Exide Technologies debt remains focus in volatile trading; Walter Energy falls as refi pulled

By Stephanie N. Rotondo

Phoenix, June 17 - The distressed debt market was quiet as the week began, but investors continued to be focused on Exide Technologies Inc.'s bonds.

"They were a big mover," one trader said. Another trader said the volatility in the name was due to the bankruptcy judge overseeing its case approving the restarting of the Vernon, Calif.-based battery recycling plant.

The plant was initially shuttered in April due to a hazardous waste leak.

Meanwhile, Walter Energy Inc. bonds were under pressure. The dip came on the back of news out Friday regarding a cancellation of a refinancing.

Exide gyrates, ends strong

Exide Technologies' 8 5/8% notes due 2018 were "kind of volatile," a trader said on Monday.

Across the board, traders said the paper opened around 62, ran up to 65 then hit a high of 70 during the session.

"They were left bid there for awhile," one trader noted.

But by the end of the day, the issue had settled back in to end in a 66-67 context, which was still up at least 4 points on the day.

One trader saw the paper going out as high as a 69-70 context, which would be up "7 to 8, maybe even 9 points."

The gyrations came as the judge overseeing the Milton, Ga.-based battery maker's case gave his approval to reopen a recycling plant in Vernon, Calif. The plant was closed in April by state environmental regulators due to a hazardous waste leak.

The restarting of the plant, however, is only temporary. Exide had appealed the decision to shutter the plant and was sent to administrative court. But that court has been falling behind and has yet to release a decision. As such, the bankruptcy judge, Luis Lavin, said Monday that the closure and the administrative court's slow-goings would cause irreparable harm to the company and that the public health was not any more at risk if the recycling center reopened.

The judge then issued a temporary restraining order, which will allow the plant to begin operating again.

"It's a temporary reprieve that prevents the shutdown of the plant," a trader said. "There will be more to come on that one."

"It's still one of those names that could go either way," another trader said. "Investors are positioning themselves whichever way they feel [the company will go]."

Walter Energy fizzles

Walter Energy's 9 7/8% notes due 2020 fell Monday as investors reacted to news out late Friday regarding the company's refinancing plans.

A trader said the debt dropped to 95 bid, 96 offered from previous levels in the high-90s.

On Friday, the metallurgical coal producer said it had scrapped a $1.55 billion credit refinancing, due to market conditions.

The company gave no further details, other than to say that the plan would not have provided any additional capital.

A general "negative underpinning" to the sector, as one trader put it, wasn't helping other coal producers either.

The trader saw Arch Coal Inc.'s 8¾% notes due 2016 at 1011/2, while Alpha Natural Resources Inc.'s 9¾% notes due 2018 "continued to drift," falling "another point" to 102.

Orchard Supply gains

Orchard Supply Hardware Stores' term loans were much stronger after news surfaced that the company filed for bankruptcy protection in order to facilitate its acquisition by Lowe's for $205 million in cash, plus the assumption of payables owed to nearly all of its supplier partners, according to a trader.

The extended and the non-extended term loans were quoted at 78 bid, 83 offered, up from 47 bid, 49 offered, the trader said.

During the Chapter 11 process, Orchard Supply will meet its financial obligations by using a $177 million debtor-in-possession financing facility committed by Wells Fargo Bank, its existing ABL lender, and its term loan lenders.

The company expects to complete the process in about 90 days, pending receipt of the necessary approvals from regulators and the Bankruptcy Court.

Orchard Supply is a San Jose, Calif.-based hardware and garden store focused on paint, repair and the backyard.

Paul Deckelman and Sara Rosenberg contributed to this article

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