Dynegy bid by Icahn fails, bonds unchanged to weaker; Ahern notes gain; Clear Channel gets hit

By Stephanie N. Rotondo

Portland, Ore., Feb. 22 - Distressed debt was "soft in spots, but not across the board," a market source said Tuesday.

"It was a little quiet," another trader said. "A lot of people were just watching and even more people were away.

"The market was a little bit off, but just a little bit," he added, noting that "we didn't even hit a billion in secondary trading."

Dynegy Holdings Inc. saw its bonds finishing up unchanged to lower, as the market digested a failed takeover bid by billionaire investor Carl Icahn. The company also announced a series of management and board changes.

Elsewhere, Ahern Rentals Inc. experienced a pop, while Clear Channel Communications Inc. took a hit, both on no news.

Blockbuster Inc. meantime saw its bonds trade at 50 cents on the dollar as the company said it had entered into an agreement to be bought by a group of noteholders.

Dynegy debt softens

Among other power producers, Dynegy debt was unchanged to weaker following news that Carl Icahn's $5.50-per-share takeover bid had failed.

Still, a trader said trading volume was "not as much as you would have thought and [there was] no major movement."

He saw the 7¾% notes due 2019 at 731/2, which was smack in the middle of recent markets of 73 bid, 74 offered. The 8 3/8% notes due 2016 were "maybe off a half" around 80.

On Monday, the Houston-based company said Icahn's Icahn Enterprises LP had received "an insufficient number of shares" in a tender offer and that the proposed takeover therefore automatically expired as of 5 p.m. ET on Friday.

The company also announced a series of board and executive changes, including Bruce A. Williamson's resignation as president and chief executive officer, as well as a director and chairman of the board. Williamson's exit will be effective March 11 and David Biegler will serve as interim president and CEO, while Patricia A. Hammick will serve as chairman.

"Recognizing the desire of the stockholders to pursue a different path, Dynegy's five remaining directors do not intend to stand for reelection at the company's upcoming annual meeting, anticipated to be held in June 2011," Dynegy said in a statement. One slot will be taken by Seneca Capital, which fought against the Icahn takeover.

Dynegy said it was in talks with Icahn to select a nominee for the board.

But while Seneca might be celebrating a victory - the shareholder had previously fought to shake up company management - not all who follow the name are jubilant.

"As if Dynegy didn't have enough problems, its CEO and CFO resigned in the wake of shareholder rejection of the bid by Icahn Enterprises," wrote Gimme Credit LLC analyst Kim Noland. The looming June departures of the rest of the board "remove significant experience and leave the company's future hazy."

Noland added that the changes could result in a "leadership void for the next four months until the annual meeting."

Ahern notes climb up

A trader said Las Vegas-based Ahern Rentals' 9¼% notes due 2013 were "up a whole lot of points," though there was "nothing new that brought them."

He placed the notes at 45 bid, 46 offered and opined that the gain was due to "just people getting involved and there's so few people around to do anything, the price just goes up."

Another source, however, saw the bonds trading with a 42 handle.

Clear Channel gets hit

Clear Channel Communications "got beat up a bit," a trader said, though there was no news to cause the decline.

He saw "$20-odd million" of the 11% notes due 2016 trade down to 951/4, which was off "a few points."

Another trader said the San Antonio-based multimedia company's recent new 9% notes due 2021 - a $1 billion issue that priced at par on Thursday - were "down over a point" to 101¼ bid, 101¾ offered, down from 102½ bid, 103 offered.

Blockbuster bonds dip

Blockbuster's 9% notes due 2012 were "not off more than a point," according to a trader, on news the company's secured noteholders had made a bid for the bankrupt Dallas-based movie rental chain.

He saw the notes trading at 50 cents on the dollar, noting that recent trades have been between 50 cents and $1.50.

Blockbuster has reportedly entered into an agreement with Cobalt Video Holdco LLC, an entity comprising various secured noteholders, including Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Värde Partners Inc.

The agreement places the sale price at $290 million, but Blockbuster is also seeking to go to auction in hopes of a better bid.

A sale is expected to be completed by April 20.

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