Distressed market closes week mixed; NewPage dominates trading; claim concerns pressure Aiful

By Stephanie N. Rotondo

Portland, Ore., Oct. 15 - Distressed bonds finished out the week in mixed fashion, traders reported Friday.

NewPage Corp. continued to be an active name, with one trader deeming the company's subordinated paper the day's most active bond. But even with all that activity, the debt still ended in line with the trend of the day.

Aiful Corp. meantime saw its bonds dropping over 5 points on the day. The Japanese consumer lender, along with its sector peers, has come under pressure of late, due in part to an increase in consumer claims. Those claims recently resulted in the bankruptcy filing of Takefuji Corp.

Also in the financial realm, Washington Mutual Inc. debt traded softer. One market source opined the softness was due to concerns about problems in the mortgage market.

Energy Future Holding Corp. notes were mostly unchanged, except for a new issue that launched Friday, which immediately headed south. There was one market player who wondered if the upsized deal had been overpriced.

NewPage bonds take over

Trading in NewPage bonds - specifically the 10% notes due 2012 - dominated the marketplace, according to traders.

"It's all NewPage today," a trader said, adding that the 10% notes were the day's "most active bonds."

However, there was little in the way of price movement, he added, seeing the bonds closing around 581/4, which he deemed to be down a quarter-point to unchanged.

He also saw the 11 3/8% notes due 2014 at 953/4, which was up slightly.

But another trader said the 10% notes were "up a little more" around the 59 mark.

NewPage has been actively trading for the past week, but there hasn't been any news out to explain what has been moving the paper around. An analyst who covers the credit said he hadn't heard anything regarding the Miamisburg, Ohio-based papermaker that would give a reason for the surge in activity.

Aiful slips on consumer claims

Japanese consumer lender Aiful saw its bonds dropping amid concerns that the country's lenders will see an increase in consumer claims following Takefuji Corp.'s bankruptcy last month.

One trader said the 6% notes due 2011 had fallen over 5 points, ending around 691/2, in active trading. Another placed the bonds around 70, down from levels in the mid-70s previously.

Takefuji filed for bankruptcy on Sept. 28 as a result of a four-year effort to stop coercive lending practices, which included placing rate caps at 20%. The practices led to the overpayment of interest in many cases and borrowers were allowed to seek a refund if that was a case.

Aiful is said to be monitoring the effects of Takefuji's filing and how it might impact them.

Mortgage concerns hurt WaMu

Among other financials, Washington Mutual's senior bank paper fell "another half a point to three-quarters," a trader said, as the market wondered if the growing mortgage issues would have a "trickle-down effect" on the Seattle-based thrift.

He said the bonds - like the 5.55% notes due 2010 - closed at 39½ bid, 40 offered.

"The question is, will [problems within the mortgage industry] have an impact on JPMorgan, WaMu and the FDIC," the trader said. If JPMorgan experiences a surge in put-backs, how would that also affect the company's settlement agreement with WaMu and the FDIC, he explained.

TXU bonds go wonky

Energy Future Holdings priced its new issue early Friday and the upsized deal quickly traded below its par issue price.

The immediate decline of the new $350 million issue of 15% second-lien notes due 2021 came as little shock to market players.

"They overpaid by 3 points to get this out the door," opined one trader.

The release of the new issue also caused some "funny trade" in the 10¼% notes due 2015, he said.

The bonds - which had been trading around 65 - traded up "several times" to around 68, but kept coming back to the 65 level.

"I think they were all against the new issue," he said. "There were a lot of artificial trades to get this thing at par."

In regard to the new issue, he quoted the bonds at 97 bid, 98 offered, adding that they could be even lower, maybe at 96½ bid, 97½ offered.

The rest of the Dallas-based power producer's structure was virtually unchanged, the trader said. He pegged the 10½% notes due 2016 at 56 bid, 57 offered and the 11¼% notes due 2017 at 57 bid, 58 offered.

"It looks like they were trying to push up, but I don't think they budged," he said of the latter issue.

At another desk, the 10¼% were called nearly a point better around 65.

Proceeds from the new issue will be used to repay term loan borrowings, as well as to take out 2015 and 2016 maturities.

Casino debt declines

Harrah's Entertainment Inc.'s 10% notes due 2018 closed half a point higher, a trader said, around 85.

Another market source, however, said the bonds had lost 1½ points, closing at 85½ bid.

MGM Resorts International Inc.'s 6 5/8% notes due 2015 finished 2 points weaker at 88 bid.

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