Global Geophysical falls post-earnings; Cengage drops on restructuring buzz; Lehman debt rises

By Stephanie N. Rotondo

Phoenix, Feb. 26 - There was "a little more activity" in the distressed debt arena on Tuesday, according to a trader.

"Yesterday was dreadful," he said of the previous session.

Disappointing earnings out Monday drove Global Geophysical Services Inc.'s bonds down come Tuesday trading.

"There was an earnings call [Monday], I guess [investors] didn't like it," a trader said.

Cengage Learning Acquisition Inc.'s paper was also down, though not nearly as much as Global Geophysical. The slip was due to news out late regarding the company's potential hiring of a restructuring firm.

But it was good news for Lehman Brothers Holdings Inc. that added value to the now-defunct investment bank's debt. The company "resolved some claims issues," a trader said, which could "pave the way" for creditor distributions in the coming months.

Global Geophysical takes dive

Global Geophysical Services reported earnings on Monday that drove the company's bonds down come Tuesday.

A trader saw the 10½% notes due 2017 falling at least 5 points to 791/4.

The stock (NYSE: GGS) was meantime down 40 cents, or 13.89%, to $2.48.

In its quarterly report, the Houston-based seismic data provider posted a net loss of $28.6 million, or 76 cents per share. There was a $12 million loss from operations.

Revenues were cut in half from the previous year, coming to $55.3 million.

Analysts had been expecting a loss of just 13 cents per share, on revenues of $95.94 million.

The company said several non-recurring charges were included in the quarter's net loss.

In its earnings statement, the company said that it was making "a number of changes" to address the issues that adversely affected the fourth quarter's results.

"Although it will take several quarters to implement the transition we are pursuing, we remain confident that the company's investments in its asset portfolio and service offerings are well positioned to support the current and emerging needs of our worldwide customer base," said Richard White, president and chief executive officer, in the release.

Cengage weaker on restructuring talk

The Wall Street Journal reported on Tuesday that Cengage Learning has been in talks with restructuring advisor Alvarez & Marsal Holdings LLC.

Though the report indicated that the company had yet to officially hire the firm, the company's bonds were "down a little bit," according to a trader.

He pegged the 11½% notes due 2020 at 79 bid, 81 offered.

The Stamford, Conn.-based textbook publisher has struggled of late, as demand for textbooks has declined. The company is also laboring under a fair bit of debt, as well as a looming audit.

For its part, the company has said the audit should not turn up any issues.

Private equity firm Apax Partners Ltd. owns the company, which was formerly known as Thomson Learning. Apax has reportedly been buying up Cengage debt, only adding fuel to the talk that a restructuring is nearing.

Lehman gains

Lehman Brothers has inked two agreements that should "pave the way for distributions [to creditors], probably in early April," a trader said.

The trader saw the 6 7/8% notes due 2018 rising a point to 261/2.

Lehman Brothers - the now-defunct investment firm that failed at the beginning of the financial crisis - still needs court approval on the deals, which resolve certain intercompany claims. The resolution will provide for securities customers to be made whole.

CEDC convertibles plunge

In the convertibles market, Central European Distribution Corp.'s convertibles plunged 10 points or more to the low to mid-teens after the U.S.-listed Polish vodka maker and beverage distributor launched exchange offers for both the $257.9 million convertibles due next month and its 2016 senior straight notes.

The exchanges are aimed at reducing CEDC's debt by more than $750 million because the current enterprise value is insufficient to cover its debt and distributions. CEDC said it can't afford to repay the 3% convertibles next month, and neither is it likely to be able to make an interest payment on the straight notes in June.

Central European's 3% convertibles due March 15, 2013 were heard to have traded as low as 12 and in the 14 bid, 15 offered context, on a flat, or without accrued interest, basis on Tuesday. That was down from the mid-20s on Monday.

CEDC shares bounced by 3 cents, or 5%, to $0.65, after a more than 50% slide on Monday.

CEDC has offered to exchange the 3% convertibles due next month for 8.86 shares of new common stock.

One New York-based trader said the offer is "a joke."

But with $257.9 million to pay out on these bonds, and only $59 million available cash on hand and about $17.7 million available under its credit facilities, the company didn't appear to have a choice.

Nevertheless, the straight note holders and Roust Trading Ltd., a major CEDC shareholder, have proposed an alternative to the company's exchange offers, and a few traders thought the alternatives would be more favorably received than the company's offers.

"Roust has about $172 million and that has more of a chance getting done, but they are running out of time to be able to salvage any value," a trader said.

In addition, the company said that it is floating a pre-packaged bankruptcy, or reorganization, plan, but there was doubt that all parties could come to an agreement on such a plan by March 15.

In a related transaction, CEDC is offering to exchange its outstanding 9.125% senior straight notes and 8.875% senior straight notes both due 2016 for shares of new common stock and new 6.5% senior straight notes due 2020.

Ameren falls, OSG mixed

Elsewhere in the distressed market, Ameren Energy Generating Co.'s 7% notes due 2018 were seen slipping a deuce to 583/4.

A trader also saw Overseas Shipholding Group Inc.'s 8 1/8% notes trading around 381/2, while the 8¾% notes due 2013 and the 7½% notes due 2024 were around 391/2.

Another trader pegged the 8 1/8% notes at 38 bid, 40 offered.

-Rebecca Melvin contributed to this report

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