TXU still strong as market mulls tender; Clear Channel inches up; Ames True moves on sale news

By Stephanie N. Rotondo

Portland, Ore., July 20 - Distressed debt "held in there" even while the equity market traded in the red, a trader reported on Tuesday.

But as the stocks began to trade upward, "the market picked up a lot of steam in the last few hours," he added.

He predicted "another strong day" on Wednesday based on the bond market's ability to hold its ground while the equities went negative.

Energy Future Holdings Corp. bonds continued to improve as the market evaluated a proposed tender offer. The debt initially traded down upon hearing about the exchange last week, but have since been moving up.

Meanwhile, Clear Channel Communications Inc. saw modest gains over the course of the trading day. There was no news out to explain the increase.

There was, however, news out to explain why rarely traded Ames True Temper Inc. debt actually traded. Late Monday, the company announced it was being sold by its private equity owners. Traders said the bonds did in fact trade, even posting slight gains.

TXU debt still strong

Energy Future Holdings' debt remained firm throughout Tuesday's session and volume in the name was "a little busier," a trader said, as investors were "still trying to feel out what's really happening and how this tender will shake out."

The trader saw about $30 million to $40 million of the 10 7/8% senior notes due 2017 changing hands, going out around 75 1/8.

"So that's back up," he said, adding that another $30 million to $40 million of the company's other bond issues traded, but those ended essentially flat.

Another trader said the 10 7/8% notes were "really active," also at 75 1/8. He deemed that level up 1½ points from the previous day.

Another source placed the bonds at 713/4.

Exchange offer terms

Late last week, the former TXU Corp. announced debt-for-debt-and-cash swap, in which the Houston-based company would exchange $2.7 billion of the 11¼%/12% senior toggle notes due 2017 and $1.78 billion of the 10 7/8% notes for new debt and cash. The new debt consists of $2.18 billion of 10% senior secured notes due 2020 and the company is also paying up to $500 million in cash.

For each $1,000 principal amount of notes tendered by the early deadline date, holders will receive $720 for the toggle notes or $785 for the 10 7/8% notes. If tendered after the early deadline, holders will get $670 for the toggle notes and $735 for the 10 7/8% notes.

The breakdown of new debt and cash per each $1,000 tendered will be dependant on how much is tendered by the early deadline. If all bonds are accepted by the early deadline, then holders of the toggle notes would get $134.33 in cash and $585.67 in new notes, while the 10 7/8% noteholders would receive $146.46 in cash and $638.54 in new notes.

However, no cash will be paid out to those tendering after the early deadline.

The early tender deadline is 5 p.m. ET on July 29. The offer expires midnight ET on Aug. 12.

On Monday, Fitch Ratings said it had placed TXU's ratings on review. The rating agency said that while a successful exchange would result in the removal of about $3.6 billion in old notes, the overall reduction in debt would likely not be enough to substantially improve credit metrics.

And, Moody's Investors Service took action against the ratings come Tuesday. Moody's dropped TXU's probability-of-default rating to Ca from Caa2 and said the outlook remained negative.

Clear Channel inches up

San Antonio-based multimedia company Clear Channel Communications saw its bonds trading on the active side Tuesday, but there was no news out that would have caused the activity.

A trader said the 10¾% notes due 2016 improved by half a point, ending the day at 741/2.

Another trader agreed with that level, adding that about $10 million to $15 million of the paper traded.

And, yet another source pegged the issue at 743/4.

Ames moves on sale news

There was "some trading in Ames [True Temper]," a trader said, following news out late Monday regarding the sale of the company to Griffon Corp.

The trader placed the 10% notes due 2012 around par.

"It rarely trades," he noted.

Another trader also saw the bonds around par, which he called better by "maybe a quarter."

Late Monday, the Camp Hill, Pa.-based company announced that Castle Harlan Inc., its private equity owners, had agreed to sell the manufacturer of lawn and garden tools to Griffon for $542 million.

Under the terms of the definitive agreement, Griffon will launch a tender offering for the senior floating-rate notes due 2012 and for the 10% notes.

The deal is expected to close by the end of the quarter.

Also, Ames True Temper released estimated third-quarter earnings.

For the 13 weeks ending July 3, the company expects to report net sales of $123 million, a 5% decline from the year before. Net income is estimated to fall 2.7% to 5.8% from year-ago levels.

Broad market firms

Among other distressed issues, Harrah's Entertainment Inc.'s 10¾% notes due 2016 closed over a point higher around 81, according to a trader.

Lyondell Chemical Co.'s bonds continued to be active, another trader reported. He said the 8% notes due 2014 was the most active issue under the Lyondell umbrella, seeing it at 104 bid, 104¼ offered. The 11% notes due 2018 were meantime "very tight" at 107 bid, 107¼ offered.

In the autosphere, General Motors Corp.'s benchmark 8 3/8% notes due 2033 inched up a tad to 32 3/8 bid, 33 3/8 offered. But another trader said the notes were "up half a point late in the day," closing around 323/4.

Spheris Inc.'s 11% notes due 2014 traded "a bunch" in the low-20s, a trader said.

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