Weak credits like Caesars, NewPage get hit; Rite Aid trades down; Dynegy bondholders file suit

By Stephanie N. Rotondo

Portland, Ore., Sept. 23 - Distressed debt "kind of clamed down" Friday, but things remained generally weak, according to traders.

"Things still feel heavy," a trader said.

"Lesser quality stuff is definitely getting beat up," said another trader.

Caesars Entertainment Corp., for instance, got knocked down as much as 3 points on the day, with no fresh news out to push it lower. NewPage Corp. was also on the soft side.

After Thursday's earnings release, Rite Aid Corp. bonds were trading downward. The company reported a narrower loss for its second fiscal quarter.

Also moving down were Dynegy Inc.'s bonds. The fight against a recent restructuring effort heated up Friday as bondholders sued the Houston-based power producer.

On the positive side, Travelport Ltd.'s paper - which had been getting beat up recently - "rebounded a little," according to a trader. The bonds were up anywhere from 1½ to 3 points on the day, as bondholders sought to block the company's recent restructuring of loans.

Caesars, NewPage down

Weaker credits continued to suffer the most in the distressed world and Caesars Entertainment's 10% notes due 2018 were not spared.

One trader said the bonds were actively traded and down "almost 3 points" at 65. Another trader said the paper was "down a couple more points" at 64 bid, 65 offered.

A third market source deemed the issue down over 4 points at 64 bid.

Bankrupt papermaker NewPage was also getting knocked around. The second trader said the 11 3/8% first-lien notes due 2014 had slipped to 81 bid, 82 offered.

Rite Aid weakens

Rite Aid debt declined by about a point, just one day after the company reported a narrower loss for the second fiscal quarter and trimmed its fiscal 2012 projections.

A trader said the 8 5/8% notes due 2015 dipped a point to 881/2. Another trader echoed that level.

For its second fiscal quarter, the Camp Hill, Pa.-based drugstore chain reported a net loss of $92.3 million, or 11 cents per share. Analysts, on average, were expecting a loss of 18 cents per share.

A year ago, net loss was $197 million, $0.23 per diluted share.

Revenues were $6.3 billion. Adjusted EBITDA was $184.3 million, compared with $181.2 million the year before.

For the 13-week period, same-store sales gained 2.2% year over year. That consisted of a 2.5% increase in front-end sales and a 2% gain in pharmacy sales.

Rite Aid also updated its guidance for fiscal 2012. In its earnings release, the company said it was expecting sales between $25.8 billion and $26.1 billion. Net loss was estimated at $345 million to $495 million, down from $370 million and $560 million previously.

Dynegy bondholders sue

Dynegy bondholders are once again attempting to fight a recent restructuring effort undertaken by the company.

The news, however, did not help the bonds.

A trader said there "wasn't much action" in Dynegy debt, calling paper unchanged to down about a point.

He saw the 7.67% notes due 2016 of Dynegy Danskammer LLC, a unit that operates a coal-fired power plant in upstate New York, unchanged at 553/4, while the 7¾% notes due 2019 were down around 621/2.

A bondholder group led by Avenue Capital Group is asking a New York court to reverse the restructuring, which transferred the company's coal assets to the parent company, thereby placing the assets out of bondholders' reach. The group has alleged that the Carl Icahn-supported move is tantamount to fraud "unprecedented in the annals of corporate finance."

"Despite the parent company's repeated and unambiguous calls of distress and gloomy outlooks, the company has pilfered one of the most valuable assets of the operating subsidiary that issued the notes, and removed it from the reach of creditors, for no reason other than to benefit the parent's equity holders, prominent among them Carl C. Icahn," bondholder attorneys wrote in court documents.

The lawsuit was filed Wednesday.

Travelport rebounds

Travelport bondholders are also attempting to use the court system to block a restructuring. But unlike Dynegy, the news gave the recently beat-up debt a boost.

"Travelport rebounded a little bit," a trader said. He said the 9% notes due 2016 were up 3 points to 63, while the 9 7/8% notes due 2014 were "up a couple" to 72 bid, 73 offered.

Another trader pegged the 9 7/8% notes at 73, a gain of 1½ points.

Bondholders are decrying the Atlanta-based company recently announced plan to transfer a $135 million second-lien term loan to a newly formed restricted unit. The group - which combined own 25% of the company's notes - are calling the plan a fraudulent transfer of assets.

Additionally, the group is fighting the company's attempt to issue new loans. The company is asking its lenders to approve the restructuring in order to avoid breaching covenants.

If the restructuring is unsuccessful, the company could file for Chapter 11 protections. Travelport said in a regulatory filing that it had begun to solicit votes on a prepackaged plan on Thursday.

© 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.