Kodak seeks rescue funds, bonds jump; Caesars debt gains steam; Dynegy extends exchange again

By Stephanie N. Rotondo

Portland, Ore., Oct. 21 - Distressed debt finished out the week strong, traders reported, despite a subdued feeling.

"Somebody said, 'Did they call an early close and not tell us?'" quipped one trader. "That's what it seemed like."

Still, he remarked that there was "a very firm tone to the market."

Eastman Kodak Co. was gaining ground, extending Monday gains into Friday's session. The debt was further boosted Friday on reports that the company was in talks with hedge funds to provide rescue financing.

Among market mainstays, Caesars Entertainment Corp. paper earned a couple points, though on no news.

Dynegy Inc. said Friday it had extended for the second time its distressed exchange offer. The deal is not going well, based on the amount currently tendered, but the company's bonds were on the rise regardless.

Kodak outlook improving

Eastman Kodak notes got a boost Friday on reports the company was in talks with two hedge funds to provide rescue financing.

A trader pegged the 7¼% notes due 2013 around 46. Another trader echoed that level, calling it up 3½ points.

The second trader also saw the 9¾% notes due 2018 at 733/4, up a quarter-point.

Still, he noted that trading in the credit was not all that active.

At a third desk, the 7¼% notes were deemed up as much as 4 points at 47 bid.

The Rochester, N.Y.-based company's debt began trading up Monday on word it had licensed its laser-projection patents to Imax Corp. News of the potential rescue package only served to increase investor confidence that the company would be able to increase its royalty revenue and thus narrow a cash shortfall.

News reports indicated that Kodak was talking to Cerberus Capital and Silverlight to provide up to $900 million in temporary financing.

Also, late Thursday it was reported that Kodak's patent fight against Apple Inc. and Research in Motion Ltd. might not be concluded by the end of October as previously hoped. Earlier in the week, the U.S. International Trade Commission delayed ruling on the matter for another two months, allowing more time for the case to be assigned to a new judge.

Caesars' bonds win

Caesars Entertainment's 10% notes due 2018 began to trade actively again after taking a bit of breather at midweek.

"They weren't all that active in the street, but the dealer community is trading a ton of them," a trader said.

He called the bonds up about 2 points around 72.

Another trader said the issue was "up a couple points, straddling 73."

A third trader deemed the notes 2½ points better around 72.

There was no fresh news out on the Las Vegas-based casino operator.

Dynegy extends exchange again

Dynegy paper was unchanged to better on the day, depending upon whom you asked.

One trader called the 8 3/8% notes due 2016 unchanged at 67½ and pegged the 7½% notes due 2015 at 69 5/8.

Another trader called the bonds up 1½ to 2 points on the day, the 8 3/8% notes at 67½ and the 7½% notes around 70.

The Houston-based power producer extended its $1.25 billion exchange offer for a second time on Friday, as the distressed swap has garnered significantly less than the company's goal.

Dynegy had first extended the deadline on Oct. 13 to Oct. 20. At that time, holders had tendered $100.5 million of the sought notes, or about 8% of the total amount.

Late Thursday, the company issued a statement after the new deadline had passed, saying that only $90.8 million of the bonds had been validly tendered.

The new deadline is Oct. 27.

"Dynegy extended its exchange offer but it didn't do much good," wrote Gimme Credit LLC analyst Kim Noland in a report released Friday. "The deal has become even less popular with bondholders as fewer of them tendered as of Oct. 20 than had tendered previously."

Noland added that it is believed bondholders are in negotiations with the company to sweeten the terms of the exchange.

"A default and bankruptcy likely would wipe out shareholder value so the architects of the distressed debt exchange (activist shareholders and their advisors) will be worse off if the exchange offer fails," she wrote. "We don't think the bondholders have much downside if the deal fails."

Clear Channel gains

Elsewhere in the market, a trader said Clear Channel Communications Inc.'s 11% notes due 2016 were "definitely better," moving up to 63 from 58 bid, 59 offered.

"So that's having a nice day," he said.

He also saw the 9% notes due 2021 up 3 points around 85.

"The whole market was strong," he said. "A lot of things were having a good day."

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