Hawker, Edison give up last week's gains; ResCap firm as Treasury OKs filing; Travelport rises

By Stephanie N. Rotondo

Portland, Ore, May 7 - Distressed bonds were coming in Monday after running up for most of the previous week.

Hawker Beechcraft Acquisition Co. LLC saw its paper take a beating during the session. Bonds were down 2 points after climbing up last week on news of an official bankruptcy filing.

Also losing steam were Edison International Inc.'s Edison Mission Energy bonds. The parent company had reported weaker earnings on Thursday, due in large part to losses at Edison Mission. Still, paper had been moving higher until Monday trading.

In other news, Residential Capital LLC paper managed to hold its ground, even as it was reported that the U.S. Department of Treasury had given Ally Financial Inc. - ResCap's parent - conditional approval to put the money-losing mortgage lending unit into bankruptcy, should that be the way the company decides to go.

Hawker loses altitude

Hawker Beechcraft bonds had run up last week, even after the Wichita-based aircraft manufacturer and reseller said it had officially filed for bankruptcy protections.

But that move into higher territory came to a halt Monday, according to market sources.

Traders said the 8 7/8% notes and 8½% notes due 2015 fell a deuce to 17.

The filing was based on a deal with senior secured lenders and senior bondholders, in which the company will be able to eliminate $2.5 billion in debt and about $125 million in annual interest expense.

Under the agreement certain lenders have also agreed to provide $400 million in debtor-in-possession financing. Hawker received interim access to $300 million of the DIP on Monday.

Also on Monday, Moody's Investors service cut its probability-of-default rating on the company to D from Ca/LD.

Edison gives up gains

Edison International's Edison Mission Energy-linked bonds began trading down Monday.

The paper had previously been on the rise, despite a disappointing earnings report on Thursday.

A trader said bonds were down at least a point across the board. He saw the 7¾% notes due 2016 at 66, the 7½% notes due 2013 at 73½ and the 7% notes due 2017 at 641/2.

Edison International reported first-quarter earnings on Thursday, which showed a 47% decline.

The narrower profit of $114 million was due in part to a wider loss at the Rosemead, Calif.-based power producer's Edison Mission subsidiary.

For the parent company, revenues gained 2.7% to $2.86 billion. Operating costs increased 9.4%.

Edison Mission's loss, however, widened to $83 million from $18 million the year before.

Energy space weakens

Elsewhere in the energy space, a trader said Dynegy Holdings LLC's 7¾% notes due 2019 were "maybe down a little" at 671/4.

Another market source echoed that level, deeming the debt down over a point on the day.

ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 meantime slipped half a point to 741/2.

ResCap holds its ground

Residential Capital's 9 5/8% notes due 2015 were "kind of unchanged," according to a trader.

He pegged the notes at 941/4.

Another market source repeated that level, also calling the paper unchanged.

According to Bloomberg, an Obama administration official said Monday that parent company Ally Financial had received conditional approval for a ResCap bankruptcy filing, should that be the way the parent decides to deal with its struggling offspring. The administration would require that it be allowed to view any proposed plan ahead of a filing, the report said.

Some say that putting ResCap into bankruptcy might help taxpayers recoup the bailout funds loaned to Ally much easier.

"Obviously, that's big news, " a market source said. "It could be a positive. Obviously there's a risk, but it could be a huge positive."

ResCap is based in Minneapolis.

Travelport loan breaks

Travelport Ltd.'s $175 million 11/2-lien term loan (Caa1/CCC) due Nov. 22, 2015 freed up on Monday, with levels seen at par bid, 101 offered, according to a market source.

In the bonds, a trader saw the 9% notes due 2016 moving up over a point to end around 65.

Pricing on the loan is Libor plus 950 basis points with a 1.5% Libor floor, and it was sold at an original issue discount of 97. There is hard call protection of 103 in year one, 102 in year two and 101 in year three.

During syndication, the coupon was reduced from Libor plus 1,100 bps and the discount tightened from 96.

Credit Suisse Securities (USA) LLC and UBS Securities LLC are the lead banks on the deal that will be used to repay the company's non-extended term loan due in 2013.

Travelport is an Atlanta-based provider of transaction processing services to the travel industry.

Bon-Ton, Caesars lose

Among other distressed credits, a trader said Bon-Ton Stores Inc.'s 10¼% notes due 2014 were weaker again, calling the bonds 11/2-points softer at 77.

And, Caesars Entertainment Corp.'s 10% notes due 2018 lost a point, finishing the day around 721/2.

Sara Rosenberg contributed to this article

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