Distressed bonds stay firm amid new issue focus; Caesars mixed, Penney dips; Ambac, MBIA rally

By Stephanie N. Rotondo

Phoenix, Sept. 12 - The distressed debt part of the space lacked the surge of activity occurring in the high-yield market, traders reported.

Still, Ambac Financial Group Inc. and fellow bond insurer MBIA Inc. continued to be topical. After losing ground in the last few sessions, a trader said both names rebounded during Thursday trading. The bonds have been weaker as investors of the companies worry about exposure to risky municipal debt, such as that from the city of Harrisburg, Pa., and Detroit.

Away from those names, it was more of the same names being thrown about. Overall, the market had a mostly firm tone to it.

Caesars Entertainment Corp.'s 10% notes due 2018, for instance, were up over half a point, according to a trader. He pegged the issue at 601/4.

Another market source placed the debt at 60½ bid, up half a point.

The first trader also noted that Caesars' 8½% notes due 2020 traded down almost a point to 94 5/8.

J.C. Penney Co. Inc. was meantime softer, with one trader seeing the 5¾% notes due 2018 falling three-quarters of a point to 831/2. Another source called the 5.65% notes due 2020 down the same amount at 80¼ bid.

Another round of new high-yield issues - including Verizon Communications Inc.'s $49 billion eight-part deal that priced Wednesday - were keeping the bond market busy on Thursday.

"More new issues, Verizon was taking a lot of the attention," one trader said, adding that it was "a more high-yield-y day" than a distressed-focused session. "Plus they are shopping this new Tenet [Healthcare Corp.] deal that is coming tomorrow."

Ambac, MBIA rebound

A trader said Ambac and MBIA paper "rebounded from being down the last few days to a week" on Thursday.

For its part, Ambac had dropped as much as 5 points in the previous session.

The trader said Ambac's 5.1% notes due 2020 rose 1 to 2 points, ending "around 86." He also saw MBIA's 14% surplus notes due 2033 "up a point or so" at 73.

The trader said that concerns pertaining to the municipal bond market had pressured the debt of the bond insurers recently. Worries about the economic status of Puerto Rico, Harrisburg, Pa., and Detroit, in particular, were playing a role.

On Wednesday, the city of Harrisburg said it was skipping an upcoming Sept. 15 coupon on two series of its debt, choosing instead to keep the cash on hand.

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