Distressed market mixed; Rural/Metro files for bankruptcy, debt quoted down; energy names busy

By Stephanie N. Rotondo

Phoenix, Aug. 5 - The distressed debt market was on the mixed side of things as the first full week of August began.

The news of the day was a bankruptcy filing from Rural/Metro Corp., the Scottsdale, Ariz.-based provider of emergency services. Traders said the bonds were not very active - the company has inked an agreement with a majority of bondholders already - but that they were quoted well down from previous levels.

Elsewhere in the distressed realm, energy and commodity names were actively trading.

Ameren Energy Generating Co.'s 6.3% notes due 2020 were "quoted a lot," a trader said, but "virtually unchanged" at 773/4.

Another trader said Edison Mission Energy bonds - all of which trade in line with one another - "cooled off a little bit," ending the session in a 64¼ to 64½ context.

Coal producer Alpha Natural Resources Inc. saw its 6¼% notes due 2021 dip a point to 83. The company reported earnings last week, which showed a narrower loss from the year before.

And, ATP Oil & Gas Corp.'s 11 5/8% notes due 2015 slipped to 1, according to a trader.

On the upside were Exide Technologies Inc.'s 8 5/8% notes due 2018, which closed around 63.

Rural/Metro bankrupt

Rural/Metro filed for Chapter 11 protections on Sunday, having inked an agreement in principle with lenders and a group of bondholders.

A trader said there were no trades in the non-Traceable bonds, though he saw an initial bid for the 10 1/8% notes due 2019 at 19.

However, the last market he saw was 5 bid, no offers. That compared to previous trades around 62 at the end of July, he said.

Another trader said he was hearing 25 bid, 30 offered for the debt.

Rural/Metro missed a $15.6 million coupon payment on July 15. Leading up to that, the bonds started to come off on speculation that the payment would not be made.

On top of that, the company - bought by Warburg Pincus LLC in a leveraged buyout in 2011 - has struggled with its debt load.

The company reported over $500 million in debt in its initial bankruptcy filing.

The company hopes to use bankruptcy proceedings to cut its debt by half, having already inked a deal with senior lenders and about two-thirds of bondholders. Under the agreement, bank and bond debt will be converted into equity, which will also help to decrease interest expense going forward.

Rural/Metro's lenders have already agreed to provide $75 million in bankruptcy financing.

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