TXU bonds take another hit as investor concern mounts; CEDC gets notice of distressed players

By Stephanie N. Rotondo

Portland, Ore., March 8 - Distressed debt traders complained that the market was still slow on Tuesday, though there were notable price moves in Energy Future Holdings Corp. and Sprint Nextel Corp.

In TXU, the bonds took another hit, continuing the declines seen last week. The losses have come as a hedge fund investor of the company is alleging a default on $20 billion in loans. Though the company has denied that the default occurred, the news has brought the over-leveraged company under more scrutiny.

Sprint meantime saw its bonds moving upward on rumors that it could merge with T-Mobile USA, a subsidiary of Deutsche Telekom AG.

Elsewhere, Central European Distribution Corp. is coming up on distressed players' radar. Last week, the company issued "a big mess of numbers," a source said, which caused the company's debt to crater. Since then, the bonds have moved back up, but investors are reportedly keeping an eye on it.

TXU notes fall again

Energy Future Holdings, better known as TXU Corp., "got beat up a little more," a trader said.

"They were the most active on the downside," he added.

The 10¼% notes due 2014 fell a couple points to 53 bid, 53½ offered, while the 6.55% notes due 2034 dipped 1½ points to end around 40. The 6½% notes due 2024, however, were called "probably flat" at 41 bid, 41½ offered.

The trader said about $200 million of assorted TXU issues changed hands during the trading day.

Another trader said the name was active and also called the 6½% notes "about unchanged, maybe a little lower," trading in the low-40s.

"I think some paper did crack 40," he noted.

The bonds came under fire last week as a hedge fund investor, Aurelius Capital Management LP, asserted that certain inter-company loans constituted a default under agreements for $20 billion in loans. Investors, already weary of the over-leveraged power producer owned by Kohlberg Kravis Roberts & Co. and TPG, drove prices down 5 to 10 points on the news.

"There's some recognition that they do have a boatload of debt out there and that they are a struggling business," a trader said of Tuesday's losses.

Also in the energy sphere, Compton Petroleum Finance Corp.'s 10% notes due 2017 were unchanged at 73 bid, 74 offered, according to a trader.

"Yesterday was their slide," he said.

CEDC attracting attention

Vodka distributor Central European Distribution is catching the eye of some distressed investors, as the company struggles with "a big mess in terms of numbers," a market source said.

The source said the company has about $1.3 billion in total debt and that news out last week pushed the stock and convertible bonds down "significantly."

On March 1, the company said it would have to pay a high fee to Polish lenders in order to avoid a breach of covenants. The company must reach new terms by June 30 or risk an acceleration.

The company also said that its 2011 numbers would likely be negatively impacted by higher marketing and spirit costs.

CEDC, as it is referred to by traders, is forecasting a profit of $1.05 to $1.25 per share on sales of $880 million to $1.08 billion.

Analysts polled by Thomson Reuters are expecting a profit of $1.88 per share on sales of $946.8 million.

A trader said the 3% convertible notes due 2013 were up 3 points at 86 bid, 87 offered. He also said the company's straight bonds were hanging around the low-90s, up for the levels in the 80s they had fallen to last week.

Central European Distribution is based in Warsaw, Poland.

Sprint up on merger chatter

Sprint Nextel bonds popped on rumors of a potential merger with Deutsche Telekom AG's T-Mobile USA subsidiary, traders reported.

One trader called the 8¾% notes due 2032 up 5 points around 109.

Still, "it's only jumping because of its association with Deutsche Telekom," he said.

Another market source deemed the 6% notes due 2016 more than 2 points better at 102½ bid.

At another shop, a trader said the debt was "up a good bit," the 6 7/8% notes due 2028 around "94-ish," versus levels in the high-80s previously.

He also saw the 6.90% notes due 2017 closing around 1041/2, up from "101 and change" on Monday.

Sprint is the third largest wireless carrier in the United States and T-Mobile is the fourth. News reports indicate that the companies have had trouble coming to terms, but if they can cut a deal, it would help to alleviate Sprint's troubles associated with its 2005 acquisition of Nextel Communications.

Deutsche Telekom would have a large stake in the combined business, the reports said.

Sprint is an Overland Park, Kan.-based wireless telecommunications provider.

NewPage steady, Kodak rallies

Among other distressed issues, NewPage Corp.'s 10% notes due 2012 were seen unchanged at 691/2.

A trader said there was "some trading" in Eastman Kodak Co.'s 7¼% notes due 2013. He said the paper hit a low around 911/2, but then "rallied back a little" to close at 93 bid, 93½ offered.

© 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.