Retailers unusually busy, but mixed on no news; Dynegy extends gains into Thursday's session

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Sept. 15 - Distressed bonds were "getting better late in the day," a trader said Thursday.

Still, another market source noted that "volume was pretty light. It wasn't a crazy day. Nothing really blew up."

Retailers were unusually active despite a report from the Commerce Department that indicated retail sales were overall flat for the month. Of the actively traded credits were Gymboree Corp., Sears Holdings Inc., Bon-Ton Stores Inc. and Rite Aid Corp. however, there was no overall trend, as retail bonds ended mixed.

Dynegy Holdings Inc.'s paper was also active and better, extending the gains from Tuesday. But there hasn't been any fresh news out to act as a catalyst.

Retailers busy, but mixed

Retailers were active, but mixed during Thursday's session.

There was no news out - specifically or generally - to explain the surge in retailer action, except for the Commerce Department's retail sales report published Wednesday. According to the report, sales for August were unchanged from July.

There was also no rhyme or reason to specific retailer's performance. Gymboree's 9 1/8% notes due 2018, for instance, fell slightly to 811/2, according to a trader.

Sears Holdings' 6 5/8% notes due 2018 were also weaker, losing 2 points to end around 84, the trader said.

Meanwhile, Bon-Ton Stores' 10¼% notes due 2014 were holding steady at 841/4.

And, Rite Aid's 8 5/8% notes due 2015 moved up 1 point to 90, a trader said.

Another market source deemed the issue up nearly 2 points at 90¼ bid.

Dynegy gains again

Dynegy's good fortune continued Thursday, as the Houston-based power producer's debt moved up another 1½ to 2 points.

The bonds have been gaining ground since Tuesday, though there has been no fresh news out to act as catalyst.

A trader saw the 7¾% notes due 2019 at 62. Another market source called the bonds up a deuce at 61¾ bid.

AGY declines sharply

A trader noted the sharp drop in AGY Holding Corp.'s 11% senior secured notes due 2014, which had recently been seen anchored around the 91 bid level; on Wednesday, he said, the bonds suffered "a massive, massive drop," down to the 25 level, which "got everybody's attention."

He saw the bonds move back to around 50 bid on Thursday.

He said, "There were rumors around about what happened, so the bonds traded down at 25 - a single print, round lots, and it kind of woke everybody up."

He said that he had seen no trading at 50 bid on Thursday, "but obviously, the bid is much better than where they were trading [Wednesday]."

He was skeptical of the notion that the drop may have been caused by a mistake or a bad print. "There's a lot of stories going around, but from what I know, it was a real trade - but beyond that, everything is kind of rumor and speculation."

A market source at another desk said that a check of the Trace system found that there had been no less than six round-lot trades of over $1 million in the bonds down at 25, all at around the same time on Wednesday afternoon, along with one trade sandwiched in there at 51 bid, but nothing at all after that.

And very late in the day on Thursday, the source said, there were two more trades at 51, considered fairly good-sized but not quite round-lot caliber.

There was no fresh news seen out Thursday on the company, an Aiken, S.C.-based maker of fiberglass yarns and specialty glass materials formerly known as Advanced Glassfiber Yarns - the name some in the market still use for it - until its 2004 reorganization. There were also no new regulatory filings seen.

Several traders queried by Prospect News said they had not heard anything about the company that might explain the very unusual activity in its bonds, and calls to the company late in the afternoon on Thursday had not been returned by press time.

Broad market firms

Elsewhere in distressed debt, a trader said Nortel Networks Corp.'s 10¾% notes due 2016 and 10 1/8% notes due 2013 ended at 108 bid, 109 offered.

The trader also saw NewPage Corp.'s 11 3/8% first-lien notes due 2014 at 86 bid, 86 ½ offered and the 10% second-lien notes due 2012 at 13 bid, 14 offered, both "up a point or so."

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