NewPage trending higher; market bolsters Rite Aid; Chemtura bonds 'pop'; TXU debt still active

By Stephanie N. Rotondo

Portland, Ore., July 21 - The distressed debt market saw more buyers than sellers during Wednesday trading, but that didn't stop it from moving up half a point to a point, generally speaking.

"There's been a spending spree," a trader said, though that spree was likely dampened by the lack of available paper.

But the general positive trend of the market helped companies like NewPage Corp. and Rite Aid Corp. post gains in their debt. Traders saw the bonds up half a point to a point, in line with the market average.

Chemtura Corp., however, saw its bonds "pop," as one trader put it. The bonds were up as much as 4 points as the company received the exclusive right to file a reorganization plan.

Meanwhile, Energy Future Holdings Corp. remained on the active side, though gains were modest. Investors continue to digest what a recent debt exchange could mean for them and some market players are not hopeful.

NewPage trending higher

NewPage's 11 3/8% notes due 2014 were "kind of active" and "up with the market," a trader said.

The trader quoted the notes at 92 bid, 92½ offered, up from 91½ bid, 92 offered.

Another trader said the NewPage paper was a "big trader," with about $25 million to $30 million changing hands. However, he called the notes "essentially flat" around 92.

And, yet another trader pegged the notes at 92 bid, 92½ offered.

There was no news out on the Miamisburg, Ohio-based coated papermaker. NewPage is scheduled to release earnings Aug. 5.

Market bolsters Rite Aid

Rite Aid was another credit that moved up in line with the rest of the market, according to a trader.

"They were trading up again," he said, though, as with NewPage, there was no fresh news out on the Camp Hill, Pa.-based drugstore chain.

He saw the 9¾% notes due 2016 at 107 bid, 107½ offered, the 10¼% notes due 2019 at 102 bid, 102¼ offered and the 9½% notes due 2017 around 81.

He added that the bonds were up half a point to a point across the board.

Rite Aid will announce July sales next week on July 29.

Chemtura bonds 'pop'

A trader said Chemtura's bonds were "up about 2 to 4 points, depending on the issue," as the company got a bankruptcy judge's approval to control its reorganization.

The trader said the 6 7/8% notes due 2016 hit a high of 109 during midweek trading.

At another desk, a second trader said the 6 7/8% notes were "up the most," closing around 1083/4. The trader also saw the 7% notes that were to have matured in 2009 at 104½ and the 6 7/8% notes due 2026 at 1061/4.

A third trader said Chemtura experienced "a pop in the market," with the 6 7/8% notes gaining "a few points" to end at 108¾ bid, 109 offered. That compared to 105 bid, 105¼ offered.

According to the second trader, Chemtura is expected to bring a new deal in the next few weeks to fund its exit from bankruptcy.

"When the new deal comes, that should get some activity, or at least that is what I am hoping," he said.

The bankruptcy judge overseeing Chemtura's case ruled Wednesday that the company has the exclusive right to file a reorganization plan, negating a motion by equity holders who want to file a rival plan.

"The equity committee has had a seat at the table," said Judge Robert Gerber, referring to the more than 20 meetings the company has held with members of an equity committee.

Elsewhere in the chemical arena, a trader said Tronox Worldwide LLC's 9½% notes due 2012 were up a point to around 85.

Chemtura is a Middlebury, Conn.-based manufacturer of plastic additives.

TXU bonds still active

Energy Future Holdings' debt posted slight gains during the trading day, but one trader was still surprised that trading volume in the name was not more.

Still, he noted that about $60 million to $70 million of the company's various issues turned over.

He said the 10 7/8% notes due 2017 were "up a bit" at 753/4, while the 10¼% notes due 2015 ended at 673/4.

Another trader called the bonds essentially unchanged, seeing the 10 7/8% notes at 751/2, the 11¼% notes at 67¾ and the 11¼% toggle notes due 2017 around 67.

But a third trader deemed the debt up half a point to a point, placing the 10 7/8% notes in a 75½ bid, 76 offered context.

Late last week, the former TXU Corp. announced debt-for-debt-and-cash swap, in which the Houston-based company would exchange $2.7 billion of the 11¼%/12% senior toggle notes due 2017 and $1.78 billion of the 10 7/8% notes for new debt and cash. The new debt consists of $2.18 billion of 10% senior secured notes due 2020 and the company is also paying up to $500 million in cash.

Exchange offer terms

For each $1,000 principal amount of notes tendered by the early deadline date, holders will receive $720 for the toggle notes or $785 for the 10 7/8% notes. If tendered after the early deadline, holders will get $670 for the toggle notes and $735 for the 10 7/8% notes.

The breakdown of new debt and cash per each $1,000 tendered will depend on how much is tendered by the early deadline. If all bonds are accepted by the early deadline, then holders of the toggle notes would get $134.33 in cash and $585.67 in new notes, while the 10 7/8% noteholders would receive $146.46 in cash and $638.54 in new notes.

However, no cash will be paid out to those tendering after the early deadline.

The early tender deadline is 5 p.m. ET on July 29. The offer expires midnight ET on Aug. 12.

But the exchange is already drawing criticism from market watchers. KDP Investment Advisors Inc. recently released a report in which it noted that bondholders face a difficult decision: Tender their holdings for new debt or don't tender and keep their old notes?

TXU has already claimed that 52% of eligible bondholders have agreed to the swap, which means the company can strip the old notes of their covenants and place them below the new notes in the overall capital structure. If holders opted to keep their bonds, KDP estimates the notes will lose up to 30 points versus today's levels.

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