Cengage Learning bonds gyrate, loans widen after Chapter 11; coal stays in the spotlight

By Paul Deckelman

New York, July 2 - Cengage Learning Acquisitions Inc.'s bonds were seen gyrating around on Tuesday, after the Stamford, Conn.-based educational content, software and services company sought protection from its bondholders and other creditors via a Chapter 11 filing with the U.S. Bankruptcy Court in Manhattan.

Traders saw the bonds firm in the wake of the bankruptcy filing.

However, the company's term loans were seen by bank debt market participants to have widened out after that filing.

Elsewhere, traders said that coal names were still topical in the wake of last week's presidential speech laying out plans to combat carbon emissions - plans which opponents criticized as a "war on coal," despite administration denials of any such intent.

Among the names seen in the market, albeit on not much trading, were Alpha Natural Resources, Inc., Arch Coal, Inc. and the bankrupt Patriot Coal Corp.

Away from Cengage and coal, traders saw a few trades here and there in the bonds of such companies as Caesars Entertainment Corp., Exide Technologies and Momentive Specialty Chemicals, Inc.

However, the traders said that the distressed-debt market generally - like the overall junk bond market - saw little real action, as participants were winding their activities down ahead of what is expected to be a deadly dull, abbreviated session on Wednesday preceding Thursday's July 4th holiday.

Cengage bonds better

A trader in distressed bonds said that Cengage Learning Acquisitions filed, "and their bonds actually have moved up."

He said the company's 12% second-lien senior secured notes due 2019 "were probably quoted around 13-15 before they filed, and then once some details came out about the filing, they moved up."

"They're in the high teens now," he said, quoting the issue as trading in a 17 to 19 context and calling that a 4-point post-filing gain.

In the bank-debt market, though, a trader said that Cengage's term loans saw levels widen out after the bankruptcy filing.

He said that the company's extended term loan, its non-extended term loan and its incremental term loan were all quoted at 73½ bid, 76½ offered, versus 74 bid, 75 offered on Monday.

In conjunction with that Tuesday filing with U.S. Bankruptcy Court for the Eastern District of New York, the company entered into a restructuring support agreement with an ad hoc committee of first-lien lenders who hold about $2 billion of its first-lien debt.

The restructuring is expected to eliminate more than $4 billion of its $5.8 billion of total debt from the balance sheet and position the company to implement management's strategic business plan.

Major unsecured bond creditors include Wilmington Trust, NA of Minneapolis, with a $292.1 million senior unsecured notes claim; Bank of Oklahoma, based in Tulsa, with a $131.96 million senior subordinated discounted notes claim; and Wells Fargo Bank, NA of New York, with a $63.61 million senior PIK notes claim.

The company is not planning on getting a debtor-in-possession financing facility as it maintains substantial cash balances and expects to generate positive cash flow, a news release said.

Secured lenders have agreed to let the company use its use cash flow from operations to continue to fund the business and meet obligations in the normal course during the restructuring process.

Coal names still scrutinized

Away from Cengage, a trader said that "all of the coal stuff has been getting hammered recently, so [Tuesday's activity] is just a continuation."

He saw the sector names, such as Bristol, Va.-based Alpha Natural Resources' 6¼% notes due 2021, about unchanged on the session.

A market source at another shop said the bonds gained maybe a quarter-point, to 80½ bid, and also saw St. Louis-based Arch Coal's 8¾% notes due 2016 steady at 101 7/32. The latter credit saw some $7 million having changed hands, making it one of the busier names in an otherwise dull session.

A trader said that "some of the coal names dropped down," though on "not a lot of volume."

He said that Arch's 7¼% notes due 2020 and 7¼% notes due 2021 were both quoted around an 80 to 82 bid range, which he called "pretty much unchanged, on not a lot of volume".

"They were in the mid-80s a week ago, and now they're in the low 80s."

He said that the bonds "dropped from the mid-80s to 80-82 last week," probably in response to indications the Obama administration will take a tougher line against coal-fired power plants and other coal-fueled facilities as part of what it called a coordinated effort to cut carbon emissions, citing global warming concerns.

Administration critics warned that mounting what they termed a "war on coal" could cost tens of thousands of jobs and damage a key segment of the economy, although its officials denied that there was a war on coal.

Having had their fall, the trader said, the bonds "were just staying there" this week.

Patriot Coal's 8¼% of 2018 were going home in a 45½ to 48½ bid context, although he said that "there was no volume today; it was a lot of nothing."

"They've been in the 40s for two weeks, or three weeks - it might be 48, then 46 - so right now, there's no real difference."

St. Louis-based Patriot, which filed for Chapter 11 protection from its bondholders and other creditors almost exactly a year ago, announced on Tuesday that its recent talks with the United Mine Workers of America union, which represents most of its employees, "have resulted in substantial progress toward a consensual resolution.

On July 1, Patriot exercised the authority granted to it by the bankruptcy court to implement changes to wages, benefits and active employee health care, but chose to implement terms that are significantly improved from those approved by the court. Patriot and the UMWA are continuing to meet in a diligent effort to resolve the outstanding differences and reach a consensual agreement."

The company release also said that the company and the union have additionally reached an agreement through which retiree healthcare will continue to be provided at current benefit levels through July and August.

The company said that its talks with the union "are expected to continue over the coming weeks. The parties are targeting completion of a final resolution to be presented to UMWA members by the end of July."

Exide off a little

A trader saw Exide Technologies' 8 5/8% notes due 2018 in a 59 to 61 bid context.

He said that there was maybe one sizable trade Tuesday, around 60 bid, 60½ offered.

He called that down a half-point, or perhaps even a whole point from the 60½ to 61 neighborhood at which the recently bankrupt Milton, Ga.-based automotive and industrial storage battery manufacturer's bonds had finished up on Friday.

The trader said that "one trade is not saying a whole lot."

Overall market a mixed bag

One of the traders dismissed Tuesday's market, saying that "there were some trades here and there - but it was just kind of one-off stuff."

He saw Momentive Specialty Chemicals' 9% notes due 2014 traded around 86 bid.

He said that the Columbus, Ohio-based chemical manufacturer's 8 7/8% notes due 2018 "keep moving up a little bit, they traded a little north of 105, probably up a half-point."

Another market source saw those bonds, originally issued by predecessor company Hexion U.S. Finance, at 103½ bid, but still pegged them up 1½ points.

Las Vegas-based gaming giant Caesars Entertainment's 10% notes due 2018 were at 59½ bid, which a trader called down 1 or 2 points, although he allowed that the level was based on only one big trade and so was suspect.

Caesars' 11¼% notes due 2017 gained 1½ points to end at 105¾ bid.

A trader said that some of San Antonio, Texas-based media company Clear Channel Communications Inc.'s LBO bonds issued after its leveraged buyout several years ago were trading on Tuesday.

He said that its 11% PIK senior toggle notes due 2016 were trading around 89, "so those continue to trade up from the [recent] lows.

"They didn't trade [Monday]," he continued, "but they've crept back up after getting down to the mid-80s."

Overall, a trader said, the market was "definitely going in the holiday mode."

A second said that things were "pretty uneventful at my end of the world.

Sara Rosenberg and Caroline Salls contributed to this review

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