Dynegy seen active on better Blackstone bid buzz; rebounding Blockbuster, Rite Aid stay busy

By Paul Deckelman

New York, Sept. 27 - Trading in established high yield bonds in general, and especially in distressed issues, was seen taking a backseat on Monday to aftermarket dealings in last week's heavy new-issue junk calendar, as well as the lone domestic deal pricing Monday, for chemical manufacturer Vertellus Specilties Inc.

Nonetheless, traders did see some activity in some of Junkbondland's more underperforming companies on Monday. One such name was Dynegy, Inc., whose bonds traded around as the Houston-based power generating company's stock rose, helped by market speculation that Blackstone Group - which last month agreed to a $4.76 billion buyout of Dynegy - might raise the price it is offering for the company, as evidenced by the shares' rise above the announced $4.50 per share price.

Traders also saw a fair amount of volume in Blockbuster Inc.'s bonds, which have rebounded from the lows they initially hit after Thursday's not-unexpected announcement of the Dallas-based movie-rental company's entry into Chapter 11.

And they said there was good activity in Rite Aid Corp. paper, which is trading above the lows hit last week when the drugstore chain operator reported disappointing second-quarter results.

Higher levels were meantime seen for Catalyst Paper Corp. and Sorenson Communications Inc. bonds.

Traders in the bank-debt market, on the other hand, saw little or no activity in distressed-name loan paper.

New deals dominate junk

As has been the case over many recent sessions, the heavy tally of new high yield issuance, and the aftermarket activity in that paper when it freed for secondary dealings, has pushed trading in established junk names and distressed credits onto the back burner among many accounts, traders said, and they saw the phenomenon continuing on Monday, especially given the warm aftermarket reception accorded Vertellus Specialties, whose new bonds moved up more than 2 points from issue.

"Nothing was crazy today," a secondary trader opined. "We were not seeing a lot of movement."

Dynegy deal buzz spurs bonds

One established name which did see some activity was Dynegy, with one market source seeing the company's 7¾% notes due 2019 up around 1¼ points on the day and more than 2 points over the past two sessions, at a shade above 68 bid.

A trader at another shop called them up ½ point on the day at 681/2, characterizing them as "pretty active."

A source at another desk, on the other hand, while quoting those bonds around that same 68ish level, pegged them down nearly a point.

And yet another trader agreed that the Dynegy bonds were down ½ to ¾ point around 68.

He noted that at the beginning of last week, they had been around 70, but were "in the 60s all week." He saw "decent volume" in the name on Monday.

The Dynegy bonds orbited that 68 level even as its New York Stock Exchange-traded shares rose by 27 cents, or 5.96%, on volume of 26.6 million, some 2½ times the norm.

And for the second straight session, the shares closed above the $4.50 per-share price at which Blackstone last month announced that it would acquire Dynegy, proposing to pay shareholders $550 million for their equity while assuming some $4.2 billion of debt.

Market-watchers said the rise of the shares above Blackstone's price is an indicator that investors believe the private equity company may raise the per-share purchase price to get the job done. Dynegy shareholders - some of whom have grumbled at what they consider to be a too- low valuation for the company by Blackstone - are scheduled to meet on Nov. 17 to vote on the deal.

Blockbuster holds rebound gains

A trader quoted Blockbuster's 11¾% senior secured bonds due 2014 having "moved back up" to trade at bid levels between 55½ and 57, quoting them not too much changed from Friday but "up a good bit" versus Thursday, when he saw the bonds dip into the lower 50s in the aftermath of the company's Chapter 11 filing, even though news of the bankruptcy case was hardly unexpected.

"They moved back up on Friday and are hanging in at those higher levels," he said, pronouncing a final trading level for Monday around 56 bid.

A second trader also saw the bonds going home around 56 bid."

Rite Aid rally remains

A trader said that there was "a lot of volume" in Rite Aid Corp.'s bonds, which mostly traded around the levels to which they had risen on Friday as they rebounded from Thursday's downturn that followed the Camp Hill, Pa.-based pharmacy chain's less than stellar second-quarter numbers.

He saw the 8 5/8% notes due 2011, for instance, right around 86 bid, 87 offered, while its 7½% notes due 2017 were at 92¼ bid, 93¼ offered.

"There was some activity - some trading on Friday, some trades today - but that looks pretty much where they were on Friday as well."

However, another trader said Rite Aid's 9½% notes due 2017 eased a little to 83½ bid.

Catalyst Paper pops

Catalyst Paper's 11% notes due 2016, which had been seen trading busily around last week, were "definitely up 2 points from Friday, a trader said, quoting the Richmond, B.C.-based papermaker's issue at 83 bid, 84 offered.

A second trader quoted the bonds at 82¾ bid, calling that up 1½ points on the day, in brisk trading.

In that same sector, a trader said he "didn't see much change" in NewPage Corp.'s 11 3/8% senior secured bonds due 2014, saying "they still are" around 90 bid, 91 offered, "slightly better - not much better, but slightly better."

Another trader saw Miamisburg, Ohio-based coated-paper manufacturer's bonds as "pretty active - but it usually is," calling the 91 bid level the bonds reached up ½ point.

GM gains on busy volume

In the autosphere, a trader said "there was a lot of activity" in the benchmark issues of domestic arch-rivals General Motors Corp. and Ford Motor Co., with the latter's 7.45% bonds due 2031 firmer at 101½ bid, 102 offered, "so they're hanging up at those higher levels, on a lot of trading."

Meanwhile, GM's 8 3/8% benchmark bonds due 2033 were up 1 point on the day at 33 bid, 34 offered. Again, he said, "there was a lot of activity in GM, good volume."

A second trader, though, called GM unchanged at 33 bid, 33½ offered, and saw Ford's long bonds likewise steady at 100¼ bid, 101½ offered.

Sorenson strengthens

A trader saw Sorenson Communications' 10½% senior secured notes due notes due 2015 trading at 58½ bid, 59½ offered, on "some trading, actually," characterizing the bonds as "a little higher than it was," buy perhaps ½ point over Friday's levels.

He saw no fresh news out on the Salt Lake City, Utah-based company, which provides telecommunications services to the hearing-impaired via its videophone technology.

Distressed bank debt little seen

Traders in the bank-debt market said Monday that they saw little or no activity in distressed loan paper.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.