General Growth notes gain; ResCap concerns hurt bonds; Hawker Beechcraft dips on term loan news

By Stephanie N. Rotondo

Portland, Ore., Nov. 18 - The distressed debt market was largely unchanged to firm on Wednesday, according to traders.

That general market tone, coupled with seemingly positive news, helped General Growth Properties Inc.'s bonds gain as much as 3 points on the day. The news - which came out late Tuesday - was that a potential buyer had entered the mix.

But Residential Capital LLC was not as fortunate, as its bonds continued to get beaten up. The bonds have been falling all week, presumably as investor concerns about the troubled mortgage lender mounted.

Hawker Beechcraft Acquisition Co. LLC's debt was also on the weaker side, as the company announced - and priced - a term loan add-on. The new debt is aimed at improving the company's liquidity position.

General Growth notes gain

Word of a potential buyer resulted in a 1- to 3-point gain for General Growth Properties' bonds.

"That paper was up 2 to 3 points," a trader said, placing the 7.20% notes due 2012 at 97 bid, 98 offered, up from levels around 95.

Another trader called the 5 3/8% notes due 2013 up 1 to 1.5 points at 93.5 bid, 94.5 offered. The 8% notes that were to have matured in April of this year were likewise better at 98.5 bid, 99.5 offered.

"That has to be a high level," the second trader said.

At another desk, the 7.20% notes were seen up a deuce at 97 bid, 97.5 offered, while the 8% notes were pegged at 98 bid, 99 offered.

Simon Property Group Inc. has reportedly hired Lazard Ltd. and Wachtell, Lipton, Rosen & Katz to advise it on buying some assets of General Growth.

Simon's top executive, David Simon, had previously expressed interest in buying some of the shopping mall owner's properties. Simon came out within days of General Growth's bankruptcy filing to say so and, in a Sept. 15 interview with Bloomberg, said his company was the "logical buyer."

Before filing for Chapter 11 protections, General Growth had attempted some asset sales, but was unable to do so.

General Growth Properties is based in Chicago.

ResCap concerns hurt bonds

Concerns about its future continue to weigh on Residential Capital's debt, according to traders.

"That has been getting beaten down," a trader said. While he called the 9 5/8% notes due 2015 unchanged at 67 bid, 68 offered, he also noted that it was down 3 to 5 points over the week - and it was only Wednesday.

Another trader said he was "only seeing offerings in the last few days." He saw the 6 3/8% notes due 2010 offered at 63.25, adding that "those were all over the lot and pretty wide." He also saw the 9 5/8% notes offered at 68.

Another market source deemed the 8 7/8% notes due 2014 nearly 5 points weaker on the day at 51.5 bid.

Earlier this month, ResCap's parent company, GMAC LLC, halted public reporting on its money-losing mortgage unit, leading some to believe that its future was short. GMAC has indicated it was looking at its options regarding what to do with the business.

Hawker slips on new debt

Hawker Beechcraft Acquisition's 8½% notes due 2015 were losing ground during trading, following news late last week that the company was seeking a $200 million term loan add-on.

A source saw the notes drifting down about 1.5 points to 76 bid, while another quoted the issue at 74 bid, 75 offered.

The aircraft manufacturer intends to use the proceeds to bolster its liquidity.

On the news of the debt addition, Moody's Investors Service revised its outlook to negative and dropped its bank debt rating to Caa1 from B3.

All other ratings were affirmed.

Lehman active, somewhat better

A trader saw a fair amount of activity going on in bonds issued by the former Lehman Brothers Holdings Inc. before the company's fall last year.

He said that the paper "have mostly been quoted right around" 16 bid, 16.5 offered, but on Wednesday, "you saw them getting lifted at 161/2," and then continue rising to an 18 bid, 19 offered context "as the day wore on, so that just kind of raised an eyebrow.

A market source said that over $17 million of the Lehman 6 7/8% notes due 2018 had traded by mid-day, over $12 million of its 5 5/8% notes due 2013 and $10 million of its 5½% notes due 2016 - all in an 18 bid, 19 offered context, and all among the day's busiest junk issues.

The action came as Lehman said it was eyeing a first quarter of 2010 exit form bankruptcy.

Broad market mostly unchanged

Among other names in the distressed arena, General Motors Corp.'s bonds "remain active," a trader said. He said the debt was trading in a 23 to 24 "ZIP code, depending on which flavor you're looking at."

Also, Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were seen closing at 7.5 bid, 8 offered. Late Tuesday, news outlets reported that former owner Donald Trump was pulling his offer to buy back the hotels bearing his name.

Paul Deckelman contributed to this article.

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