Dynegy files, bonds trade flat, better; Caesars weaker on results; more bad news for MF Global

By Stephanie N. Rotondo

Portland, Ore., Nov. 8 - The distressed credit du jour was Dynegy Holdings LLC Tuesday after the subsidiary of Dynegy Inc. filed for bankruptcy protections late Monday.

"All the bonds are trading flat," a trader said. The bonds were up on the news, however, in some cases as much as 10 points. Most issues were trading with or near a 75 handle.

"75 was the number on these things," the trader said. "It seems to be a magical number."

Meanwhile, Caesars Entertainment Corp.'s debt got bogged down on the back of the company's quarterly earnings report. The results showed a slightly narrowed loss while revenues declined.

MF Global Holdings Ltd. remained an actively traded name, as the negative news cycle continued for the recently bankrupt futures broker. News outlets reported that, in the wake of missing client funds, customers might have to share what cash is available among themselves, meaning a full recovery - at least at this point - is unlikely. Also, some market watchers are wondering if the firm might simply liquidate instead of reorganize.

Dynegy files, bonds jump

Dynegy Holdings filed for Chapter 11 protections late Monday, ending months of speculation regarding the future of the struggling power producer.

The news resulted in gains for the bonds, though the debt was seen trading flat across the board.

One trader saw the 8 3/8% notes due 2016 gaining 5½ points to end at 75 5/8, while the 7½% notes due 2015 rose about 3½ points to 75. The 7¾% notes due 2019 meantime gained 7 points, also closing with a 75 handle.

The trader also pegged the 7 5/8% notes due 2028 at 73 3/8, up 10 points on the day.

"Dynegy was up roughly 6 to 10 points, depending on the issue," another trader said. He saw both the 7½% and 7¾% notes around 75, while quoting the 8 3/8% notes at 75 bid, 76 offered.

He called the latter issue up from 65 bid, 66 offered.

Yet another market source deemed the 7¾% notes up 7 points at 75 bid.

The GasCo and CoalCo term loans also rallied a bit in the secondary market as the company disclosed late Monday that its wholly owned subsidiary, Dynegy Holdings, and four of Dynegy Holdings' wholly owned subsidiaries (Dynegy Northeast Generation Inc., Hudson Power LLC, Dynegy Danskammer LLC and Dynegy Roseton LLC), filed for bankruptcy.

The GasCo term loan was quoted by one trader at 101 bid, 102 offered, up from 99¾ bid, par ¾ offered, and by a second trader at par ½ bid, 101½ offered, up from 98½ bid, par ½ offered.

And, the CoalCo term loan was quoted by the first trader at par bid, 101 offered, up from 98¼ bid, 99¼ offered, and by the second trader at par bid, 101 offered, up from 98 bid, par offered.

The company said that the issuers of the GasCo and CoalCo term loans are not included in the bankruptcy filing, and will operate their businesses in the ordinary course without any impact from the restructuring.

In Dynegy's bankruptcy announcement, it was revealed that an agreement has been reached with a group of investors holding over $1.4 billion of senior notes for a consensual restructuring of over $4 billion of obligations, and that if completed, the restructuring will significantly reduce the amount of debt on its consolidated balance sheet.

Under the restructuring support agreement, all unsecured obligations of Dynegy Holdings, including $3.4 billion of senior notes, $200 million of subordinated notes, about $130 million of accrued interest and the payments associated with the Roseton and Danskammer leases will be exchanged for a $400 million cash payment, $1.0 billion of new seven-year 11% secured notes and $2.1 billion of new convertible PIK notes maturing on Dec. 31, 2015.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

Caesars slips post-earnings

Caesars Entertainment's 10% notes due 2018 fell to 73 bid, 74 offered from previous levels around 76, according to a trader.

The losses came after the company reported weaker-than-expected earnings.

Another market source called the debt down over 2 points at 73 bid.

For the third quarter, the Las Vegas-based casino operator posted a loss of $164 million, which compared with a loss of $164.8 million the year before.

Revenues fell 1.5% to $2.25 billion.

The company blamed the weak revenues in part on its Atlantic City market, which has not only been experiencing a decline due to new gambling centers in Pennsylvania and New York, but also suffered through Hurricane Irene shortly before Labor Day.

Las Vegas revenues, however, were up 2.9%.

"There's no real issues [with the company] going forward," one trader said.

MF Global debacle continues

The negative news continued to pour out of MF Global Holdings Tuesday, as news outlets reported that not only could customers wind up receiving less than 100% recovery, but that the firm might be positioning itself for a total liquidation instead of a restructuring.

A trader saw the 6¼% notes due 2016 trading at 37 bid, 38¾ offered.

Another trader placed the notes at 38 bid, 39 offered.

A third trader said the debt fell half a point to "38-ish."

On Tuesday, the head of the Securities Investor Protection Corp. said that customers might have to share available cash with each other, given that about $593 million in commodity customer funds are unaccounted for. That could mean less than 100% recoveries for some folks if the missing money is not found.

Additionally, some are wondering if the brokerage formerly run by Jon Corzine is planning to liquidate instead of restructure. The speculation comes as creditors formed a committee Monday, but without immediately hiring an attorney to represent them.

In some cases, that indicates a liquidation is in the works.

Exide falls on numbers

A trader said Exide Technologies Inc.'s 8 5/8% notes due 2018 were down 13 points "on poor numbers."

He pegged the issue around 87.

Another trader said the debt was "whacked pretty good," but not only on the poor results. He also noted reports that one of the company's units had misstated production and inventory levels since 2004.

"You can't have misstatements," he said. "That's no good."

He said the paper, which had previously been trading near par, fell all the way to levels around 86.

"That's down a solid 13 to 15 points, on pretty good volume," he said.

Late Monday, the battery maker posted its quarterly results, which showed a swing to a loss from the year before.

The disappointing results were blamed on weak performance at the company's Americas transportation segment.

For the quarter, Exide reported a loss of $.59 million, or 5 cents per share. That compared with a profit of $18 million, or 22 cents per share, the year before.

Revenues increased 16% to $773 million.

Exide also said that the reported misstatements are believed to be focused on the company's Portugal recycling facility. An investigation into the matter is under way, however, and could have negative implications moving forward.

Broad market mixed

Elsewhere in the distressed debt realm, a trader saw OPTI Canada Inc.'s 7 7/8% and 8¼% subordinated notes due 2014 moving up to finish around 66.

He also deemed NewPage Corp.'s 11 3/8% first-lien notes due 2014 unchanged around 74.

General Maritime Corp.'s 12% notes due 2017 meantime dropped "a couple points" to end with a 10 handle.

"They had earnings the other day; they don't have enough money to make the [Nov. 15] coupon," the trader said of the declines.

Sara Rosenberg contributed to this article

© 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.