in order to avoid or reduce the risk of an 'ownership change,' and therefore to terminate the exchange offer," Synovus said in a press release.

Blockbuster unmoved by sector news

A trader said, "There should have been a little more activity [in Blockbuster debt] given the news Moviebox [i.e., Movie Gallery] is shutting down."

Chatter is that Movie Gallery - the movie rental chain that recently filed for bankruptcy protections for the second time in about three years - is shuttering all of its stores, including those operated under the Hollywood Video and Game Crazy monikers. While this came as little surprise to many market players - many of whom have predicted that the "bricks and mortar" business model is unsustainable - the trader expected to see some reaction in Blockbuster's bonds.

But the bonds held their ground amid the flurry of headlines. The trader pegged the 9% notes due 2012 around 24 and the 11¾% notes due 2014 at 73.

"I would argue that it is just a precursor to what Blockbuster will have to do," the trader said. "I think people have Blockbuster all wrong," pointing to the belief of some that the company can turn itself around in what he deems an "obsolete business."

At another desk, the 9% notes were also seen at 24 and the 11¾% notes at 73.

Blockbuster is a Dallas-based movie rental chain.

GM steady as sales improve

General Motors' notes were "generally unchanged," a trader said, following the release of the company's April sales report.

The trader said the benchmark 8 3/8% notes due 2033 slipped a point to 371/2, but deemed the 8¼% notes due 2023 and the 7.2% notes due 2011 unchanged at that same level.

For the month of April, the Detroit-based automaker saw a 20% combined retail sales increase in its four brands year-over-year. During the month, a total of 183,091 new GM-branded vehicles were sold.

For the year to date, total sales are up 31%, according to a press release.

"Clearly, our launch vehicles are hitting the mark with consumers who are looking for bold styling, quality, safety and fuel efficiency," said Steve Carlisle, vice president of U.S. sales operations, in the release. "But our results aren't limited to just our newest vehicles. Sales of our full-size pickups and our mid-sized crossovers continue to strengthen.

"The good news is that we have more on the way, including the all-new Buick Regal this spring and the Chevrolet Cruze in the third quarter," added Carlisle.

Sorenson under FCC fire

A trader told Prospect News that Sorenson Communications Inc., a Salt Lake City-based telecommunications company focused on products for the hearing impaired, had come under fire from the Federal Communications Commission, which was putting some pressure on the company's bonds.

The trader noted that the $735 million 10½% five-year notes came in January around 98. He estimated that the bonds were now trading in the mid-60s.

"They don't Trace, so it's hard to tell," he added.

He said the FCC was "cracking down on them" due to a rate dispute.

But another trader clarified the situation.

The trader said Sorenson's 10 senior secured notes due 2015 "got hit hard," falling to levels around 66 offered, with no bids, after having traded last week around 97. He cited news reports indicating that the National Exchange Carriers Association - a telecommunications industry group which by law administers an interstate fund that compensates providers of Telecommunications Relay Services that allow speech- or hearing- impaired people to use regular phone service, using special equipment, such based Sorenson - would recommend a new payment schedule that would lower those payments by as much as 40%.

The new payment schedule is currently before the FCC for approval.

Calls to the NECA and to Sorenson late Monday afternoon had not been answered by press time.

The trader also heard that Sorenson's term loan had dropped as low as 81 from prior levels near par, before bouncing back to the mid-80s.

Another trader, who had seen the Sorenson bonds offered at 97½ without a bid on Friday, heard the bonds having plunged to a 60 to 64 context by Monday afternoon.

Broad market mostly better

Also going on in the distressed debt arena, Energy Future Holdings Inc.'s bonds were "kind of active," a trader said.

The trader said the 10 7/8% notes due 2017 were up a point around 803/4, while the 11¼% notes due 2017 inched up half a point to 713/4.

And, the always-active Harrah's Entertainment Inc. notes were slightly better, according to traders.

One trader said the 5 5/8% notes due 2015 were half a point better at 711/2. Another trader also saw the notes at that level, with "probably $20 million" changing hands.

Paul Deckelman contributed to this article

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