Momentive bonds gain momentum; MBIA's bond rally continues; Caesars declines; ATP steady

By Stephanie N. Rotondo

Phoenix, May 7 - There were "buyers of everything" in the distressed debt market on Tuesday, according to a trader.

Momentive Performance Materials Inc.'s bonds were seen firming about 4 points on the day. However, there was no fresh news to act as a catalyst.

Meanwhile, MBIA Inc.'s debt continued to gain ground just one day after the company announced a $1.6 billion settlement with Bank of America Corp.

Though the day had a generally strong feel to it, some names weren't reaping the benefits.

Caesars Entertainment Corp. was inching downward. A trader said that Gimme Credit LLC had put out a negative report on the Las Vegas-based casino operator. The report centered on the company's plan to create an offshoot venture and how that will - or won't - help the struggling enterprise.

Also, ATP Oil & Gas Corp. was holding steady. But late-day news about the winner of the company's assets could impact the bonds come Wednesday, a trader said.

Momentive gets a boost

A trader called Momentive Performance's 11½% notes due 2016 up 4½ points in Tuesday trading, pegging the issue at 741/2.

Another trader saw the 11½% notes going out in a 76 to 78 context, while the 9% notes due 2021 closed around 94.

The trader called both issues up at least 3 to 4 points.

There was no fresh news out on the Waterford, N.Y.-based manufacturer of silicones and other specialty chemicals.

MBIA stays strong

MBIA paper continued to firm up during Tuesday's session, following news out Monday of a $1.6 billion settlement with Bank of America.

"They're rallying like crazy," a trader said, seeing the 6.4% notes due 2022 gain another 1½ points to close around 98.

The issue had gone from the low-80s to the mid-90s on Monday.

At another desk, a trader saw the 0% surplus notes due 2033 hitting a high of 80, though he noted that the paper went out around "79-ish."

That issue began trading in the mid-20s on Monday.

The bond insurer's settlement with Bank of America was in regards to a variety of disputes, including MBIA's liability as a counterparty on swap deals done with the bank.

Under the terms of the settlement, MBIA will receive $1.6 billion in cash from Bank of America and the bank will have the right to purchase a 4.9% equity stake in MBIA. Bank of America will also cancel $137 million of MBIA's senior debt that the bank bought in December.

Bank of America will also provide MBIA with a $500 million line of credit.

The settlement is one of the last remaining hurdles the company has to undertake in order to complete a restructuring effort. The deal will also allow MBIA to avoid liquidation.

Caesars' debt dips

Caesars Entertainment's 10% notes due 2018 were weakening despite a strong broad market.

A trader placed the bonds at 601/4, which he deemed down over half a point.

Another market source pegged the notes at 60¾ bid, off just a quarter-point.

In a morning report put out on Tuesday, Gimme Credit analyst Kim Noland was less than optimistic about the company's latest "financial maneuver."

In its earnings report last week, Caesars said it was creating Caesars Growth Partners, into which investors TPG Capital and Apollo Capital Management had agreed to invest $250 million each. Subscription rights would also be released to certain shareholders.

For its part, Caesars would contribute about $1.1 billion of operating company debt and its online gaming business, Caesars Interactive.

Caesars Growth Partners will then buy Planet Hollywood and Horseshoe Baltimore for $360 million.

However, Noland noted that few, if any, funds - aside from the asset sale - would flow into the operating company, which would do little to buoy disappointing quarterly results.

"Even with the new financial engineering, Caesars may not be able to dance its way out of a restructuring of at least some of its debt," Noland said in the report. "While we don't see a liquidity crisis near term given the company's current cash and availability, pressures could increase as the parent company faces the maturity of near $5 billion of CMBS securities in 2015."

ATP auction results out

After the bell, news outlets began reporting that a group of secured lenders led by Credit Suisse AG had won at auction the oil and gas drilling assets of ATP Oil & Gas.

"It looks like that will be an ugly one tomorrow," a trader said, predicting an impact for the bonds come Wednesday.

He said the 11 7/8% notes due 2015 were trading at 3½ bid, 4 offered early in Tuesday's session.

The winning group bid $690.8 million for the assets. Most of that price will come in the form of cancelled debt. The group will also buy $45 million of debt that is senior to their holdings - the lenders have been providing financing for ATP while it sunk into bankruptcy.

ATP is a Houston-based oil and gas exploration company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.