MF Global dominates trading as company files bankruptcy; NewPage falls; broad market weakens

By Stephanie N. Rotondo

Portland, Ore., Oct. 31 - The end-of-the-month session in the distressed debt realm was weaker overall, traders reported Monday.

The majority of the focus was on MF Global Holdings Ltd., the New York-based futures broker run by former Goldman Sachs head Jon Corzine. The company said it filed for Chapter 11 protections Monday, as it was unable to find alternative means to shore up its books.

On the news, the bonds gyrated some, only to end about unchanged on the day. However, the debt was trading flat, or without accrued interest.

Away from MF Global, traders said activity was "lackluster."

"It was much ado about nothing," said one trader. He opined that the day's weakness would continue into Tuesday trading.

NewPage Corp. debt was seen softening, though trading volume was thin. A committee of the bankrupt papermaker is currently investigating a $25 million transfer of funds from the parent company to one of its Canadian subsidiaries shortly before filing for bankruptcy.

MF Global turns flat

MF Global Holdings was again the nom du jour in the distressed debt arena Monday as filed for bankruptcy.

One trader said about $160 million of the company's debt changed hands, making it among the top three most actively traded securities of the day. The other two major traders were new issues.

The trader saw MF Global's 6¼% notes due 2016 close at 47½ bid, 48½ offered.

The bonds are trading flat, or without accrued interest.

"Everybody was playing around in MF Global," said another trader. He said the paper opened in the mid-40s, fell to around 35 on news of the filing and then closed out "48-ish."

"So they were all over the place," he said. "For such a small deal, it was quite active."

The trader said people were concerned about the filing, given that MF Global is a financial company "similar to Lehman." News of such bankruptcies "takes the wind out of people's sails," he said.

The meltdown of MF Global began last week when Moody's Investors Service downgraded the firm. The hits continued on Tuesday on the back of disappointing earnings and didn't let up through the rest of the week.

News reports out last week indicated that the company had found a buyer for some of its assets. That deal apparently fell through, thus the bankruptcy filing.

Interactive Brokers Group Inc. was the reported buyer.

Additionally, the New York Federal Reserve suspended the firm from conducting new business with the central bank, and CME Group Inc., ICE Futures U.S. and the Singapore Exchange all halted the broker's operations in some form.

On the news, Standard & Poor's and Fitch Ratings dropped their ratings on the company to D.

NewPage debt dips

NewPage bonds were slipping in Monday trading as the official creditors' committee looked to investigate a $25 million transfer from the parent company to Canadian subsidiary NewPage Port Hawkesbury Corp., the owner of a paper mill in Nova Scotia.

A trader said the 11 3/8% first-lien notes due 2014 fell a quarter-point to end around 75.

The committee is asking the bankruptcy judge overseeing the Miamisburg, Ohio-based papermaker's case for the OK to investigate the transfer and whether it was beneficial to the company or not.

The committee is alleging that it was not.

Weakness permeates market

Elsewhere in the distressed market, Caesars Entertainment Corp.'s 10% notes due 2016 fell 5 or 6 points from Friday levels to 73½ bid, 74½ offered, according to a trader.

Given that the issue is very liquid, "3 points or so is nothing for them," he said. Accounts typically use the name to raise cash quickly.

Meanwhile, Hovnanian Enterprises Inc.'s 10 5/8% notes due 2016 were "maybe up a little bit, but kind of unchanged" at 86.

Another trader said that Clear Channel Communications Inc. paper had traded "slightly better" after the San Antonio-based media company released quarterly results - but was ending the day "virtually unchanged," characterizing the results as being in line with expectations.

He saw its 10¾% notes ending at 72-74, its 11% notes at 66-68 and its 9% notes due 2021 at 88-891/2.

Paul Deckelman contributed to this report

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