MF Global notes roll around in active trading; Realogy posts better earnings, debt drifts down

By Stephanie N. Rotondo

Portland, Ore., Nov. 1 - Distressed debt was on the decline Tuesday, following the trend of the broader markets.

The markets were losing ground due to Greek Prime Minister George Papandreou's call for a referendum vote on the ailing country's latest bailout package.

"A lot of stuff in general was off, given the tone of the market," a trader said.

MF Global Holdings Ltd. was again the most active name of the day. Early on in the session, news outlets reported that regulators were investigating where millions of dollars of client money had gone prior to the company's bankruptcy filing on Monday. Later in the day, news came out that the company had admitted to using client funds to shore up its troubled books.

Meanwhile, Realogy Corp. debt dropped about 3 points following the release of the company's third-quarter results.

Rite Aid Corp. paper was also weaker, following the trend of the overall market.

MF Global remains active

A trader said MF Global Holdings' 6¼% notes due 2016 traded "a bunch" and "all over the place" on news the company had misused client funds.

The trader said the debt ended the day down 4 points around 43. However, he said the notes traded as low as 35 and as high as "close to 60."

"They've been all over the place," echoed another trader. He saw the bonds begin the session around 40, then they fell 2 to 3 points. The paper then rallied, closing at 45 bid, 46 offered, he said.

News reports citing a "federal official" claimed that an executive of the New York-based futures broker had admitted early Monday that the company had used client dollars to shore up its books as its financial issues unraveled.

Regulations require company funds and client funds to be kept separately. An investigation is pending and could lead to civil or even criminal charges.

MF Global filed for bankruptcy on Monday. Moody's Investors Service said Tuesday it had downgraded the company, its third rating action in just over a week.

Realogy notes drift down

Realogy's 11½% notes due 2017 drifted down to 771/2, according to a trader.

He called that a loss of 3 points.

Another trader saw the issue "straddling 77," down from the low-80s.

The Parsiappany, N.J.-based real estate and relocation services company reported third quarter results on Tuesday. For the quarter ending Sept. 30, Realogy posted net revenue of $1.2 billion, a 10% increase year over year.

The increase was attributed to an increase in transaction volume in the franchised and company-owned real estate services units.

Net loss was $28 million, compared with $33 million the year before.

"Given the macroeconomic headwinds facing the housing market, our operating performance has shown resilience," said Richard A. Smith, president and chief executive officer, in the earnings release. "We believe we are substantially advantaged with our leaner, highly variable cost model, a capital structure that includes $2.1 billion of convertible debt and the continued support of our largest investors."

The company also noted that it expects home sales to increase, though at a slower pace than in the third quarter.

"The trend we are seeing currently is that in many of our markets, affordability of owning a home, particularly for first-time buyers, is driving activity at the lower end of the housing market," said Anthony E. Hull, chief financial officer, in the statement. "This has the impact of increasing unit volume while putting pressure on price. We expect that this trend will continue into 2012."

At the end of the quarter, Realogy's senior secured leverage ratio was 4.15 to 1, below its maximum level required to be in compliance on its senior secured credit agreement.

Realogy had $62 million of available cash and $50 million under its senior secured credit agreement. Additionally, there is $300 million available on the company's revolving credit facility.

Rite Aid paper slips

Last week, Rite Aid reported a 2.9% increase in same-store sales for the four weeks ending Oct. 22.

But come Tuesday, as the market was turning downward, so was Rite Aid's debt.

A trader said there was "some action" in the Camp Hill, Pa.-based drugstore chain's bonds. He called the 8 5/8% notes due 2015 down a deuce at 92½ and the 6 7/8% notes due 2013 down 1½ points at 951/2.

Another trader deemed the 8 5/8% notes a point weaker at 92½ bid, 93 offered.

A third market source saw the issue falling 3 points to 92½ bid.

Broad market declines

Among other distressed issues, Caesars Entertainment Corp.'s 10% notes due 2018 fell 2½ points to 721/4, according to a trader.

He also saw Sears Holding Corp.'s 6 5/8% notes due 2018 dipping 1½ points to end around 85.

Radian Group Inc.'s 5 3/8% notes due 2015 meantime slipped a point to 59.

At another shop, a trader said Clearwire Corp.'s 12% second-lien notes due 2017 were down at 56 bid, 80 offered, down from levels in the low-60s.

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