Holiday, weak jobs report weigh on distressed debt; Bon-Ton bonds decline; Dynegy paper falls

By Stephanie N. Rotondo

Portland, Ore., Sept. 2 - The holiday weekend was garnering more attention from distressed debt investors than the actual bonds were, traders reported.

"There's not a lot of notable activity," said one trader. "There's definitely some stuff quoted down."

Declining equities and a dismal jobs report didn't help matters," he noted.

"It's the last Friday of the summer," he said. "There's a bit of a volatile tape. I don't think anybody wanted to do anything."

About an hour before the bell, one trader said volume was quite low: He saw just $300 million of bonds in the secondary space changing hands.

Bon-Ton Stores Inc.'s bonds were "noticeably weaker," a trader said. The bonds had fallen a few points in the previous session on the back of disappointing same-store sales. That trend continued into Friday.

Meanwhile, Dynegy Inc.'s debt was also softer, despite news the company was considering calling up to $3.5 billion of notes.

The market will be closed Monday in observance of Labor Day.

Bon-Ton falls again

A trader said Bon-Ton Stores' 10¼% notes due 2014 were "down a little more" at 87 bid, 88 offered.

Another trader quoted the issue at 86 bid, 88 offered, down from 90 bid, 92 offered "a day or two ago."

On Thursday, the York, Pa.-based retailer reported its August same-store sales, which showed a 4.7% decline. Total sales dropped 5.4% to $177.1 million.

Year to date, total sales were down 2.4% to $1.42 billion.

"We believe there was a negative impact on our eastern stores from Hurricane Irene, however, it is difficult to quantify the lost sales caused by the disruption to our customers' shopping patterns," Tony Buccina, vice chairman and president of merchandising, said in the sales release.

Dynegy powers down

Houston-based power producer Dynegy saw its bonds declining as the company said it was considering its options as it attempts to deleverage its balance sheet.

A trader said the 7.67% notes were "the only one that was really trading," adding that the issue "looks to be down a little from the last trading levels" around 62 bid, 63 offered.

In a press release out Friday, Dynegy said it was looking for ways to clear up its balance sheet, including a possible tender or exchange for some or all of Dynegy Holdings Inc.'s $3.5 billion of debt.

On Thursday, Macquarie Equities Research analyst Angie Storozynski upgraded Dynegy's stock to neutral from underweight. The upgrade was due to new management and their "highly aggressive" cost-cutting initiatives.

Broad market softens

Among other distressed issues, NewPage Corp.'s 11 3/8% first-lien notes due 2014 were "quoted lower," but "not much trading," according to a trader.

He pegged the paper at 86 bid, 87 offered.

Another trader said Chrysler Group LLC's 8% notes due 2019 and the 8¼% notes due 2021 fell to 84½ bid, 85½ offere, versus "the other side of 87 in the last couple of days."

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