Alpha Natural falls as company heralds bond offering, tender; ResCap noteholders pull support

By Stephanie N. Rotondo

Phoenix, Sept. 27 - The bond du jour on Thursday was Alpha Natural Resources Inc., a distressed debt trader reported.

The action came as the company announced a $500 million offering of senior notes, the proceeds of which would be used to partially redeem its convertible debt. The market had a mixed reaction to the news, however, and the straight bonds ultimately ended the day weaker.

Meanwhile, Residential Capital LLC paper was also on the decline, after a group of bondholders were reported to be pulling their support for the company's reorganization plan.

Overall, the broader high-yield market was firm, a trader said, though he said that was driven largely by new issues.

Alpha Natural falls

Alpha Natural Resources' debt was slipping Thursday, after the company announced plans to price a $500 million offering of senior notes.

"The coals are getting hit," a trader said, seeing Alpha's 6% notes due 2019 down a point at 841/2.

The 6¼% notes due 2021 were also weaker, he said, but only marginally. He pegged the issue at 843/4.

Both issues saw about $15 million to $20 million of the bonds changing hands.

The Bristol, Va.-based coal producer said that proceeds from the proposed offering would be used to fund a partial redemption of its 3.25% convertible notes due 2015. Any remaining funds will be used for general corporate purposes.

News of the notes sale prompted Standard & Poor's to cut its overall rating on the company to B+ from BB-.

The agency said the change was due to the belief that EBITDA would be lower than expected due to a decline in demand.

However, Gimme Credit LLC analyst Evan Mann deemed the deal "a net positive" for the company as it attempted to address its looming maturities.

Still, Mann also noted that the gain in liquidity was offset by an increase in leverage.

ResCap paper leaking

A group of third-lien bondholders have pulled their support for Residential Capital's plan of reorganization, which put pressure on the bonds.

A trader called the 9 5/8% notes due 2015 down almost half a point to par 3/8, on about $20 million traded.

Another market source pegged the 8½% notes due 2013 at 2 ¾ bid, 27 offered, down from 27 bid, 28 offered previously.

Parent company Ally Financial Inc. told both Reuters and Bloomberg late Wednesday that the bondholders had in fact decided to not support the reorganization plan, but that they did not expect it to impact the bankruptcy case. ResCap and Ally now intend to focus their efforts on the junior secured bondholders in an effort to come up with a broader plan.

Additionally, the lack of the group's support is not expected to have any effect on agreements with Ally and residential mortgage-backed securities investors.

Minneapolis-based ResCap, the mortgage unit of Ally, filed for Chapter 11 protections in May.

Dex One steady

Dex One Corp.'s 12% PIK notes due 2017 were trading ahead of an upcoming coupon, a trader said.

The trader saw the issue trading around 37. Another source quoted the notes at 37 bid, 37½ offered, about in line with where they had been.

The first trader said a partial cash, partial in-kind payment was to take place on Monday.

Some names adding losses

Also in the land of distressed debt, Clear Channel Communications Inc.'s 11% notes due 2016 gave back the gains it incurred in the previous session, a trader said, seeing the debt fall 2¼ points to 701/2.

Another trader said NewPage Corp.'s 11 3/8% first-line notes due 2014 dropped by a point to around 63.

ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were also softer, closing around 21.

And, Eastman Kodak Co.'s 9¾% second-lien notes due 2018 were "slowly dribbling" down, the trader said, placing the notes at 63 bid, 64 offered.

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