Edison Mission bonds slip, still up since filing; Geokinetics downgraded, debt not much moved

By Stephanie N. Rotondo

Phoenix, Dec. 18 - The high-yield new issue market was not slowing down Tuesday, which once more kept attention from the distressed debt arena - even after Monday's big news day.

"There's not a whole lot for sale," a trader said.

Edison Mission Energy remained somewhat active, according to traders. The bonds had run on Monday after the company announced it had filed for Chapter 11 protections. The debt then came in a touch on Tuesday, but was still trading up from levels seen in the previous week.

However, that was in part due to the fact that all the debt is now trading flat, or without accrued interest.

Meanwhile, Moody's Investors Service and Standard & Poor's downgraded Geokinetics Holdings USA Inc. during Tuesday's session. The rating change was based on a skipped Dec. 15 coupon.

Despite the downgrade, the bonds were holding their ground.

Edison gives back

Edison Mission Energy's various bond issues - which trade in line with one another - gave up a bit of the gains seen Monday after the Santa Ana, Calif.-based power producer announced it had filed for bankruptcy.

One trader said "small pieces" of the bonds were trading at 54 bid, 54½ offered.

Another trader, however, called the debt "active," noting that the securities "dribbled down" to levels around 54.

"They're still up dramatically since the filing," he said.

The bankruptcy filing came after the company failed to make a coupon payment on Nov. 15. Another coupon came due Dec. 15.

Edison Mission has previously operated as a unit of Edison International. With the bankruptcy filing, that will cease to be the case.

Edison Mission "will be deconsolidated from Edison International as of the filing date and EIX expects to report the results of EME as discontinued operations for current and prior periods," the former parent said on its website.

"EIX has reached an agreement with [Edison Mission] and a majority of its noteholders that would transition EIX's ownership to [Edison Mission's] creditors upon approval of a plan of reorganization by the bankruptcy court."

Geokinetics unmoved by downgrades

Geokinetics debt was holding in despite receiving downgrades from both S&P and Moody's on Tuesday.

The downgrades were based on the fact that the company missed a Dec. 15 coupon and stated that it would, in all likelihood, face an "in-court restructuring."

A trader placed the 9¾% notes at 41 bid, flat, or without accrued interest.

Another trader noted that there was "not much trading," still seeing the paper quoted in the low-40s.

Before missing the $14.6 million interest payment, Houston-based provider of seismic data acquisition, seismic data processing services and multi-client seismic data to the oil and gas industry had said that it was in talks with creditors on a possible restructuring. Those talks ended Friday without any indication - at least from the company - how they had gone.

However, the company said in its press release on Monday that regardless of whether or not a deal can be reached with bondholders, an "in-court restructuring" was likely.

In its rating review, Moody's said the company could face another downgrade in the future.

For its part, S&P implied that a restructuring was imminent.

"Although it is operating under a 30-day grace period to make its interest payment, we consider the grace period for interest payment as tantamount to default if the payment is not cured within five business days after the initially scheduled due date. Given the company's very weak liquidity, we believe it is unlikely that the company will make its payment within the five-day window," said S&P credit analyst Marc Bromberg in a press release.

Broad market still firm

Among other distressed names, a trader saw Eastman Kodak Co.'s 9¾% notes due 2018 at 82¼ bid, 83¼ offered.

The 7¼% notes due 2013 were at 10½ bid, he said.

Another trader saw Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 move up "a point or so" to 38.

And, AMR Corp.'s 6¼% benchmark convertible notes due 2014 inched up to around 84, according to the trader.

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