Distressed market ends week mixed; Dynegy bonds head higher; TXU notes mixed on debt swap news

By Stephanie N. Rotondo

Portland, Ore., Oct. 8 - Distressed debt traders saw activity in the marketplace declining into Friday's afternoon, as players got a jump start on the long holiday weekend.

And, traders could not agree on whether the market was unchanged, up or down.

Dynegy Inc. was one of the day's gainers, as sources saw the bonds inching up half a point at the least. But fellow energy credit Energy Future Holdings Corp. was not as lucky, with its bonds slipping on news of a debt exchange.

Meanwhile, casino credits like Harrah's Entertainment Inc. and MGM Resorts International Inc. headed upward on the back of improved monthly gaming revenues out of Nevada.

Realogy Corp. continued to be an active name, though there was no news out. And, a trader said the debt remained unchanged.

Dynegy trading higher

Dynegy debt traded back up during the final trading day of the week.

One trader called the 7¾% notes due 2019 up about half a point at 67 bid, 68 offered. Another said a "big hunk" of the bonds changed hands around 69, which he deemed up "almost three-quarters."

But another trader said the bonds were "a touch lower" at 67½ bid, 68 offered.

The Houston-based power producer is currently being courted by the Blackstone Group in a $4.7 billion takeover bid. Earlier in the week, the private equity firms management put the kibosh on chatter they might be upping their $4.50 per share bid, calling the current offer "full and fair."

Dynegy had previously gone looking for competing offers, but turned up none.

Meanwhile, Seneca Capital said it had increased its equity stake in the company to over 9%, according to a Thursday regulatory filing.

Seneca paid about $51 million through August and September, acquiring over 11 million shares.

TXU bonds dip, loans improve

Energy Future Holdings bonds were one of the day's few losers, as the company announced it had exchanged old notes for new second-lien paper.

A trader saw the 10¼% notes due 2015 and the 10½%/11¼% senior toggle notes due 2016 falling 3 points, the former at 62½ and the later at 551/2.

He added that about $25 million to $30 million of the 10¼% notes turned over, while about $20 million of the toggle notes traded.

Both issues were part of the debt exchange.

At another desk, however, the 10 7/8% notes due 2017 were seen gaining a point to end at 611/2.

In the bank debt, traders said the company's term loans headed for higher ground on the back of the news.

One trader quoted the term loan B-1 at 80 bid, 80¾ offered, up from 79 bid, 79½ offered, the B-2 at 80¼ bid, 80¾ offered, up from 79 1/8 bid, 79½ offered, and the term loan B-3 at 79¾ bid, 80½ offered, up from 78¾ bid, 79¼ offered.

Meanwhile, a second trader was quoting the term loan B-1 and B-2 at 80 bid, 80½ offered, up from 79¼ bid, 79¾ offered, and the term loan B-3 at 79¾ bid, 80¼ offered, up from 79 bid, 79½ offered.

One trader explained that a possible reason for the bank debt's move "could be from rumors of a higher perceived recovery for bank debt holders from the bond deal."

Through the exchange offer, the Dallas-based energy company issued approximately $336 million of 15% senior secured second-lien notes due 2021 for about $478 million of its 10¼% notes and 10½%/11¼% senior toggle notes.

The exchange offer was completed on Wednesday but was first announced in an 8-K filed with the Securities and Exchange Commission on Friday.

Casinos gain on revenues

A boost in Nevada's August gambling revenue gave Harrah's Entertainment and MGM Resorts International a bit of a boost, according to traders.

Sources called Harrah's 10% notes due 2018 up 1½ to 2 points around 85 and one source said about "$10-and-change" million changed hands.

The 10¾% notes due 2016 meantime improved 1½ points, closing around 861/2.

In MGM paper, traders said the bonds were up about a point across the board, seeing the 7 5/8% notes due 2017 trading around 88.

However, while the casino operators' debt was higher, market sources noted that trading in the names was on the light side.

For the month of August, Nevada-based casinos took in over $944 million from gamblers, representing an 11.5% increase from year-ago figures.

The Las Vegas Strip saw winnings gaining 21% to $544.4 million, while Downtown Las Vegas revenues fell 1.4% to $41.4 million.

Realogy still active, steady

Realogy's 10½% notes due 2014 "continue to be active," a trader said, but remained unchanged.

He pegged the paper around 871/4, with "another $20 million" changing hands.

There was no news out on the Parsippany, N.J.-based real estate services company.

Financials unchanged

A trader said that Washington Mutual Inc.'s senior bank notes were at bid, 43 offered, which he said was unchanged on the day, but up 1 point on the week.

Also among the financials, Lehman Brothers Holdings "sort of hung out right where it was," calling the bankrupt New York-based investment bank's 5 5/8% notes due 2013 22¾ bid, 23¾ offered, while its 6 7/8% notes due 2018 stayed at 23¼ bid, 23½ offered.

The trader saw failed Japanese consumer finance company Takefuji Corp.'s 9.20% notes due 2011 as low as 16 bid before ending the week at 17 bid, 17¾ offered.

Sara Rosenberg and Paul Deckelman contributed to this article

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