Recently busy Tronox, NII quiet down; USEC convertibles jump on pre-pack deal; AMR loan breaks

By Paul Deckelman

New York, Dec. 16 - The week was heard to have opened quietly in the distressed bond market.

Traders said that Tronox Ltd., whose bonds traded actively and at higher levels on Friday, held steady around those Friday levels but on considerably less volume. The Friday performance was aided by a favorable court ruling in the company's battle with former corporate parent Kerr-McGee over who is responsible for billions of dollars of environmental clean-up costs.

There was continued trading in one of last week's more active names - NII Holdings Inc., whose bonds have recently been under pressure.

USEC Inc.'s 2014 convertibles pushed up solidly into the low 30s from prior bid levels around - or even below - 20 after news that the Bethesda, Md.-based supplier of nuclear fuel and services has reached an agreement with most of its note holders to file for Chapter 11 bankruptcy.

AMR Corp., the parent company of American Airlines, saw its $1.9 billion debtor-in-possession/exit financing term loan free up for trading, quoted slightly above par.

Tronox slacks off

A trader said trading in Tronox's 6 3/8% notes due 2020 "slowed down a lot today," after the credit had been one of the busiest junk names on Friday, when over $25 million of the notes traded.

He said that the price levels were "pretty much unchanged, right around that 1011/4-101½ type of zip code."

The volume, he said, "fell off substantially."

"It didn't seem that active," a second trader agreed, "just a few million."

The Stamford, Conn.-based chemical company's bonds had firmed in active trading on Friday, getting as good as 102 bid, before settling in around 101 to 1011/2, which traders called up a little.

The bonds rose in the wake of a ruling late Thursday by Judge Allan Gropper of the federal bankruptcy court in Manhattan, who declared that Tronox's former corporate parent, Kerr-McGee, and ultimately, Kerr-McGee's current owner, Anadarko Petroleum Corp., are liable for anywhere between $5 billion and $14 billion of cleanup costs that predecessor company Tronox was stuck with when Kerr McGee spun it off in the mid-2000s. These costs ultimately pushed the company into bankruptcy in 2009, from which it emerged two years later.

Tronox's bankruptcy estate had contended that Kerr-McGee had improperly loaded the company up with its own environmental liabilities having nothing to do with Tronox's titanium oxide pigment production operations, and had misrepresented the extent of those liabilities in representations it made to eventual Tronox shareholders and bondholders when it spun the company off.

In reaction to the judge's decision, Tronox said that it will receive no immediate or direct benefit from the Dec. 12 ruling.

Instead, 88% of the judgment will go to trusts and other governmental entities to remediate polluted sites. The remaining 12% of any funds ultimately received will be distributed to a tort trust "to compensate individuals injured as a result of Kerr-McGee's environmental failures."

Anadarko said it would appeal the decision.

NII still weak

A trader said that NII Holdings bonds remained weak.

He said that company's NII Capital Corp. "weakened a fair amount last week." On Monday, he said, "it was not overly active, but definitely on the weaker side."

He quoted the company's 10% notes due 2016 "straddling 50," while its 7 5/8% notes due 2021 were hanging around a 37-38 bid complex. Its NII International Telecom SCA 11 3/8% notes due 2019 "probably were no better than 79-80."

He said the bonds had gone home on Friday around 80-81, so "they were slightly weaker now."

He said there was "not a lot of volume, though," in the bonds of the Reston, Va.-based company, which sells wireless phone service in several Latin American countries under the Nextel banner.

A second trader said the 11 3/8s were "hanging around" 781/2-80, after having "dropped down this month a little bit." He said that the notes had been around 82 bid.

"Looks like it rolled over a bit," he declared.

He also saw the company's 10% notes around 49-51.

Another quiet day in bonds

A bond trader opined that "today is a tough day to get a lot of feedback. It's a quiet day."

He said that even recently active names, like underperforming retailers Gymboree Corp. and J.C. Penney Co. Inc., were quiet.

USEC gains on pre-pack

In the convertibles market, USEC's 3% convertibles due 2014 traded up to the lower 30s on Monday on the heels of news that the majority of noteholders have agreed to a plan for restructuring the ailing company's debt.

A trader said that the bonds had dropped to 20 in recent months amid speculation around a potential bankruptcy.

"There are still trades going through," he said just after the market close. He said the bonds were active.

"People think the plan is worth more than 20."

As for whether there will be further movement in the bonds, he said it will depend on how people value the business going forward.

There are still unknowns regarding parts of the plan, he said.

A distressed-debt trader at another shop said that the bonds were "up a good bit from the 'teens last week."

He said that they "spiked up 14 points" on Monday to 32-33½ from prior levels around 17-18. He saw over $23million of the notes having traded, putting the credit high up on the most-actives list.

The company said in a news release that the terms of the plan will strengthen its balance sheet, enhance its ability to sponsor the American Centrifuge project and improve its long-term business opportunities.

Under the terms of the pre-packaged bankruptcy plan, the company will replace about $530 million of the 2014 convertibles with debt totaling $200 million. The new debt would have a maturity of five years, which would automatically extend an additional five years upon the occurrence of certain events.

The restructuring plan also contemplates that the existing equity will be replaced with new equity. The note holders would receive 79% of the new equity as common stock. The plan calls for preferred equity investment holders Toshiba Corp. and the Babcock & Wilcox Investment Co. to jointly obtain 16% of the new common stock, as well as $40 million in debt on the same terms as the note holders, in exchange for their existing stakes.

USEC shares plunged $5.30, or 60%, to $3.51 on Monday.

AMR exit loan frees

In the bank loan market, AMR Corp. saw its $1.9 billion debtor-in-possession/exit financing term loan free up for trading, with levels quoted at par¼ bid, par¾ offered, a source said.

Pricing on the loan is Libor plus 300 bps with a 0.75% Libor floor and it was issued at par. There is 101 soft call protection for six months.

During syndication, pricing finalized at the tight end of the Libor plus 300 bps to 325 bps talk and the Libor floor was reduced from 1%.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays, Goldman Sachs Bank USA, J.P. Morgan Securities LLC and Morgan Stanley Senior Funding Inc. are leading the deal that will be used to reprice an existing term loan from Libor plus 375 bps with a 1% Libor floor.

The Fort Worth, Texas-based airline company officially emerged from bankruptcy last Monday after some two years of restructuring under Chapter 11, including its recently closed merger with former rival US Airways Group.

Sara Rosenberg and Rebecca Melvin contributed to this report

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