Distressed marketplace remains strong into month-end; Tribune bonds move up; Edgen debt dips

By Stephanie N. Rotondo

Portland, Ore., Sept. 29 - Distressed debt continued to be firm during the midweek trading session and paper remained better bid for.

"For the most part, stuff traded better," a trader said. "There is still a pretty good bid for paper."

"Stuff is trading pretty tight," added another market source. Still, even with "a lot of cash coming in...everybody has a bid; nobody has an offering."

Tribune Co.'s debt managed to inch up a point or 2. The move came after the bonds lost ground on Tuesday, following word of a new deal between the company and two key creditors. However, not all market watchers believe the deal will result in an exit from bankruptcy.

Meanwhile, Edgen Murray Corp.'s bonds lost value, falling about half a point on the day.

In the financial space, Washington Mutual Inc. paper held its ground in the wake of an article published Tuesday regarding a potential battle between the company's new owner and the Federal Deposit Insurance Corp. A trader said the notes "didn't really react" to the news.

Tribune debt inches up

Tribune's bonds "rebounded some," a trader said, just one day after the company announced a deal with hedge funds Angelo Gordon & Co. and Oaktree Capital management LP that might allow the newspaper publisher to exit bankruptcy.

The trader said the bonds - which tend to trade on top of one another - moved up to levels around 45, versus 43 bid, 44 offered on Tuesday.

Another trader quoted the 5¼% notes due 2015 at 44½ bid, 45½ offered and the 7¼% notes due 2013 at 46 bid, 47 offered.

On Tuesday, Tribune said it would back the Angelo/Oaktree-led plan that would allow creditors to sue each other over the company's 2007 leveraged buyout. The company is calling the deal a "settlement," as it attempts to make similar types of deals with other warring creditors.

According to the terms of the plan, lenders involved in the 2007 buyout would receive $5.5 billion in stock, cash and a new term loan. Lower-class creditors would get a piece of any funds that came from lawsuits associated with the buyout.

Lindsay Berz, an analyst with Chapdelaine Credit Partners, said she considered the so-called settlement a "non-starter."

"It's an immaterial revision to the plan," she said in an interview with CONTACT _Con-394683D89 Prospect News. "The only difference appears to be that it is now providing something for the bonds," which it did not do before.

Still, based on her calculations, bondholders would only likely get about 23 cents on the dollar. "That is not satisfactory to the bonds," she said.

Berz also noted that the "original banks that did this deal were glaringly absent," referring to JPMorgan Chase Bank NA and others who were involved in the 2007 acquisition by Sam Zell.

Their absence, she continued, could mean that the lenders are not agreeable to the Angelo/Oaktree plan and intend to block it, or that they have their own plan in the works.

Or, she added, both.

"The news is more or less a non-starter," she said. "It won't make it to creditors to vote."

One trader said he agreed that the deal was nothing to write home about and added that "someone" was actively looking to buy up Tribune debt.

"Maybe somebody is trying to buy them up so they can block this thing," he said.

Tribune filed for Chapter 11 protections in December 2008, just one year after the leveraged buyout. A recent examiner report claimed that the buyout did in fact have elements of a fraudulent transfer.

Edgen notes slip

A trader called Edgen Murray's 12¼% notes due 2015 "active," though he also said the paper was "off some."

He placed the issue around the 71 mark. Another trader quoted the notes at 70½ bid, 71½ offered.

There was no news out on the steel supplier for the energy sector, though the first trader said he had heard there was a negative research report out.

Last week, the company met with "certain investors," according to a regulatory filing. It wasn't clear why the company held the meeting, but it is believed that a decline in capital has put Edgen Murray close to a covenant breach on its term loans.

WaMu holding on

News that JPMorgan Chase & Co. might go after the Federal Deposit Insurance Corp. in regard to its buyout of the now defunct Washington Mutual had little effect on the Seattle-based thrift's debt, according to a trader.

The bonds, such as the 5.55% notes due 2010, were "still" trading around 42, he said.

"They really didn't react to that article in the paper yesterday," he said.

In a Wall Street Journal article, the market learned on Tuesday that JPMorgan had sent a series of letters to the FDIC regarding the 2008 bank failure. JPMorgan picked up the bank for $1.88 billion in September 2008.

What JPMorgan wants is for the FDIC to absorb any losses incurred from WaMu-related lawsuits. The $1.88 billion paid to the receivership in 2008 are the only funds available for such things, but the letters are reported to indicate that the FDIC could be stuck with more than $6 billion in claims.

The deal struck between the FDIC and JPMorgan allows for claims against the receivership and states that the receiver must cover any liabilities of WaMu that were not assumed by the buyer.

Elsewhere in the financial-oriented world, iStar Financial Inc.'s 5.7% notes due 2014 and 5 7/8% notes due 2016 closed around 75 bid, 76 offered, according to a trader.

Broad market mixed

In the rest of Distressed Land, a trader said Blockbuster Inc.'s 11¾% senior notes due 2014 closed around 57, while the 9% subordinated notes due 2012 slipped back down to around 3.

Another trader said some "$20-odd million" of the 9% notes changed hands at 2½ bid, 3 offered.

The second trader added that he believed the subs to be worth nothing and that activity in them could be "more guys just being able to monetize their shorts."

Also, a trader saw Local Insight Regatta Holdings Inc.'s 11% notes due 2017 finishing around 33.

"They haven't been trading that much," he added.

Clear Channel Communications Inc.'s debt was meantime "active again," the trader said. The 10¾% notes due 2016 "kind of keep creeping up," he said, pegging them around 78. The 11% notes due 2016 were also better around "76 and change."

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