Coal, oil rise as Romney lauds industries in debates; Supervalu slides on buyout concerns

By Stephanie N. Rotondo

Phoenix, Oct. 4 - Coal credits were rising in the distressed debt arena Thursday, reportedly spurred by positive comments made by the Republican presidential challenger at Wednesday night's debate.

In the first debate, governor Mitt Romney of Massachusetts said he wanted to tap the energy sector in order to create jobs. Specifically, he said he was a fan of so-called "clean coal."

But Romney didn't make any comments to bolster Supervalu Inc.'s debt. The grocery store chain's debt began sliding Wednesday on reports private equity firms like KKR were showing interest in buying some of the company's assets. Alas, the potential buyers are more interested in pieces of the company rather than the whole.

Romney gives coal a boost

The coal arena got a boost Thursday following comments made by Romney in the first round of the presidential debates on Wednesday night.

"Coal stuff had a little bit of an uptick today," a trader said. He saw Arch Coal Inc.'s 8¾% notes due 2016 trading around 991/2, while Alpha Natural Resources Inc.'s 6¼% notes due 2021 rose "about a point" to end around 85.

The trader noted that "the new deal wasn't really trading up," referring to the $500 million of 9¾% notes due 2018 that priced Sept. 28.

He quoted the recent deal at 99 bid, 99¼ offered.

A second trader meantime said Arch Coal's debt was up 1½ to 2 points, the 7% notes due 2019 at 86¼ and the 7¼% notes due 2021 at 86.

He also saw Alpha Natural's 6% notes due 2019 gain a point, closing around 841/2.

At another desk, a source called Alpha Natural's 6¼% notes up almost a point at 84¾ bid.

Coal wasn't the only energy space to get a boost. The price of U.S. crude oil jumped nearly 4% on the day to $91.60. That rise also helped ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 gain a bit.

A trader placed the notes around 181/2.

Supervalu slips again

Supervalu paper continued the slide that began Wednesday on reports prospective buyers were only interested in pieces of the company rather than the whole.

A trader said the 8% notes due 2016 began to sink late in the session, calling the issue down "1½ points or so" at 86 5/8. He also deemed the 7.45% notes due 2029 a point lower at 57, though the 7¼% notes due 2013 were unchanged around 101.

Another market source called the 8% notes a point weaker at 87¼ bid.

And, a third source said the name was "not quite as active as yesterday" but still a "smidge weaker," the 8% notes ending in an 86½ to 87 context.

The Eden Prairie, Minn.-based grocery store chain previously noted that it was reviewing its strategic options, including a potential sale of the company. Potential buyers include billionaire Ronald Burkle and buyout firms KKR & Co. and TPG Capital, though the buyers are reported to only want parts of the company, not the whole.

For its part, Supervalu is still attempting to find a buyer of the whole company and have therefore extended an offer deadline to Oct. 15.

The company could piece out its business, but that raises questions about what to do with its $2.5 billion in debt: Would a potential buyer assume it or would whatever is left of the larger company be forced to carry it? With the company already struggling to compete, the latter option could be highly detrimental.

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