MF Global is once more name du jour, bonds falter; Dynegy ticks lower; Clearwire hangs in

By Stephanie N. Rotondo

Portland, Ore., Nov. 21 - It was a muted day for distressed debt on Monday, as the shortened holiday week meant empty desks and investors were hesitant to play given the likely failure of Congress' super-committee to cut $1.2 trillion from the federal budget.

"It was very slow," a trader said. "Feels like the day before Thanksgiving.

"It's going to be like this all week, I imagine."

Another trader said the market felt "heavy," seeing a general 1- to 2-point decline overall.

MF Global Holdings Ltd. was the "bond du jour," according to one trader. The bonds fell all the way into the high-20s on news the company's bankruptcy trustee had said the cash shortfall could be nearly double what was previously thought.

However, by the end of business, the bonds had rallied some, but still closed down about 6 points on the day.

Meanwhile, Dynegy Holdings LLC paper was only slightly weaker on news certain stakeholders were seeking to dismiss the unit's bankruptcy case.

Clearwire Corp. debt meantime held in there after losing ground on Friday. The losses were due to word that the struggling wireless services provider was considering skipping an upcoming coupon.

Clearwire's network partner Sprint Nextel Corp. however, was on the decline.

MF Global tops charts

MF Global's 6¼% notes due 2016 dipped all the way into the high-20s Monday on news that the futures broker's cash shortfall could be as much as double as was previously expected.

A trader said the issue fell all the way to 28 before settling back in at 32½ bid, 33½ offered. That compared with levels around 37 on Friday.

Another trader quoted the issue at 31 bid, 33 offered, while a third source placed the notes around 31, down 6½ points.

On Monday, the trustee in charge of liquidating the new York-based firm formerly run by Jon Corzine said that a shortfall of customer funds could be as much as $1.2 billion.

Last week, the company received an OK to distribute about $520 million of cash to customers, though it was only a 60% recovery.

Regulators have been trying to locate the missing funds since the company's Oct. 31 bankruptcy filing.

Dynegy slightly weaker

Public Service Enterprise Group's indirect subsidiaries are seeking to dismiss Dynegy Holdings' bankruptcy case, alleging that the debtors "have fraudulently and without good faith manufactured an artificial insolvency in an effort to impose the limitations" of a section of the Bankruptcy Code upon a handful of the debtors' creditors.

"[Parent company] Dynegy Inc. cannot be both the cause and the beneficiary of Dynegy Holdings' artificial insolvency," the filing said.

The news did little to move the bonds, however.

A trader saw the 8 3/8% notes due 2016 slipping half a point to 701/2.

Dynegy Holdings, a Houston-based power producer, filed for bankruptcy on Nov. 7.

Clearwire steady, Sprint falls

Clearwire's debt managed to hold its ground Monday, after losing territory on Friday.

The previous losses were based on news that the Kirkland, Wash.-based wireless services provider was considering skipping its Dec. 1 coupon.

A trader said the bonds were "probably in line" with where they closed out Friday, the 12% first-lien notes due 2015 at 76 and the 12% second-lien notes due 2017 at 43 bid, 45 offered.

Clearwire's network partner Sprint Nextel, however, was seen on the decline.

A trader said the 8 3/8% notes due 2017 lost a deuce, closing around 87.

Another market source pegged the 6% notes due 2016 at 80¼ bid, a loss of 3 points on the day.

At another shop, a trader said that Clearwire's first-liens rose to 76¼ on Monday, and were left bid, with no offerings, he added.

"So they're up a little."

He noted that some people in the market believe that "this is just a ploy to force [54% owner] Sprint to do some more business with them."

Broad market heavy

Among other distressed issues, NewPage Corp.'s 11 3/8% first-lien notes due 2014 fell to 69, a trader said.

Another trader said Caesars Entertainment Corp.'s 10% notes due 2018 fell "a couple points" to finish around 62.

Paul Deckelman contributed to this article

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