Momentive Performance debt gains as judge OKs plan; Rue21 bonds firm ahead of conference call

By Stephanie N. Rotondo

Phoenix, Aug. 27 – Momentive Performance Materials Inc. was the “name du jour,” a distressed debt trader said, as a judge gave conditional approval to the company’s plan of reorganization.

The ruling was handed down late Tuesday, after the judge overseeing the company’s bankruptcy case ruled that senior lenders did not have a right to any “make-whole” premium because its debt was being retired sooner than later.

On the news, the company’s bonds put on about 2 points.

Meanwhile, Rue21 Inc.’s 9% notes due 2021 were up considerably leading up to an end-of-day conference call for lenders and bondholders. The call was to discuss the company’s latest quarterly results, which are not typically released to the public.

One market source said the issue ended the day with an 80 handle, up from the 73½ area previously and up from the opening levels around 74.

At another desk, a trader said the notes had been trading in the low-70s, but saw them move up to 80 from 73½.

In other distressed dealings, NII Holdings Inc. continued to be in focus, according to a trader who deemed the company’s debt better on the day.

The trader placed the 7 5/8% notes due 2021 at 16¼, up a touch from Tuesday levels. Both the 8 7/8% notes due 2019 and the 11 3/8% notes due 2019 put on a quarter-point, he said, finishing at 29¼ and 67¾, respectively.

The 10% notes due 2016 earned nearly a point, closing at 29½.

Momentive gains momentum

Momentive Performance Materials first-lien and 1½-lien notes gained ground after U.S. Bankruptcy Court Judge Robert Drain approved the company’s reorganization plan, though with a few conditions.

The ruling was handed down late Tuesday and “after 5 p.m. [ET] they started quoting a lot of markets [in the bonds],” one trader said, seeing the 8 7/8% first priority senior secured notes due 2020 in a 93½ to 94½ context.

That compared to 90 bid, 92 offered previously.

As for the 10% senior secured notes due 2020 – the so-called “1½-lien notes” – they ended around 92, up from 90.

Another trader pegged the 8 7/8% notes at 94, up from opening levels of 92, and the 10% notes at 92, up from 90.

Judge Drain approved of the company plan of reorganization on the condition that the company increased the interest rate for new debt being given to the first- and 1½-lien noteholders.

Under the terms of the plan, most of the stock in the reorganized company will go to those holding the 9% second-lien notes. That group is funding a planned $600 million rights offering.

Holders of the 11½% notes due 2016 were disappointed, however, when Drain said they were not being unfairly subordinated to other debt classes.

Early Tuesday, Drain ruled that senior lenders did not have the right to a make-whole claim on its holdings, which are being redeemed earlier than scheduled under a plan of reorganization that is currently on the table.

The lenders had previously opposed the plan, though they were getting cash for the debt they held. Judge Drain even chastised the lenders for not taking the money during the hearing on Tuesday.

On Monday, the lenders had indicated that they might be willing to give their support to the reorganization plan. Momentive asked for an official ruling on Tuesday, even as lenders agreed to back the plan.

Momentive is a Waterford, N.Y.-based manufacturer of specialty chemicals and polymers.

Claire’s sales improve

Claire’s Stores Inc. released its second-quarter results after the market closed on Wednesday.

A conference call to discuss said results is scheduled for Thursday.

Ahead of the earnings release, a trader said the 9% notes due 2019 printed as high as 104, compared to earlier levels around 102½. However, he said he was not sure if the day’s high tick was “indicative” of how the results fared.

“I guess we’ll have something to talk about tomorrow,” he quipped.

For the quarter ended Aug. 2, the Chicago-based retailer posted net sales of $377.8 million, a 3% increase year over year.

The company noted that the increase was due in part to a favorable foreign currency exchange.

Consolidated same-store-sales, however, dropped 0.6% for the quarter. North American sales declined 2.9%, while European sales improved by 2.5%.

Gross profit percentage fell to 49.8% from 50.6%.

Adjusted EBITDA came to $64.5 million, versus $64 million the year before. Net loss was $20.57 million, just slightly better than the $20.67 million loss posted the year before.

At quarter end, the company had cash and equivalents of $29.5 million, plus $92.2 million of borrowing availability from its credit facility.

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