Dynegy debt keeps trading higher; Eastman Kodak new issue falls after pricing; Caesars gyrates

By Stephanie N. Rotondo

Portland, Ore., March 11 - The distressed debt market started the day off softer, but rallied by the end of business, traders reported Friday.

"Most stuff is ending at the highs," a trader said.

Early in the session, when it looked like the weakness would prevail, there was "definitely some opportunistic buying," the trader said.

Dynegy Inc. was grinding higher as investors shook off concerns that the company might file for Chapter 11 protections later this year. One trader called the company's filing warning earlier in the week "a complete ploy."

Meanwhile, Eastman Kodak Co.'s new issue - which priced late Thursday - failed to garner much interest and in fact, traded down from its original issue price. The company's other debt was similarly quiet.

Caesars Entertainment Inc.'s bonds were gyrating with the overall market, traders reported. The bonds originally traded down, but ended the day unchanged from Thursday levels.

Dynegy powers up

Dynegy debt was "continuing to rocket higher," a trader said Friday.

"I think that whole concept of filing was a complete ploy," he added, referring to the company's warning earlier in the week that it might have to file for bankruptcy protections in the later half of the year.

He saw the 8 3/8% notes due 2016 gaining 1½ points to 78½ bid, 79 offered, while the 7¾% notes due 2019 were bumped up a deuce at 71½ bid, 72 offered.

Another trader called the notes 2 points higher on the day, seeing the 8 3/8% notes ending at 79 bid, 79½ offered.

Late Tuesday, the Houston-based power producer filed its 10-K. While the numbers were in line with expectations, the company said that its overleveraged profile might force it into Chapter 11, as it would likely fall out of compliance on its bank debt facilities by mid-year.

In the past six months, Dynegy has rejected two buyout offers, one from Blackstone Group LP and one from billionaire investors Carl Icahn.

Also in the energy space, Edison Mission Energy's 7¾% notes due 2016 were "better," according to a trader.

He placed the notes around the 81 level, noting that the debt had been trading in the high-70s previously.

Kodak new issue dips

Eastman Kodak's new issue hit the market late Thursday but come Friday, the new notes were seen slipping below the issue price amid light trading.

"It did come off," a trader said of the 10 5/8% notes due 2019. He said that there "wasn't really any kind of big size" trading, as the bonds fell a couple points below its original issue price to 97½ bid, 98 offered.

The $250 million deal came at 98.686.

He meantime quoted the 7¼% notes due 2013 at 97 bid, 98 offered.

Another trader also saw the new issue "trading off a little bit." He pegged the paper at "+/- 98."

The Rochester, N.Y.-based company intends to use a bulk of the proceeds from the new issue for general corporate purposes. Some of the funds, however, will be used to repay the 7¼% notes.

Caesars gyrates with market

Caesars Entertainment - formerly known as Harrah's Entertainment - saw its bonds gyrating with the market, according to a trader.

The trader said that early in the session, "when it looked like things might get ugly," the 10% notes due 2019 hit a low around 89 before coming "right back where it was yesterday" to around 91.

He added that about $15 million of the notes turned over.

Another trader said the 10% notes were "somewhat active" at 90 bid, 90½ offered, which he called "down maybe a little bit."

There was no news out on the Las Vegas-based casino operator.

Broad market mixed

Among other distressed issues, OPTI Canada Inc.'s 7 7/8% and 8¼% subordinated notes were "up a teeny bit" around 53, a trader said. He added that about "$20-odd million" of the notes changed hands.

The trader also quoted Solo Cup Co.'s 8½% notes due 2014 at 84½ bid, 85½ offered.

Another trader said NewPage Corp.'s 10% notes due 2012 "continues to be active," closing around 66 bid, 67 offered. While he said that was "not much different" than it had been at Thursday's close, the bonds had "opened up lower" before managing to crawl back up.

Harry & David Operations Corp.'s 9% notes due 2013 "continues to drift," the trader added, seeing them around 35.

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