AMR, Caesars bonds remain busy in otherwise quiet distressed market; Synagro loan trades

By Paul Deckelman

New York, Aug. 19 - Although the paper was pretty much unchanged on the day, AMR Corp.'s notes remained the subject of fairly active dealings in an otherwise sleepy distressed market on Monday, traders said.

The notes opened the week at about the levels to which they had fallen by the end of last week after the federal government filed suit to block the bankrupt airline giant's proposed merger with industry rival US Airways Group on anti-trust grounds. At the very least, the federal action has held up confirmation of the company's reorganization plan, which is predicated on the merger taking place.

Elsewhere, there was some activity in the various bonds of Caesars Entertainment Corp., although there was no fresh news out on the gaming powerhouse that might explain the activity.

There was a little bit of activity seen in the bonds of underachieving retailer J.C. Penney Co., Inc., although volume was limited.

Other CCC-rated credits seen trading around included First Data Corp., Clear Channel Communications Inc. and Springleaf Financial Corp.

In the bank-debt market, Synagro Technologies Inc.'s credit facility made its way into secondary trading, ahead of the bankrupt organic recycling company's scheduled Tuesday plan confirmation hearing.

AMR stays active

AMR Corp.'s bonds were among the more active issues in a largely quiet market as investors continued to sort out last week's developments surrounding the bankrupt Fort Worth, Texas-based parent of American Airlines.

A trader quoted the company's 6¼% notes due 2014 in a 93 to 93½ bid context, "where they were trading all day, and that's where they were Friday, so I'd call them unchanged."

He said that 93 to 93½ range "covers virtually all activity" and estimated that about $15 million of those bonds had changed hands.

A second trader pegged the bonds at 93½ bid going home, which he also called unchanged, and said volume was more than $17 million.

On Friday, more than $14 million of the notes had traded at around that same 93½ bid level. But that was way down from the levels around 115 at which the issue had begun last week.

Investors began to savagely shoot the bonds down last Tuesday on the news that the U.S. Justice Department, joined by the attorneys general from six states plus the District of Columbia, had filed suit with a federal court in Washington to stop the planned merger between the bankrupt AMR and industry peer US Airways.

The bonds fell over several days on very heavy volume, bottoming below 90 bid, before coming off those lows to climb back to the lower 90s, where they have stayed for the moment.

The surprise federal move threatens the viability of AMR's attempt to come out of bankruptcy, where it has been since seeking protection from its bondholders and other creditors via a Chapter 11 filing in November of 2011 with the U.S. Bankruptcy Court for the Southern District of New York.

That court had been expected to confirm the company's plan of reorganization, which is conditioned on the $11 billion merger going through, at a hearing last week.

But the unexpected government action caused the judge in the case to delay confirmation and to instead order lawyers for AMR and US Air to file briefs arguing whether he should confirm the proposal in light of the Justice Department suit. The companies say the federal lawsuit is without merit and they intend to contest it vigorously.

Bankruptcy court proceedings are scheduled to resume this coming Friday.

Caesar's trades around

A trader said that Las Vegas-based gaming giant Caesars' bonds "went down a bit," although there was no firm news out on the company that might provide an explanation.

He saw the 10% notes due 2018 issued by the old Harrah's Operating Inc., now a Caesars subsidiary, having "dropped a couple of points over these last few days" and falling another point on Monday.

He said those notes had traded in a 55 to 57 bid context and were going out between 56½ and 57 bid.

However, he added that "there's not a whole lot of volume today, so it's tough to tell if they're really staying down."

At another desk, a market source called the bonds down 7/8 of a point on the day on volume of over $5 million.

He also saw parent Caesars' own 9% notes due 2020 closing at just under 95½ bid, up a quarter-point on the session, with about $3 million having changed hands.

Caesars' 12¾% notes due 2018 were finishing up around 65¼ bid, a gain of 1¼ points on the day, although the trader noted that there were only a couple of large-block trades and most of the activity was in smallish odd-lot transactions.

Penney pretty quiet

While J.C. Penney's bonds had been among the more active names last week, given a boost first on all of the news coming out of the boardroom battle between dissident director William Ackman and the board over replacing interim chief executive Myron "Mike" Ullman and then later on the news that another major shareholder, billionaire speculator George Soros, had upped his already sizable stake in Penney's stock, a trader said that failed to carry over into the new week.

He said that he was "not seeing much activity in that name," quoting the underachieving Plano, Texas-based retailer's 5.65% notes due 2020 trading between 73 and 74 bid, "but it's just a couple of trades, pretty much unchanged from Friday - unchanged and quiet."

He looked at one of the company's other issues but pronounced that "unchanged on not much activity, just a couple of million bonds traded as well."

Broad market mostly easier

Among other CCC rated issues, a trader saw Clear Channel's10 ¾% notes due 2016 down 1 point at 88 bid, with about $3 million of the San Antonio, Texas-based media company's bonds having changed hand.

But the 9% notes due 2019 gained more than a quarter-point in trading to end around the 96½ level, on volume of over $2 million.

Atlanta-based electronic transactions processor First Data's 11¼% notes due 2016 finished the day trading around 99 13/16 bid, a market source said, down 3/16 on the day. Volume in the credit was over $4 million.

And Springleaf Financial's 6.90% notes due 2017 were seen down 3/8 of a point at 101 5/8 bid, with about $4 million traded.

On Friday, the Evansville, Ind.-based consumer finance company's bonds had gotten a boost from the new that the company had filed paperwork with the Securities and Exchange Commission to do an IPO, anticipating raising about $50 million to be used for general corporate purposes. The notes had firmed by around 1¼ points on Friday to the 102 bid level on volume of over $12 million.

Mostly quiet market

But despite those individual pockets of activity in Monday's distressed-bond market, a trader opined that there was "not a lot of activity on my end of the world. It's quiet - and it's ugly."

He added: "I'm not having much fun in distressed."

Bankrupt Synagro's loan trades

From the bank-debt market came word that Synagro Technologies' credit facility made its way into the secondary arena on Monday. The $215 million seven-year term loan (B3/B+) was quoted at 98 bid, 99 offered, a trader said.

Pricing on the term loan is Libor plus 525 basis points with a 1% Libor floor and it was sold at a discount of 98. There is 101 soft call protection for one year.

During syndication, the spread on the term loan was lifted from talk of Libor plus 450 bps to 475 bps and the discount widened from 99.

The company's $280 million credit facility also includes a $65 million five-year revolver (B3).

RBC Capital Markets is leading the deal that will be used to help fund the buyout of the company by EQT Infrastructure II, which will be done as part of Synagro's plan of reorganization under its bankruptcy case.

Synagro - a Houston-based recycler of biosolids and other organic residuals - sought protection from its creditors via an April 24 Chapter 11 filing with the U.S. Bankruptcy Court for the District of Delaware (case number 13-11041).

According to court papers, EQT Infrastructure II, an investment managed by EQT Partners, a Stockholm, Sweden-based private-equity group, will acquire Synagro in a transaction valued at $480 million, including $465 million in cash and the assumption of certain liabilities.

The disclosure statement for the plan of reorganization was approved on July 18, and a confirmation hearing for the company's plan is scheduled for Tuesday in Wilmington, Del.

Sara Rosenberg contributed to this review

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