PDVSA and ATP Oil improve; Dynegy Holdings debt gains ground; Bon-Ton bonds pop; Kodak firms

By Stephanie N. Rotondo

Phoenix, June 19 - Distressed debt was generally stronger Tuesday, traders reported.

"There was a really firm tone to the market as the day wore on," one trader said.

"A lot of things were better on the day," said another trader. "Equities were up a good bit. I guess everybody thinks the world is fine again."

The oil arena was benefiting from the day's tone, as well as a modest rise in oil prices. Both Petroleos de Venezuela SA and ATP Oil & Gas Corp. were trading actively and higher during the session.

Meanwhile, Dynegy Holdings LLC paper was climbing higher as well. The gains came as the bankrupt subsidiary of Dynegy Inc. sought court approval for a planned merger with the parent.

Bon-Ton Stores Inc. was also continuing to firm. On Monday, the retailer had reported early tender results for a planned debt swap, in which 71% of notes had been validly tendered.

A new lawsuit against Apple Inc. was meantime given credit for a slight boost in Eastman Kodak Co.'s debt. The bankrupt company filed the lawsuit, alleging that Apple is attempting to undermine a patent auction planned for August.

Oil names on the rise

A trader said PDVSA debt was topping the day's most active list, though there was no fresh news out on the Venezuelan state-owned oil producer.

He said $26 million each of the 9% notes due 2021 and the 8½% notes due 2017 changed hands. The 9% notes rose 1½ points to 761/4, while the 8½% notes improved by a point to 83 7/8.

The trader also saw ATP Oil & Gas' 11 7/8% notes due 2015 increasing by a point to end around 47, on about $16 million traded.

Another trader saw the Houston-based oil exploration company's debt at 47½ bid, 48 offered, up from opening levels of 46 bid, 47 offered.

For its part, the price of U.S. crude oil gained 78 cents, closing at $84.37 per barrel.

Dynegy firms

Dynegy Holdings' 8 3/8% notes due 2016 were called "stronger" by a trader, as the company sought approval for a merger with its parent company.

The trader pegged the issue around 65.

Another trader quoted the notes at 64½ bid, 65½ offered.

The merger is part of a court-approved global settlement. If approved, the parent company is expected to file a Chapter 11 case in order to facilitate the combination.

The subsidiary filed for bankruptcy on Nov. 7, 2011.

Bon-Ton climbing higher

Bon-Ton's bonds continued to gain ground Tuesday, following the Monday release of early tender results for its planned debt exchange.

A trader called the 10¼% notes due 2014 up more than 3 points at 85 1/8.

"They were not terribly active, but the bonds are up," he said.

Another trader also deemed the debt better, placing the paper around the 85 mark.

On Monday, the York, Pa.-based retailer said that noteholders holding 71% of its 10¼% notes had tendered their holdings by the early deadline on Friday.

The company intends to redeem all of the $464 million outstanding 10¼% notes and, as of the early deadline in Friday, about $329.4 million of the bonds had been tendered.

Investors will have until July 3 to participate in the exchange.

In return for each $1,000 of 10¼% notes tendered, investors will receive $970 of new 10 5/8% second-lien notes due 2017.

Those who tendered by the early deadline received $1,000 new notes for each $1,000 of old notes tendered.

Kodak up on Apple suit

A lawsuit against Apple filed late Monday was given credit for a modest rise in Kodak's debt come Tuesday.

"Maybe that filing from last night perked people up a bit," a trader said.

He saw the 7¼% notes due 2013 at 14½ bid, 15 offered and the 9¾% notes due 2018 around 641/2.

But another trader deemed the senior notes - the 9¾% notes - unchanged also around 641/2.

Kodak filed a lawsuit against Apple Monday, alleging that the maker of the iPod was attempting to "delay an derail" an auction of the company's patent portfolio.

The auction is tentatively planned for August.

Apple had previously claimed ownership of at least 10 of the patents expected to be sold at the auction. Last week, a bankruptcy judge declined to rule on ownership of the patents, but acknowledged that Kodak could pursue other legal means to have ownership validated.

"Apple's strategy has been to use its substantial cash position to delay as long as possible the payment of royalties to Kodak and to interfere" with the auction, Kodak said in the filing.

Apple is also seen as a likely buyer of the patents and Kodak claims that the ownership claims are simply a way to prevent the company from getting a good price on the portfolio.

Rochester, N.Y.-based Kodak has previously stated time and again that a sale of the portfolio was essential to its turnaround efforts.

Strength remains in market

With the broader markets ending on a positive note, many distressed credits were moving upward without any name- or sector-specific news to act as catalyst.

A trader saw Caesars Entertainment Corp.'s 10% notes due 2018 gaining 1½ points on the day, ending around 691/4.

The trader also called Springleaf Financial's 6.90% notes due 2017 up nearly a point at 801/2.

"There were a bunch of those trading," he said, seeing at least $16 million of the debt turning over.

Another trader said Clear Channel Communications Inc.'s 10¾% notes due 2016 were trading up at 64½ bid, 65 offered.

Residential Capital LLC's 6½% notes due 2013 "continues to trade up," the trader added, seeing the bonds with a 24 handle.

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