Travelport gains amid refi news; Exide up on battery boom, but overall distressed market off

By Paul Deckelman

New York, June 4 - The distressed debt market was seen mostly lower on Tuesday, reflecting generally weak status in the larger junk bond market.

But even as traders saw a mostly heavier environment in junk, which continued its recent retreat, two familiar underperforming names were seen to have gotten better.

Travelport LLC's bonds improved on brisk volume, helped by various news developments, including reports that the travel services company is looking to refinance much of its debt and extend those maturities by several years.

Automotive and industrial storage battery maker Exide Technologies' bonds seemed to get a jump-start from news from an industry group indicating that battery shipments climbed sharply in April, in line with better auto sales.

But apart from those two bright spots, the market in distressed and underperforming debt was mostly lower on the day.

Among names on the downside, Pittsburgh-based aluminum maker Alcoa Inc.'s 5.95% bonds due 2037, lost 2 points on the day to end at 94 ½ bid, a market source said. Its bonds were pushed down following Moody's Investors' Service's recent move cutting its ratings to junk status at Ba1 from its previous investment-grade standing at Baa3, triggering forced selling by some high grade accounts prohibited from holding split-rated or junk bonds.

San Antonio, Texas-based media company Clear Channel Communications' 10¾% notes due 2016 lost 1¾ points to 91¼ bid.

In the convertibles market, Molycorp Inc. was also getting hit lower, with the 3.25% convertibles trading down about a point to 69.5 on Tuesday, with the underlying share down 3%.

Peabody Energy Corp. was another name "getting offered lower and lower and lower," a New York-based trader said. Peabody's 4.75% convertibles were down to 83.5 on Tuesday, a slide from 87 last week.

Ryland Group Inc. was another name under pressure, he said.

Exide excels

But while most of the distressed or underperforming bonds were showing weakness, in line with the overall softer market, Exide Technologies' 8 5/8% notes due 2018 were seen by a market source to have moved up to around 62½ bid, from prior levels at 603/4, although the bonds finished below their day's peak level of 64.

The Milton, Ga.-based automotive and industrial storage battery maker's paper was one of the most heavily traded issues of the day, racking up over $23 million of round-lot dealings alone, plus millions more in odd-lot transactions, the source said.

The company's beleaguered Nasdaq-traded shares gained 1 cent on the day, or 3.19%, to close at 47 cents. Volume of 2.8 million shares was about one-third higher than normal.

Exide was seen having gotten got a jump-start from the news that North American shipments of new automotive batteries rose by 18% year over year in April, reflecting higher sales of new cars and trucks. The data from Battery Council International, an industry trade group, indicated that sales were at their highest levels in more than a year.

Travelport tracks upward

Also bucking the overall negative trend was Travelport's 11 7/8% notes due 2016.

The bonds were up by several points from Monday's closing levels, although on a round-lot basis, the gain was a more conservative three-quarters of a point, with the bonds ending at 95½ bid. Late in the session, there were a few smaller trades at levels as high as par, although those odd-lot pieces probably were not representative.

Volume was over $13 million.

News reports indicated that the Atlanta-based provider of computerized reservation services and other travel-related products was trying to arrange refinancing for its current debt, looking to borrow as much as $1.65 billion.

The company is scheduled to hold a bank meeting in New York on Wednesday to launch its credit facility, according to a market source.

The facility consists of a $100 million five-year revolver and a $1.55 billion six-year first-lien term loan, the source said.

Price talk on the term loan is Libor plus 450 basis points with step-downs, a 1.25% Libor floor and an original issue discount of 99, the source continued.

Proceeds will be used to refinance the company's existing first-lien loan.

Overall heavier market

However, despite those individual pockets of strength, a trader said on Tuesday that overall, "the caution flag is really up."

He said: "There's a rumor that [exchange-traded funds] are shorting high-yield bonds now. There's nervousness with what's going on in the stock market," where all of the major indexes were down across the board, "and over whether the Fed is going to cut back on the bond-buying it's been doing."

"That's really put the brakes on our market - it's been weaker," he added.

Another market observer said that "there were bid lists out there. Lots of stuff was being offered."

Rebecca Melvin and Sara Rosenberg contributed to this review

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