Smurfit gains on plan OK; Ahern up despite rating cut; Realogy still strong; First Data rallies

By Stephanie N. Rotondo

Portland, Ore., June 21 - Distressed debt continued to rally on Monday, drawing out the trend set last week.

"There was huge turnover for a random Monday," a trader said, noting that total trading volumes were "just shy" of $2 billion.

The trader also opined that "unless the new issue calendar really builds," there was "still some cash [around] to keep it running [up].

"It's hard to get in the way of a speeding freight train," he quipped.

Smurfit-Stone Container Corp.'s bonds moved up 1 to 2 points following news that the company had received court approval on its plan of reorganization. The company hopes to emerge from bankruptcy by the end of the month.

Elsewhere, Ahern Rentals Inc. got downgraded on Monday, but the company's bonds shook it off, gaining about a point. Still, a trader noted that the debt has lost about half its value since April, deeming it "a little disconcerting."

Realogy Corp.'s notes continued to trade upward, traders reported, a trend that began in last week's market rally. First Data Corp. was also on the firm side. There was no fresh news out on either company.

And, though not technically a distressed credit, Anadarko Petroleum Corp. could soon be headed that way. The company's debt was the day's biggest volume trader, as traders saw the bonds slipping 3 to 4 points in early trading.

However, the bonds managed to pare the losses, ending down just 1 to 3 points on the day. The declines came after a downgrade on Friday and one trader speculated that some investors were attempting to get rid of their position in the oil company.

Smurfit gains on plan OK

Smurfit-Stone Container paper popped 1 to 2 points as the company received court approval on its plan of reorganization.

A trader called the 8% notes due 2017 "up a buck" around 883/4, while another market source deemed the 8¼% notes due 2012 more than 2 points better at 893/4.

Yet another source said about $25 million to $30 million of the company's four assorted issues traded, with the 8% notes being the most active. He called the issue "up a solid point," also around the 88¾ level.

The Chicago-based paper packaging manufacturer announced Monday that the court overseeing its bankruptcy case had approved its reorganization plan, allowing for the company to exit Chapter 11 protections by the end of the month.

"With confirmation of the plan of reorganization, Smurfit-Stone is now on a path to emerge from our financial restructuring on June 30," said Patrick J. Moore, chairman and chief executive officer, in a statement.

"Upon consummation of the restructuring plan, we will have successfully reduced our debt and realigned our capital structure in a way that dramatically improves the company's prospects for long-term growth and profitability."

Ahern up despite rating change

Ahern Rentals' 9¼% notes due 2013 managed to gain ground in Monday trading, despite getting downgraded by Standard & Poor's.

A trader called the notes up 1 to 2 points at 36½ bid, 38 offered.

Another trader deemed the debt up only half a point, around the 36½ mark.

"They have been drifting down with not huge trading," the second trader said of the bonds' recent performance. He noted that the paper had "lost half its value in the last two months." Before, the bonds had held in around 73 bid, 74 offered, he said, calling the situation "a little disconcerting."

S&P dropped its corporate credit rating on the Las Vegas-based equipment rental company to B- from B and the rating on the second-lien secured notes to CCC from CCC+. The rating agency cited a weak business profile and its concerns about Ahern's ability to maintain adequate liquidity.

Realogy still strong

Realogy debt remained firm in Monday trading, but there was "not as much volume" in the credit as last week, a trader said.

The trader called the 10½% notes due 2014 "up a solid half-point" around 90, while the 12 3/8% notes due 2015 inched up slightly to around 811/4.

Another trader also placed the 10½% notes around the 90 mark, calling that up half a point to three-quarters of a point.

There has not been any fresh news out on the Parsippany, N.J.-based real estate services company.

First Data makes comeback

First Data bonds were "a big trader," a market source said, though there wasn't any news out on the Atlanta, Ga.-based electronic payment processor.

The source said about "$50-odd million" of the 10.55% notes due 2015 turned over, gaining "3 [points] and change" to finish around 81. He noted that the gains were in addition to the approximately 2 points gained Friday and another 2 on Thursday.

"They have come a long way back" from the recent smackdown caused by a management shakeup, he said.

The source also saw about $40 million to $50 million of the 9 7/8% notes due 2015 trading at 851/4.

At another desk, a trader said the 10.55% notes improved 2 to 3 points, closing at 81 bid, 82 offered.

Anadarko day's big trader

Anadarko Petroleum was by far the most active name in the secondary universe, traders reported.

One trader said Anadarko bonds made up at least 8 out of 10 of the most active trading bonds, according to the Trace bond-tracking system. He saw the 5.95% notes due 2016 slipping "almost 3 points" to end around 88, while the 6.45% notes due 2036 dipped 2 to 3 points to around 841/2.

Another trader said Anadarko made up a big chunk of total trading volume, with at least $300 million of the 5.95% notes changing hands around 88. That was down nearly 3 points, he said.

The second trader also saw "a couple hundred million" of the 6.2% notes due 2040 falling more than 2 points to close around 831/2. He noted that most of the trading took place in the longer issues.

The trader also speculated that activity in the name was a result of last week's rating downgrade by Moody's Investors Service. The rating agency dropped Anadarko to Ba1 from Baa3. The company called the move "very disappointing and surprising in light of Anadarko's limited role as a non-operating investor in the Macondo well."

"A lot of places [such as insurance companies] can't own 5-B paper," he said. As such, trading volumes suggested that some investors were trying to rid their portfolios of Anadarko debt.

Among others in the oil arena, BP plc's bonds were "active, but not to the same extent of Anadarko," a trader said.

The trader said about $70 million of the 5¼% notes due 2013 traded around 93, which he called essentially flat on the day.

Another trader said ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were "mildly active" and "kind of unchanged" at 72½ bid, 73½ offered.

Anadarko agreement liabilities

Anadarko owns a 25% interest in BP's Deepwater Horizon rig that exploded in April, resulting in a massive oil leak in the Gulf of Mexico. Under the terms of the joint operating agreement, Anadarko would have to fork over a quarter of the costs associated with any liabilities, unless BP proved to be grossly negligent.

In a press release issued on Friday, Anadarko implied that it would not be footing any of the costs associated with the Gulf clean-up effort, as it alleged that evidence showed BP to be completely on the hook.

"The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP's reckless decisions and actions," stated Jim Hackett, chairman and Chief executive officer, in the June 18 statement.

"Frankly, we are shocked by the publicly available information that has been disclosed in recent investigations and during this week's testimony that, among other things, indicates BP operated unsafely and failed to monitor and react to several critical warning signs during the drilling of the Macondo well.

"BP's behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement."

Anadarko is also looking to cancel a leasing contract with Noble Corp., due to the six-month moratorium on offshore drilling that was put in place on May 27 as a result of the oil leak.

Broad market continues rally

Elsewhere in distressed debt land, Harrah's Entertainment Inc.'s 10% notes due 2018 inched up a point to end at 843/4, according to a trader.

Another market source said General Motors Corp.'s benchmark 8 3/8% notes due 2033 closed up slightly at 34½ bid, 35 offered. Another trader placed the bonds at 35 bid, 35½ offered.

A trader said Bon-Ton Stores Inc.'s 10¼% notes due 2014 were "somewhat active," trading up half a point to par bid, par ½ offered.

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