Reddy Ice bonds in death march, company said to be filing soon; Hawker remains under pressure

By Stephanie N. Rotondo, Paul Deckelman and Sara Rosenberg

Portland, Ore., April 9 - Distressed debt ended softer Monday as the market experienced an "Easter hangover," as one trader put it.

The trader also noted that Friday's unemployment report has caused some to be "apprehensive to do or say much.

"The market in general was a little bit weaker," he said. "But nothing was specifically active."

A trader said Reddy Ice Corp. was the biggest in the way of movers," as the market reacted to recent news that the ice-maker was preparing to file for bankruptcy as early as this week. He also noted that the bonds had begun to trade flat, though a grace period is not set to expire until the end of the month.

Meanwhile, Hawker Beechcraft Acquisition Co.'s bank debt fell again Monday, bringing total losses for the last week to 8 points. The bonds were also "marked down a little bit," a trader said, though he added that not much paper was actually trading.

Reddy Ice's death knell

Reddy Ice bonds were "starting to roll over a die," a trader remarked on Monday.

He said the 13¼% subordinated notes due 2015 were trading between 10 and 15 in odd-lots, while the 11¼% senior notes due 2015 were "down quite a bit," around 89.

He added that the subs had been around 40 on Wednesday, falling to 30 by Thursday. In the seniors, paper was trading in the mid- to high-90s on Thursday.

"They were quoted flat today as well," he said. "Today is the first day I saw them flat."

On Thursday, it was reported that Dallas-based Reddy ice was in the final stages of preparing a Chapter 11 filing and rumors have been circulating that the company has made a consensual reorganization plan with Centerbridge Partners, its largest creditor.

The company currently has about $450 million in debt. Last week, both Moody's Investors Service and Standard & Poor's downgraded the business, citing an overleveraged balance sheet.

Reddy Ice also missed interest payment due in mid-March.

Hawker drops again

Hawker Beechcraft's strip of institutional bank debt fell to 65 bid, 67 offered from 66 bid, 67½ offered, bringing total losses in a week's time to around eight points, according to a trader.

The strip of loans came under heavy pressure last week because of ratings downgrades, a missed 10-K filing deadline, skipped April 2 interest payments on notes and news of expected 2011 losses from operations of roughly $481.8 million.

And, the week before that there were some additional losses on the loans as a result of earlier ratings downgrades, news of a forbearance agreement through June 29 with about 70% of credit facility lenders to defer interest payments and get covenant relief, and completion of a new $124.5 million senior term loan due June 29 to fund ongoing operations.

A trader also noted that Hawker's senior notes - like the 8 7/8% and 8½% notes due 2015 - were "marked down a little bit" at 11 bid, 12 offered. The 9¾% subordinated notes due 2017 were meantime quoted at 1 bid, 2 offered, "but nothing is really trading," the trader said.

Hawker is a Wichita, Kan.-based manufacturer of business, special mission, light attack and trainer aircraft.

Open Solutions rises

A trader said that he had heard that Open Solutions Inc.'s 9¾% senior subordinated notes due 2015 were "up a ton" in trading Monday, quoting them in a 93-to-95 context, and citing news reports that the company's private equity owners have put the Glastonbury, Conn.-based software and IT services provider up for sale, looking to get at least $1 billion, or maybe more.

However, while he heard the bonds were up, "I didn't actually see that."

A second trader said he too had heard of bond price movement but had not actually seen trading in it.

At another desk, a trader noted that the 144A bonds don't show up on Trace, so it's difficult to keep track of them.

However, yet another trader said that the bonds were now circulating around in the 90s, versus levels in the upper 70s at the end of last week.

As he traced the timeline of events, the bonds opened on Thursday trading in a 79-to-81 context, and that's where the last trade of the day went off, somewhere around 1:30 p.m. EDT. With market activity shutting down early Thursday, ahead of Friday's virtual market holiday, there really wasn't anyone around to trade in them when the Wall Street Journal's website ran a late-afternoon story indicating that Carlyle Group and Providence Equity Partners - which took Open Solutions private for $1.3 billion, including debt, in early 2007 - were shopping the company around via Credit Suisse Group.

The Journal said that the sale process began about a month ago and has drawn interest from technology-focused buyout firms and financial technology companies. It reported that initial bids valued Open Solutions at over $1 billion, including debt, although it quoted unidentified "people familiar with the matter" as saying that the company is expected to fetch less than $1.3 billion.

With that news out there - Open Solutions later confirmed through a statement that it is considering a range of strategic initiatives - the bonds rose right out of the gate on Monday, the trader said.

He said the first opening quote was 91½ bid, 93½ offered, and "at one point, they were as good as 94-95." After that, he said, "they found a range and have closed today at 90-92."

"They were trading in that context."

He added that the $325 million issue "never was a very active bond to begin with, to be honest with you," and said that last month, it had been trading in an 80-82 range.

Broad market loses footing

Elsewhere in the distressed arena, a trader said Clear Channel Communications Inc.'s debt was "quoted lower, but they weren't really trading all that much."

He called the 9% notes due 2021 down "about a point" at 89.

He also deemed Exide Technologies Inc.'s 8 5/8% notes due 2018 a point weaker at 81.

At another shop, a trader saw General Maritime Corp.'s 12% notes due 2017 trading around 21/2.

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