TXU trades up as amend-and-extend secured; Supervalu bonds gain on earnings; GM quiet on news

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., April 14 - Despite being "dreadfully quiet," as one trader put it, the distressed debt market did see news out that caused some credits to move around.

Energy Future Holdings Corp., for instance, announced that it had secured an amend-and-extend agreement from its credit facility lenders. On the news, the energy company's debt moved up in active trading.

Supervalu Inc. also had news out as it released its fourth-quarter earnings. Though still weaker year over year, the numbers were better than what the market had been expecting, a trader said, also causing some gains in the debt.

Meanwhile, General Motors Corp. bonds were largely inactive despite news out regarding the formerly bankrupt company's equity distribution plan. The bonds had once been consistently active, but a trader said that "they have been quiet for some time now."

Also, NewPage Corp.'s subordinated debt picked up in trading, though price levels were virtually unchanged.

TXU trades higher

Energy Future Holdings, or TXU as it is more commonly referred to, saw its bonds trading up a bit on news it had secured approval to amend and extend more than 80% of the amount under its senior secured credit facilities.

A trader quoted the 10¼% notes due 2015 at 66 bid, 66½ offered. That compared with levels around 64 on Wednesday.

Another trader also placed the 10¼% notes around 66 and the 6½% notes due 2024 around 54, which he called "up a little bit."

In order for the amend and extend to become effective, TXU must first raise some funds and is choosing to do so via a private placement of $1.725 billion of senior secured notes due 2020. Proceeds from the sale will be used to pay the lenders higher interest rates, as well as fees associated with securing the extension.

"Today's announcement is a very significant step in our ongoing efforts to improve our balance sheet," said Paul Keglevic, chief financial officer, in a statement released late Wednesday. "Operationally, we continue to perform at high levels and are an industry leader. Upon effectiveness, these extensions will provide us with more time to create additional enterprise value and give power markets the opportunity to recover."

TXU was prompted to secure the amend and extend from lenders holding about $177.77 billion in debt after Aurelius Capital Management alleged that certain intercompany loans made by TXU to its subsidiaries alleged a technical default.

As part of its effort, TXU also asked lenders to agree that it had not breached covenants on its credit facilities.

TXU is a Dallas-based power producer.

Supervalu up on numbers

Grocery store operator Supervalu reported better earnings than had previously been expected, causing its bonds to gain ground, traders reported.

One trader called the 8% notes due 2016 higher around the 102 mark. Another trader said the 7.45% notes due 2029 - linked to Albertson's Inc. - were nearly a point higher at 801/4.

For the fourth fiscal quarter, Supervalu reported a 2.1% decline in earnings, posting a profit of $95 million, or 44 cents a share. That compared with $97 million, or 46 cents a share, a year earlier.

Revenue fell 5.9% to $8.66 billion after dropping 15% a year earlier.

Supervalu also provided guidance for the year, forecasting earnings of $1.20 to $1.40 per share on revenue of $37.5 billion. However, the company is expecting same store sales to continue to decline.

GM releases equity plan

General Motors' debt was "pretty quiet," a trader said, even as news emerged regarding an equity distribution among bondholders.

"They've been quiet for some time now," the trader said, pegging the 8 3/8% notes due 2033 at 28 bid, 28½ offered.

"So they have come in some," he added.

Another trader said the name was "not active at all," seeing just one trade in the typically active benchmark issue. He called the paper half a point softer around 28.

The Detroit-based automaker's stock (NYSE: GM) traded down 28 cents, or 0.91%, to $30.58.

Motors Liquidation Co. - the company that was formed in June of 2009 to facilitate the company's bankruptcy plan - said it would distribute about 75% of the stock and warrants it owns in GM to bondholders by April 21. For every $1,000 of unsecured claims - not $1,000 face value of the bonds - the company will give creditors 3.802187 shares, 3.456534 warrants to acquire shares at $10 per share and 3.456534 warrants to acquire shares at $18.33 per share.

NewPage unchanged

NewPage's 10% notes due 2012 were a bit more active during Thursday's session, but still "kind of unchanged," according to a trader.

He placed the notes around 62. Another trader echoed that level.

NewPage is a Miamisburg, Ohio-based coated papermaker.

DirectBuy hit with lawsuit

A trader said that DirectBuy Holdings'12% notes due 2017 have tumbled into the 60s, citing news that the attorneys general from 37 states, Puerto Rico and the District of Columbia are objecting to the settlement of a class action suit against the Merrillville, Ind.-based members-only showroom and home-design center over its sales practices.

"Whether it was new news or not, the price of the bonds dropped," he declared.

Another trader quoted the bonds at 64 bid, 65 ½ offered, calling them down ½ point on the session but well down from their levels earlier in the week when they were trading around 75 bid.

A market source at another shop said most of the downside movement came on Wednesday, when the legal motion by the attorneys general was filed, and then the paper moved a little further downward on Thursday.

The $335 million bond deal - which had priced in late January at 97 bid to yield 12.721% - was still trading as high as around the 90 level in mid-March, but collapsed later in the month on the unexpected news of the chief financial officer's abrupt resignation, which over the space of several subsequent sessions hammered the bonds down as low as the upper 50s. They began recovering from that nadir in late March and had managed to climb back up into the 70s before the latest legal setback.

DirectBuy reached the settlement with the original plaintiffs in the lawsuit, who had alleged that the company fraudulently misrepresented itself by implying in its sales materials that its paid memberships, ranging in price from $1,000 to $5,000, would entitle customers to purchase goods from manufacturers and suppliers at actual cost. The suit had contended that DirectBuy got kickbacks from the manufacturers and inflated the costs the members paid.

The attorneys general filed their objections to the deal with the federal court in Bridgeport, Conn. on Wednesday, saying it would provide little or no relief to the bulk of the company's customers - while enriching only the plaintiffs' lawyers - and didn't even officially bar the company from similar future conduct.

DirectBuy rejected the criticism and will defend the proposed settlement at a May 10 hearing.

Nortel notes decline

Nortel Networks Corp.'s bonds slid on the news that the Toronto-based communications equipment manufacturer - currently in the process of liquidating its operations through the bankruptcy courts in the U.S. and Canada - had announced the failure of the non-binding mediation process that had been trying to hammer out a formula for the allocation of the sale proceeds of Nortel's various business and asset divestitures. The mediators were also trying to resolve other inter-estate matters, including inter-company claims.

Nortel warned in its statement of "significant" potential delays in coming up with an acceptable distribution formula in light of the mediation effort's failure, and corresponding lengthy delays in any actual distributions of the bankruptcy estate's proceeds to bondholders and other creditors.

A trader said that Nortel's 10¾% notes due 2016 were down between 1½ and 2 points at 90 bid, 91 offered, while its floating-rate notes slated to come due later this year were down 1 point at 87½ bid, 88½ offered.

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