PMI Group loses ground after CDS auction; Dynegy debt slips; SuperMedia term loan drops again

By Stephanie N. Rotondo

Portland, Ore., Dec. 14 - It was a "little bit weaker" for the distressed debt market on Wednesday.

The equity markets were also on the decline ad one trader remarked that he had heard a $200 million high-yield bid-wanted list was circulating, possibly accounting for some of the losses.

PMI Group Inc.'s debt was trading "a bunch," a trader said. The second round of a CDS auction was held Wednesday, setting the final price at 161/2. As such, the bankrupt mortgage insurer's bonds were trading downward.

Dynegy Holdings LLC paper was also weakening, though trading was thin in the credit. There was also no news out to explain the drop.

In the world of bank loans, SuperMedia Inc.'s term loan lost ground, continuing the trend set Tuesday. The debt had begun to lose steam on word a tender for the debt had expired.

Ultimately, the tender was successful and priced at the high end of guidance.

PMI falls on CDS results

A second round of a CDS auction held on Wednesday set the final price for PMI Group CDS at 161/2.

One the news, the company's bonds - which tend to trade in line with one another - dropped from levels around 20 to levels around 16, traders reported.

One trader said the 6 5/8% notes due 2036 had lost 2½ points to 163/4, while the 6% notes due 2016 fell to 161/2.

The first round of the auction was held Tuesday, setting the initial midpoint range at 18.125.

A total of 13 dealers participated in the auction.

As previously reported, the Walnut Creek, Calif.-based company filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware in October. On Nov. 28 the ISDA Determinations Committee confirmed that a bankruptcy credit event occurred for PMI and announced the Dec. 13 auction.

Among other financial-related credits, a trader said MF Global Holdings Ltd.'s 6¼% notes due 2016 were lower, trading in a 30-31 context.

Dynegy losing power

Dynegy Holdings' debt was down Wednesday, though there was no fresh news out to act as a catalyst.

A trader saw the 7¾% notes due 2019 fell 2½ points to end at 67. However, he noted that it was "just one trade, so that doesn't really mean anything."

Another market source pegged the issue at 67 bid, down 2¼ points on the day.

Dynegy Holdings is the bankrupt subsidiary of Houston-based power producer Dynegy Inc.

SuperMedia on losing streak

SuperMedia's term loan dropped to 45 bid, 47 offered from 46 bid, 48 offered, continuing its slide from Tuesday when the company's sub-par buyback offer expired, according to a trader.

The loan had gotten as high as 47 bid, 49 offered on Tuesday morning ahead of the term loan tender offer expiration deadline, and earlier in the week it had been at 46½ bid, 48½ offered. Prior to the launch of the tender on Dec. 7, the debt was seen at 45 bid, 46½ offered.

Under the repurchase offer, the company was proposing a $117 million cash-offer buyback for its term loan debt in a price range of 43 to 50. The tender was successful with the entire cash amount being used to buy back about $235 million of the debt at a price of 493/4.

This was the company's second attempt at a tender. In November, SuperMedia had launched an offer with the same cash size but a price range of 43 to 46. This offer was then pulled because of insufficient interest.

SuperMedia is a Dallas-based directory publisher.

Sino-Forest stays planted

A trader said Sino-Forest Corp.'s notes were "still in the mid-20s," but another trader said the debt had gained a bit.

The second trader called the 10¼% notes due 2014 a point higher at 261/4.

On Wednesday, Moody's Investors Service dropped Sino-Forest's credit rating to Ca from Caa1, following news out on Monday regarding the forest products company decision to skip a $9.77 million interest payment on its 4¼% convertible notes due 2016. The company therefore entered a 30-day grace period. If the payment is not made in that time, or another agreement cannot be reached, the notes can be accelerated.

Moody's also said it planned to withdraw all ratings on the company.

Sino-Forest also said on Monday that it was talks with stakeholders and advisors and that it was considering all of its strategic options, including a possible sale of the company. The company has already breached covenants under its notes and, as such, remarked that its ability to continue as a going concern was contingent upon talks being successful.

Sino-Forest had come under scrutiny in June when Hong Kong-based Muddy Waters Research - an outfit run by known short-seller Carson Block - alleged that the company had fraudulently misrepresented land holdings in China. The company has since investigated the claims and come to the conclusion that the allegations were false.

Kellwood rises

Kellwood Co.'s 7 5/8% notes due 2017 were being quoted as high as 26 bid, well up from levels in the mid-teens at which those bonds have recently traded.

Wednesday's volume came from a pair of round-lot trades, totaling about $2 million.

There was no fresh news out on the St. Louis-based apparel company.

Sara Rosenberg and Paul Deckelman contributed to this article

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