Petroplus gives back gains; Sino-Forest secures default waiver, bonds firm; Sears remains busy

By Stephanie N. Rotondo

Portland, Ore., Jan. 12 - Distressed debt was on firmer footing again Thursday, though not everyone was benefiting from the market's generally positive tone.

Petroplus Holdings AG, which had run up on Wednesday on news the oil refiner had reached a deal with its lenders, moved back down on Thursday. The declines came as trade unions were blocking oil shipments in order to make sure employees were being paid and Moody's Investors Service lowered its rating.

Meanwhile, Sino-Forest Corp.'s bonds climbed up at least a deuce on news the company's bondholders had agreed to waive a default.

Sears Holdings Corp. was also better, despite news that CIT Group Inc. was halting supplier loans. Also in the retail space, Bon-Ton Stores Inc. paper "got crushed," though on no fresh news.

Petroplus gives back gains

Petroplus gave back the gains incurred on Wednesday, a trader reported.

He said that most of the issues were trading down into the mid-40s, after closing in the low-50s in the previous session. He saw the 7% notes due 2017 and the 9 3/8% notes due 2019 at 45½ bid, 47½ offered and the 6¾% notes due 2014 around 50, versus 52 bid, 54 offered on Wednesday.

On Wednesday, the Zug, Switzerland-based oil refiner said it had reached a deal with lenders that would allow access to its credit facilities. The news resulted in sizable gains for the bonds.

But come Thursday, those gains all but vanished.

The company is currently dealing with trade unions that are blocking the exportation of oil products from the Antwerp refinery. The union said it was doing so to ensure that the company's staff gets paid while it deals with its financial issues.

"We want to keep this stock on the site to guarantee whatever happens that there is enough stock to be sold to generate money," a spokesman for the BBTK union said on Thursday in a Reuters report.

In a joint statement with the ABVV, LBC-NVK and ACV unions, BBTK said that it would not release the products - estimated to be about $200 million - "if the worst case scenario takes place."

Also on Thursday, Moody's cut Petroplus' rating to Caa2 from Caa1, citing increasing concern about the company's highly leveraged balance sheet.

The ratings remain under review for possible further downgrade.

"While we believe the company has a good shot at avoiding bankruptcy or administration, we are also mindful of the risks that it mishandles the current situation or that any sell-off in the capital markets could make the task more difficult," wrote David Epstein, managing director of CRT Capital Group LLC, in a research report put out Wednesday.

Sino-Forest firms on waiver

Sino-Forest got a shot in the arm Thursday as bondholders agreed to waive a default that occurred when the company failed to release its third-quarter earnings report on time.

A trader said that all of the company's issues were at 30 bid, versus levels around 28 the previous day.

"A big dealer was buying them," he said.

Under the terms of the waiver, the Toronto-based forest products company will pay $9.77 million in interest to its 2016 convertible noteholders. The company also agreed to pay interest on all its other issues of debt.

Holders of the 2014 and 2017 bonds will also get a 1% waiver fee.

The agreement contains covenants, several of which must be fulfilled by March 31. The waiver terminates on April 30.

However, if the company fails to meet the covenants, bondholders can cancel the waiver with 30 days notice.

Sears rises, Bon-Ton 'crushed'

Sears Holdings 6 5/8% notes due 2018 were again "really active," pushing up "almost 2 points" to levels around 80, a trader said.

He pegged the notes at 793/4.

The gains came despite news out that CIT Group was halting its supplier loans or guaranteed payments for their shipments to the Hoffman Estates, Ill.-based retailer.

Though it's possible that other lenders might follow suit, Sears is said to have enough liquidity to weather the storm, at least temporarily.

Among other retailers, Bon-Ton Stores' 10¼% notes due 2014 "got crushed," a trader said.

He saw the bonds dropping 4½ points to end around 551/2.

There was no fresh news out on the York, Pa.-based retailer, although on Wednesday, Moody's downgraded the company. That followed a rating change from Standard & Poor's on Tuesday.

AMR rallies on buy interest

A trader said AMR Corp.'s debt was rallying on reports that both Delta Airlines and TPG Capital were looking into purchasing the bankrupt airline.

U.S. Airways is also reported to be considering a bid.

On the news, the bonds - such as the 6¼% notes due 2014 - moved up to 23 bid, 24½ offered from previous levels around 21.

AMR is a Fort Worth, Texas-based airline, the parent company of American Airlines.

Texas Competitive loan slips

Texas Competitive Electric Holdings Co., a Dallas-based energy company, saw its term loans weaken on Thursday as low natural gas prices, coupled with a lot of supply caused bids to back up, according to traders.

One trader was quoting the extended term loan at 61 bid, 62 offered, down from 63 bid, 63½ offered, a second trader was seeing it at 60 bid, 61 offered, down about a point and a half on the day, and a third trader was quoting it at 60½ bid, 61½ offered, down from 63¼ bid, 64 offered.

Meanwhile, the non-extended term loan was quoted by one trader at 65¾ bid, 66¾ offered, down from 67¾ bid, 68¼ offered, by a second trader at 65½ bid, 66½ offered, down from around 67 bid, 68 offered, and by a third trader at 65¾ bid, 67 offered, down from 67¾ bid, 68¾ offered.

"[There's] a lot of pent supply over the past week. Maybe dealer supply. [Loans] really accelerated down because of gas. Gas is $2.70 - almost at 2009 levels," one trader added.

According to government data, the pressure on natural gas prices is coming from higher-than-average seasonal temperatures, along with continued high storage levels and consistent production.

Sara Rosenberg contributed to this article

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