Energy Future bonds lead trading, jump on day's news; GM debt firms on stock gains, sales data

By Stephanie N. Rotondo

Portland, Ore., April 1 - A distressed debt trader said that "99.9% of all issues were higher" during Friday trading.

The bulk of the gains went to Energy Future Holdings Corp., whose bonds gained anywhere from 5 to 15 points on the day, depending upon where you look.

The debt got a boost as the company said it was looking to amend and extend its credit facilities and that it was asking lenders to agree that it was not in a technical default, as alleged by Aurelius Capital Management.

The company also said it was intending to launch a new issue.

In the autosphere, General Motors Corp. inched up a bit, following a gain in the company's equity and the release of its March sales report.

TXU debt ramps up

Friday was all about Energy Future Holdings - or TXU, as it is more commonly referred to - after the company said it was seeking to make certain amendments on its credit facilities in order to brush off an allegation of a covenant breach.

"It was TXU all the time," a trader said, seeing about $300 million to $400 million - "or maybe more," he said - of the bonds changing hands on the day.

He noted that TXU trading made up at least a quarter of all the trading in the secondary universe.

In addition to trading actively, the bonds were trading up.

"They were up a minimum of 5 points," the trader said, with the 10¼% notes due 2015 gaining 10 points to 67 bid, 68 offered.

They had been 56 bid, 57 offered on Thursday, he said.

"[TXU] was really what was driving the market," he noted. "The entire complex is strongly, strongly up. And that makes sense because it is one of the most widely held names."

Another trader said TXU debt was "cranking," placing the 10¼% notes around 67, a gain of 7 points on the day.

He also saw the 6½% notes due 2024 trading around 52, up 5 points and the 5.55% notes due 2014 at 80, up 15 points from 65 just a couple days ago, he said.

At another desk, a trader said the paper was "pretty active and topical," seeing the 10¼% notes at 67 bid, 68 offered, up from the high-50s.

Late February, Aurelius Capital Management said that TXU had breached covenants on its credit facility by providing direct intercompany loans. Under the covenants, the company was only allowed to make such loans on an "arm's-length" basis.

TXU, however, has fought the allegations, saying that it did not breach covenants. In addition to seeking to amend and extend its senior secured credit facilities, the company is also asking lenders to agree that it complied with the covenant.

The company said that, based upon ongoing discussions with lenders, about 50% would agree that the loans were made at an arm's length.

If TXU is able to secure approval, it will also be conditioned upon a successful offering of new senior secured notes. The proceeds from the offering will be used to pay down the credit facilities.

According to one trader, the company is expected to issue "$1 billion and change" of new debt. Combined with the amend and extends, the offering will "give them a ton of breathing room.

"It doesn't put some of this stuff to par," he conceded. However, if the lenders agree that there is no default, "with that out of that way, it just clears the path."

TXU is a Dallas-based energy producer.

GM up with stock, sales

A trader said General Motors' debt "got a bit of a bounce with the stock flying today."

He saw the 8 3/8% notes due 2033 trading around 301/2, up from 29½ bid, 30 offered.

Other traders also saw the benchmark issue around 301/2, though one trader said trading in the credit was "fairly benign."

One trader pegged the 8¼% notes due 2023 at 291/2, up as much as half a point.

The Detroit-based automaker's stock (NYSE: GM) traded up $1.38, or 4.45%, to $32.41.

GM released its March sales report Friday, posting an 11% increase year over year.

Rite Aid, Blockbuster unchanged

Among other topical distressed credits, a trader said it was "interesting" that trading volume in Rite Aid Corp. was less than $15 million total, given the company's sales release on Thursday.

"I would have thought there would have been more action," he said.

He said the bonds were "exactly where it went out [Thursday], maybe up marginally," the 9½% notes due 2017 at 90½ bid, 90¾ offered.

Meanwhile, Blockbuster Inc.'s 9% notes due 2011 were still at 7/8 bid, 1 1/8 offered, according to a trader, with "no real trades."

He added that he hadn't seen the 11 ¾% notes due 2014 trade "in weeks."

Blockbuster said Friday that it had received numerous bids for its business ahead of an upcoming auction.

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