Tribune debt strengthens; General Growth unchanged on plan changes; Alcatel-Lucent inches up

By Stephanie N. Rotondo

Portland, Ore., Aug. 3 - Distressed bonds were "a little better," a trader reported Tuesday.

"[The market] continues to improve here and there," he added.

Still, distressed investors were not as active as their new issue-seeking counterparts.

"There was a lot of new issue focus today," another trader said.

In distressed land, Tribune Co.'s bonds popped as much as 2 points during the trading day. The gains came as a bankruptcy judge approved the unsealing of the bankruptcy examiner's report, which concluded that fraud came into play during a 2007 leveraged buyout.

In other court news, General Growth Properties Inc. announced it had revised its plan of reorganization late Monday. Come Tuesday, however, the bonds were not much fazed.

And in the technology arena, Alcatel-Lucent SA's debt closed the session modestly higher. One trader said the bonds were only up "marginally."

Tribune debt strengthens

Tribune bonds firmed 1 to 2 points on the day as the bankruptcy judge overseeing the company's case unsealed a recently completed report regarding the 2007 leveraged buyout that creditors say resulted in bankruptcy.

One trader said the bonds had gained 1½ to 2 points, seeing the 5¼% notes due 2015, the 5.67% notes due 2008 and the 7¼% notes due 2013 around 361/4.

The trader added that the bonds were "not extremely active, but higher."

At another desk, a trader said, "That paper was better." He saw the bonds closing generically at 36 bid, 37 offered, which compared with opening levels "straddling" 35.

U.S. Bankruptcy Judge Kevin J. Carey agreed to open the so-called Klee report - named after bankruptcy examiner Kenneth N. Klee - to the public at the request of the examiner. The report discusses the 2007 LBO led by real estate billionaire Sam Zell and concludes that the transaction - and the events leading up to it - constituted fraud, backing up creditors' claims.

For example, the report notes that one of banks asked to approve the $8.2 billion deal - Houlihan Lokey - refused to do so. The Los Angeles-based investment firm said at that time that the transaction would result in an overwhelming amount of debt and that it would not file a "solvency opinion" on the matter.

The court has allowed creditors more time to go over the report, thereby delaying a hearing on the current reorganization plan to Oct. 4.

General Growth unchanged

General Growth Properties' debt finished up about unchanged, according to traders, despite recent revisions to the company's plan of reorganization.

A trader pegged the 8% notes that were to have matured last year at 114¾ and the 5 3/8% notes due 2013 at 1091/2.

Another trader placed the 8% notes around 115, calling the level "not all that different" than the previous session.

Late Monday, the Chicago-based shopping mall operator said that it had amended its reorganization plan to allow for the reinstatement of $1.35 billion in bonds due 2012 and 2013.

The reinstatement would also allow the company to abandon plans to seek a new term loan.

Under the new plan, bondholders would receive accrued interest instead of being redeemed.

Other changes were also made, including a provision that would allow a Brookfield Asset management-led investor group to sell $500 million in equity to Blackstone Group LP.

"These modifications provide more flexibility to GGP in managing its capital structure," the company said in a press release.

GGP added that its expected October bankruptcy exit was unaffected. A hearing on the disclosure statement is scheduled for Aug. 19.

Alcatel-Lucent inches up

Alcatel-Lucent, the French telecommunications equipment manufacturer, saw its notes heading "marginally up," in the words of one trader.

The trader pegged the 6.45% notes due 2029 around 68. Another trader also saw the bonds at that level, deeming it up half a point.

The second trader added that he had seen "67½ bids in the Street, without a right side."

Late last week, Alcatel-Lucent reported weaker-than-expected numbers for the second quarter. Since Alcatel merged with Lucent in 2006, the company has reported a loss for all but two quarters.

Hawker loan hurt by earnings

Hawker Beechcraft Acquisition Co. LLC's term loan headed lower in trading after the company announced second quarter numbers that showed a year-over-year decline in earnings and sales, according to a trader.

The term loan was quoted at 80 bid, 81 offered, down from 81 bid, 81 3/8 offered, the trader said.

For the second quarter, the company reported a net loss of $56.8 million, compared with net income of $172.2 million in the previous year.

Net sales for the quarter were $639.3 million, compared with $816.3 million in the second quarter of 2009.

And, adjusted EBITDA for the quarter was $31.4 million.

Hawker Beechcraft is a Wichita, Kan.-based manufacturer of business, special-mission and trainer aircraft.

iStar steady, ATP up

Also going on in the world of distressed debt, iStar Financial Inc.'s bonds were unchanged following the release of second-quarter results.

A trader said the 5.80% notes due 2011 and the 5 1/8% notes due 2011 both ended around 94, while the 5 7/8% notes due 2016 closed around 711/2.

ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were meantime "better again," a trader said, at 77 bid, 78 offered.

And, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were "down a smidge" around 35, the trader added. He said the bonds had opened 35¼ bid, 35¾ offered.

Sara Rosenberg contributed to this article

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