Distressed debt firms as new issue fuss goes on; Takefuji active, 'crazy'; iStar gains ground

By Stephanie N. Rotondo

Portland, Ore., Sept. 30 - It was "another strong day" for the distressed debt market, a trader reported Thursday, and some distressed credits managed to share the spotlight with the massive influx of new issues.

Takefuji Corp.'s bonds were trading actively - or, as one trader put it, "exceedingly crazy" - just two days after the company filed for Chapter 11 protections. The company filed on Tuesday, a result of a 2006 court decision that depleted the company's coffers.

Meanwhile, iStar Financial Inc. ended the day on the firmer side, even after news of a skipped payment on its credit facility.

Hawker Beechcraft Acquisition Co. LLC and Nortel Networks Inc. had news out on Thursday. But a trader said there was little action in the names and both finished about unchanged on the day.

On the flip side, there was no news out on Clear Channel Communications Inc., but those bonds have been trading actively for the better part of the week. The media company's debt was mostly better by the end of Thursday.

Takefuji 'exceedingly crazy'

Takefuji, the Japanese consumer finance firm that filed for bankruptcy on Tuesday, saw its bonds trading actively during Thursday's session.

A trader placed the 9.2% notes due 2011 around 22, calling that down a quarter of a point.

"They were exceedingly active and crazy," said another trader.

At another desk, a market source said the bonds traded as high as 231/4, and that by the end of the day, they were offered at 23½ without a bid.

According to a press release published Tuesday, Takefuji's bankruptcy filing was a result of a 2006 court ruling that forced those in the industry to pay back borrowers who had been charged excessive interest fees.

The company owes about $5.1 billion and could face claims of $24 billion from about 2 million customers stemming fro the 2006 court decision.

iStar better despite skipped payment

Also in the financial space, iStar Financial said in a regulatory filing that it would not make an optional $500 million payment on its $1 billion first-priority credit facility due June 26, 2012.

However, the bonds did not fall on the news, but instead moved up.

A trader called the 5.85% notes due 2017 up half a point at 76 and the 5 1/8% notes due 2011 up a point at 93.

In lieu of making the optional payment, iStar said it would direct funds received as principal and net cash sale proceeds from the collateral to the credit facility lenders.

The skipped payment came as little surprise to the market, as New York-based iStar is reportedly considering making a prepackaged bankruptcy filing early next year.

Fitch Ratings recently revised its issuer default rating to C from CC, meaning that a default is likely inevitable.

Meanwhile, First Data Corp.'s 9 7/8% notes due 2015 were unchanged around 811/2.

Hawker, Nortel unmoved

Both Hawker Beechcraft Acquisition and Nortel Networks had news out on Thursday, but neither saw its debt getting much action.

A trader saw Nortel's 10 1/8% notes due 2013 close around 82 and Hawker's 9¾% notes due 2017 at 591/2.

He said there was "no action really" in either name and deemed both about unchanged to just a tad higher.

Hawker announced it would pay cash on its upcoming coupon payment on its 8 7/8%/9 7/8% PIK notes due 2015. Nortel, for its part, won court approval of its $65 million sale of its switch business to Ericsson.

Clear Channel active

There hasn't been any news out on Clear Channel Communications this week, but the bonds have seen good trading volume over the course of the week and Thursday was no different.

Several traders called the 11% notes due 2016 up a point to 761/2.

"They have been extremely active," a trader said. "All of CCU paper as up a point, with some $50 million to $60 million of assorted issues trading."

Another trader also saw the 10¾% notes due 2016 at 773/4, which he deemed unchanged. The 9¼% notes due 2017 were up over a point to 1063/4.

Clear Channel is a San Antonio-based multimedia company.

Broad market firms

Elsewhere in the marketplace, Harrah's Entertainment Inc.'s 10% notes due 2018 closed unchanged at 791/2, according to a trader.

At another desk, a trader said Rite Aid Corp.'s 9 3/8% notes due 2015 were "staying real active," gaining almost a point to 86 bid, 86¼ offered.

In the autosphere, General Motors Corp.'s 8 3/8% notes due 2033 were unchanged at 33¾ bid, 34¾ offered.

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