Trading volume improves, but market unchanged; Skilled Healthcare postpones trial, debt steady

By Stephanie N. Rotondo

Portland, Ore., Aug. 31 - Trading volume in the secondary arena increased a bit during Tuesday trading, but the distressed debt arena remained largely unchanged.

"I think people were cleaning up positions and waiting for the calendar next week," a trader opined.

"It was certainly a bit more active," said another trader. He said that in terms of price movement, credits were "evenly split" between those that inched up modestly and those that fell back a little bit.

Still, he said there wasn't "a whole lot of rhyme or reason" to the market.

Skilled Healthcare Group Inc. announced late Monday that its trial had been postponed until later in the week, allowing the company more time to negotiate a settlement. But just as last week's news regarding the denial of a mistrial, the news had little effect on the bonds, which ended unchanged.

Tronox Inc.'s debt was also unchanged following news the chemical maker was allowing shareholders to file a competing reorganization plan. For its part, Tronox is also working on amending its current plan.

Skilled bonds holding in

Skilled Healthcare Group's bonds remained unchanged by news out late Monday regarding the company's ongoing court battle.

Traders placed the 11% notes due 2014 at 90 1/8 bid, 90 3/8 offered.

One trader noted that "someone had called and asked about it," but that the person wanted to sell at higher prices.

Late Monday, the Foothill Ranch, Calif.-based nursing home operator said that its court proceedings - which were to start Tuesday - would be put off until Thursday, giving it more time to negotiate a settlement.

The news came after it was learned Friday that a mistrial was denied.

The court case revolves around a 2006 class action suit that alleges the company did not provide adequate care. During the first phase of the trial, a jury ruled against Skilled Healthcare, awarding plaintiffs $613 million in statutory damages and $58 million in restitution.

Punitive damages have not yet been assigned. If a settlement is not reached and the judgment is allowed, it could potentially force the company into bankruptcy.

But in announcing late Monday that the Tuesday court session had been postponed, Skilled Healthcare said that "settlement discussions in the case are ongoing," which prompted Jefferies and Co. analyst Arthur Henderson to theorize that the delay could mean that a settlement is close, which could allow the company to avoid being forced into bankruptcy.

A bond trader declared, "Clearly, there's very little reason to postpone a court hearing at this point in time, I would think, other than because the two sides went to the judge and said 'look, we're negotiating a settlement - can you hold off for a couple of days?' That's where that speculation comes from. It's just kind of a logical assumption to be made from the delay of the court hearing."

Tronox debt still steady

Oklahoma City-based Tronox is giving shareholders time to file a rival plan of reorganization, according to news reports.

But the news did little to cause a stir in the chemical maker's debt. Several traders pegged the 9½% notes due 2012 around 92, which was unchanged.

"I've been calling them 92½ [bid], 92¾ [offered] for a week," one trader remarked.

Tronox shareholders have until Thursday to file a plan.

The company is also working on updating its own plan, which includes a new exit financing proposal.

The financing plan calls for about $170 million to be raised via an offering of 78% of stock in the reorganized company. Holders of 58% of unsecured notes and other debt will buy any stock not sold in the offering.

The new financing intends to "pave the way for Tronox to confirm a plan of reorganization that - after months of hard-fought negotiations - embodies a comprehensive settlement of complex issues among Tronox's creditors," according to documents filed with the courts.

Visteon loan breaks

Visteon Corp.'s $500 million seven-year term loan broke for trading, with the deal heard to be trading above par, according to a market source.

Pricing on the term loan is Libor plus 625 basis points with a 1.75% floor, and it was sold at an original issue discount of 98.

Morgan Stanley is the lead bank on the deal that was pre-marketed.

Proceeds will be used to help fund the Van Buren Township, Mich., automotive supplier's exit from Chapter 11.

Visteon also plans on getting a $200 million five-year ABL revolving credit facility as part of its exit financing package and is currently marketing the debt to a club of banks, the source said.

Morgan Stanley is the lead bank on the deal. There was no bank meeting.

The revolver consists of a $155 million tranche 1 priced at Libor plus 300 bps to 325 bps and a $45 million tranche 2 priced at Libor plus 350 bps to 375 bps, based on availability grids, and unused fees range from 50 bps to 75 bps.

Both tranches fund pro-rata while the tranche 2 provides a higher concentration limit on a key customer, the source said.

Furthermore, the revolver will be governed by a $40 million minimum excess availability covenant at all times.

Muted market pressures bonds

Also in the distressed space, Energy Future Holdings Corp.'s bonds were down fractionally, according to traders.

The trader saw the 10% notes due 2020 around the 953/4, 96 context, while the 10¼% notes due 2015 ended around 63½ bid, 64 offered.

General Motors Corp.'s 8 3/8% notes due 2033 meantime closed "maybe a quarter [point] cheaper," a trader said, at 31½ bid, 32 offered.

Paul Deckelman and Sara Rosenberg contributed to this article

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