RadioShack gains on shareholder rescue attempt; Momentive judge denies lender claim, debt dips

By Stephanie N. Rotondo

Phoenix, Aug. 26 – The distressed debt market was firming up on Tuesday, as new economic data pointed to an improving economy.

RadioShack Corp. bonds were pushing higher during the session. The bonds might have been helped by the generally stronger marketplace, but news came out during the day indicating a shareholder was attempting to put together a rescue package for the company that would help it avoid a bankruptcy.

Meanwhile, Momentive Performance Materials Inc. paper was lower as the judge overseeing the company’s bankruptcy case said lenders have no right to a make-whole claim.

A trader noted that the hearing to approve or deny the company’s plan of reorganization was still going on after the market closed.

RadioShack seeks lifeline

A trader said RadioShack’s 6¾% notes due 2019 were “a few points better,” trading up to 44.

Another trader also pegged the debt at that level, deeming it up 4 points on the day.

The gains came as it was reported that the company’s second-largest shareholder, Standard General LP, was working with management to come up with a plan to avoid filing for Chapter 11 protections.

The hedge fund was said to also be working on finding new financing via the issuance of new debt or equity.

And, the fund is trying to refinance the Fort Worth, Texas-based electronics retailer’s $250 million second-lien term loan. The loan is held by Salus Partners Capital LLC and Cerberus Capital Management LP, both of which blocked the company’s previous plan to shutter 1,100 stores.

Without new money coming in, RadioShack is expected to run through all of its cash by the end of 2015.

Momentive lenders denied claim

U.S. Bankruptcy Court Judge Robert Drain said in a ruling on Tuesday that Momentive Performance’s senior lenders don’t have the right to a make-whole claim on its holdings, which are being redeemed earlier than scheduled under a plan of reorganization that is currently on the table.

The lenders had previously opposed the plan, though they were getting cash for the debt they held. Judge Drain even chastised the lenders for not taking the money during the hearing on Tuesday.

On Monday, the lenders had indicated that they might be willing to give their support to the reorganization plan. Momentive asked for an official ruling on Tuesday, even as lenders agreed to back the plan.

On that news, however, the bonds were weaker.

One trader said the 11½% subordinated notes due 2016 were trading around 2, while the 8 7/8% notes due 2020 fell to 93 to 94 context.

The 10% notes due 2020 also dropped into the low-20s. Both the 2020 issues were trading in the high-90s previously.

However, the trader noted that “the court hearing is still going on.”

Another trader pegged the 8 7/8% notes at 93 bid, 95 offered, the 10% noes at 90 bid, 93 offered and the 11½% notes at 2 bid, 3 offered.

A ruling still needs to be rendered on arguments given by junior bondholders who claim that they are being unfairly subordinated to other pieces of debt. If the judge rules against them, the plan of reorganization can move forward. If the judge rules in their favor, however, it could mean the company needs to go back to the drawing board.

Momentive is a Waterford, N.Y.-based manufacturer of specialty chemicals and polymers.

NII debt busy again

NII Holdings Inc.’s debt remained active in Tuesday trading.

One trader said there was “a bunch of trades” in the 7 5/8% notes due 2021, which he called up over half a point at 16.

The trader also saw the 10% notes due 2016 nearly a point higher at 29¼, as the 7 7/8% notes due 2019 dipped half a point to 66.

The 11 3/8% notes due 2019 were slightly better, trading at 66¾.

Another trader also placed the 7 5/8% notes at 16.

NII Holdings is a Reston, Va.-based provider of Nextel mobile services in Latin America and Mexico.

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