Bon-Ton gives early tender results, bonds firm; ResCap inches up as judge OKs examiner request

By Stephanie N. Rotondo

Phoenix, June 18 - The distressed debt market was subdued Monday, though generally steady, according to traders.

"It was a pretty quiet day, not a lot of movement," one trader said.

"Today was extremely non-eventful," another trader said.

But a trader at another shop said that there were "pockets" of activity, mostly in higher-grade credits.

"Risk-on trade is alive and well," he said. "Everybody feels a little better about the world."

He conceded that the high-yield arena - and thus, the distressed market - was "kind of quiet," but added that high-grade bonds were "pretty active."

"New issues are starting to pick back up again," he said, given that, investors were turning their focus to that part of the market.

"It's the one area where there I still liquidity and things can get done."

In the distressed realm, Bon-Ton Stores Inc. paper was rising after the company announced the interim results of a tender offer for its 10¼% notes due 2014.

The old bonds will be exchanged for 10 5/8% second-lien senior secured notes due 2017.

Meanwhile, Residential Capital LLC bonds were "definitely better" on the day, a trader reported. The modest gain came as the bankruptcy judge overseeing the company's case approved the appointment of an independent examiner. The examiner will be charged with looking into pre-filing deals the mortgage firm made with its parent company, Ally Financial Inc.

Bon-Ton bonds improve

Bon-Ton Stores' 10¼% notes due 2014 were gaining ground in Monday trading, after the York, Pa.-based retailer announced interim results of its tender offer.

One trader said the bonds were "up a few points," trading around 81. Another source quoted the issue at 81 bid, 82 offered, up from opening levels around 80 and from levels around 77 last week.

The company intends to redeem all of the $464 million outstanding 10¼% notes and, as of the early deadline in Friday, about $329.4 million, or 71%, of the bonds had been validly tendered.

Investors will have until July 3 to participate in the exchange.

In return for each $1,000 of 10¼% notes tendered, investors will receive $970 in new 10 5/8% second-lien notes due 2017.

Those who tendered by the early deadline received $1,000 new notes for each $1,000 of old notes tendered.

Evan Mann, an analyst at Gimme Credit LLC, noted that even if Bon-Ton does not receive any more participation in the exchange, the refinancing effort could pay off.

"Given the company's moderate free cash flow generation and significant revolver availability, the remaining $135 million [of notes] becomes a manageable debt maturity in March 2014," he wrote in an afternoon comment published Monday. "With refinancing risk mostly taken off the table, the credit story hinges on [the company's] ability to deliver on its turnaround promises in the second half of fiscal 2012."

Judge OKs examiner for ResCap

Residential Capital bonds were modestly higher to unchanged in Monday trading, as news came out that the bankruptcy judge overseeing the case had approved appointing an independent examiner.

One trader said ResCap's 6½% unsecured notes due 2013 were "a little better," trading around 23.

"The bonds were better," another trader said. "Not a ton of volume, but they were definitely better."

He also pegged the issue around 23.

A third market source echoed that level, but added that the 9 5/8% notes due 2015 were about unchanged, trading with a 95 handle.

On Monday, judge Martin Glenn approved a request from Berkshire Hathaway Inc. to begin an independent investigation into ResCap's deal with its parent company, Ally Financial, in which the parent could potentially avoid any legal liability tied to mortgage-related securities.

ResCap, the Minneapolis-based mortgage unit of Ally, filed for bankruptcy in May after reporting a series of hefty losses.

Broad market on firm side

In the rest of the distressed arena, a trader said Cemex SAB de CV's debt was firming up, seeing the 9¼% notes due 2020 and 9½% notes due 2016 "up a couple [points]," at 83 and 961/4, respectively.

The 9% notes due 2018 were meantime over a point stronger around 871/2.

ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were also moving upward, rising a point to end around 46.

On the downside, Caesars Entertainment Corp.'s 5 5/8% notes due 2015 slipped a point to 81, while the benchmark 10% notes due 2018 fell nearly a point to 671/2.

Edison International Inc.'s Edison Mission Energy-linked paper was also weaker.

A trader called the 7¾% notes due 2016 down a point at 56½ and the 7% notes due 2017 off half a point at 563/4.

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