TXU paper slips as group opposes debt swap; Lear up on better exit terms; broad market mixed

By Stephanie N. Rotondo

Portland, Ore., Oct. 9 - Distressed debt traders saw many empty desks Friday as players cleared out before a long holiday weekend.

"It's a pretty light day," said one source, who added that he heard there was a Raymond James outing that also kept people from their desks.

"The market was unchanged, but firm, "he said. "But there isn't much trading."

Still, Energy Future Holdings saw some action, as reports surfaced indicating that a bondholder group opposing the company's recently announced debt exchange had formed. The company's bonds fell a tad during trading hours.

Lear Corp., however, posted some modest gains. The improvement came as it was learned that the company had negotiated somewhat reasonable terms on its exit financing.

The bond market will be closed Monday in honor of Columbus Day.

TXU paper slips

Though the general market was largely unchanged to firm, Energy Future Holdings - more commonly referred to as TXU Corp. - saw its debt dipping some on reports that bondholders were objecting to its recently announced debt exchange.

A trader quoted the 10¼% notes due 2015 at 69¼ bid, 69½ offered, down "probably a half," he said. The 10 7/8% notes due 2017 - "another active one" - ended nearly a point lower at 72 bid, 72½ offered.

Another source pegged the 10¼% notes at 69 bid, 70 offered, also down a half point.

Earlier in the week, TXU said it would issue up to $4 billion of 9¾% notes due 2019 in exchange for about $6 billion in existing notes. Bondholders would receive about half the face value if they participate in the exchange.

But news reports indicate that lenders owning as much as 50% of the 2017 paper are opposing the plan. Among that group is Franklin Advisers of San Mateo, Calif., which confirmed to Bloomberg news that they were not supportive of the offer.

The Dallas-based energy producer is looking to cut its massive debt load incurred in a 2007 leveraged buyout. Private equity firms KKR & Co. and TPG Inc. paid $43 billion for the company in October 2007 using a combination of high-yield, high-risk debt.

Some estimates show the company as having as much as $44.5 billion in loans and bonds, with about half of that coming due in 2014.

Lear gains on better terms

Southfield, Mich.-based automotive parts supplier Lear received somewhat reasonable terms on its recently announced exit financing, which gave the company's bonds a bit of a boost.

A trader said the 8½% notes due 2013 improved to 71 bid, 72 offered from levels around 69½ Thursday, while the 5¾% notes due 2014 moved up to around 70, compared to 67½ previously.

Lear will pay its lenders a minimum interest rate of 7¾% on $400 million of exit financing. About $200 million of the financing will be a delayed-draw, allowing the company access to additional funds if it needs it. However, that money can only be accessed one time.

Broad market mixed

Elsewhere in the distressed debt sphere, CIT Group Inc.'s notes finished the week unchanged, a trader said.

The trader pegged the 4.65% notes due 2010 at 86 bid, 87 offered and the 5.6% notes due 2011 around the 86 mark. He also placed the 4¼% notes due 2010 around 64, after going out at 64 bid, 65 offered late Thursday.

Also in the financial sector, Capmark Financial Group Inc.'s bonds - which tend to trade on top of one another - were "coming in some" with bids in the high-teens and offers around 20, the trader said.

Nortel Networks Corp.'s debt traded "up again," according to another market source. He saw the 10¾% notes due 2016 inch up about half a point to 60½ bid, 61 offered, while the floating-rate notes due 2012 were "wrapped around 60."

"So that's up at least a sold half," he said.

FairPoint Communications Inc.'s 13 1/8% notes due 2018 also "moved up a little bit."

"They had been trading 10 to 12," the source said. On Thursday, the debt had improved to 15½ bid, 16 offered and come Friday had gained some more to close at 17 bid, 17¼ offered.

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