Edison Mission bonds stay strong as company said to prepare filing; NIHD CEO exits, debt gains

By Stephanie N. Rotondo

Phoenix, Dec. 14 - The distressed debt market was "grinding down into Christmas," a trader said Friday.

Another trader echoed that sentiment, stating that the overall trading day was "lackluster," with "little movement."

Edison Mission Energy bonds continued to be strong on Friday, despite reports that a bankruptcy filing was being prepared. As previously reported, the company entered into a 30-day grace period last month after skipping a $97 million coupon payment. Another two issues have Dec. 15 coupons, according to a trader, which only adds to the belief that a filing is on its way.

Meanwhile, NIHD Holdings Inc. saw its bonds push up on news that its chief executive officer had exited his post.

Word of an extended deadline for a buyout offer was mostly shaken off by the bonds of Best Buy Co. Inc. The company's founder, Richard Schulze, was expected to formally file an offer by the end of the week, but the board of directors has extended the deadline to Feb. 28. While the bonds did trade up, volume was so thin as to make the gains questionable.

Edison Mission planning to file

Edison Mission Energy is said to be in the midst of preparing a bankruptcy filing, according to a report by The Wall Street Journal.

The news comes as no surprise to many in the distressed market who believe the filing is a foregone conclusion.

"I think it's already been factored in," said one trader. As for gains in the debt seen on Friday - and most of the week - he opined that it was "short covering or closing out of positions."

He saw the bonds trade as high as 53 on the day.

Another trader deemed the 7.20% notes due 2019 up almost 2 points to 521/2. The 7% notes due 2017 were also at 521/2, up a point.

A third trader called the debt up 2 to 3 points at 53.

The Rosemead, Calif.-based subsidiary of Edison International Inc. skipped a Nov. 15 payment on its 2017, 2019 and 2027 maturities. If the $97 million payment is not made by Dec. 17, the bonds will become due and payable immediately.

Upon skipping the payment, the company warned that a bankruptcy was possible.

A trader also noted that two other Edison issues - the 7½% notes due 2013 and the 7¾% notes due 2016 - have coupons on Dec. 15.

NIHD rises as CEO exits

NIHD Holdings' CEO Steven Dussek has left the Reston, Va.-based company to pursue other opportunities, the company announced Thursday.

Come Friday, the company's debt was trading higher.

One trader pegged the 7 5/8% notes due 2021 at 723/4, up over 2 points on the day.

Another trader said the bonds were "creeping higher," placing the issue in a 711/2-72 context.

As Dussek departs, Steven Shindler, chairman, will act as interim CEO.

The wireless telecommunications provider has struggled amid slowing subscriber growth in its Latin American markets. In August, the company cut its full-year revenue forecast by $1 billion, while also noting that it intended to dramatically reduce its workforce in order to cut costs.

Best Buy offer period extended

A trader said he saw "a little bit of activity in [Best Buy bonds], but I don't think there were many trades."

The bonds were not actively traded, but did appear to be up on the day. The 5½% notes due 2021 hit a high of 87 by the end of the day, though there were a couple earlier trades in an 82-83 context.

On Thursday, it was reported that founder Richard Schulze was expected to make a formal buyout offer for the company within the week. Schulze's offer is said to be fully financed and is expected in the $5 billion to $6 billion range. In August, Schulze - who holds a 20% stake in the company - had said he could offer up to $24 to $26 per share, or a sum between $8.16 billion to $8.84 billion.

At $5 billion to $6 billion, the price per share would be about $15 to $18.

However, Best Buy's board extended the offer deadline to Feb. 28, in order to allow Schulze and his private equity partners the ability to include holiday sales in their due diligence.

Best Buy has struggled to keep up as consumers search for good deals on electronics online. Because of the increase in online shopping, as well as shopping at discount retailers such as Wal-Mart, many have wondered if the "brick-and-mortar" business model was still useful to Best Buy, among other retailers.

In the last 10 quarters, same-store sales have declined in nine of them.

"From a bondholder's perspective, the only good outcome is if they all get taken out at 101 under the change of control covenants," wrote Gimme Credit LLC analyst Carol Levenson in a report published late Friday. "Otherwise, either a leveraged transaction that does not trigger the change of control or continued credit quality deterioration are the other two unpleasant scenarios currently on the table."

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