Petroplus paper punished; plan pushes Dynegy up; Kodak shuffles advisors, but bonds steady

By Paul Deckelman

New York, Jan. 23 - Petroplus Holdings AG's bonds fell by between 6 and 8 points across the board on Monday traders said, after the troubled European energy refiner's creditors reportedly barred the company from shipping out fuel from its British refinery, raising new questions about its ability to survive.

On the domestic energy scene, there was active trading at higher levels in the bonds of offshore energy operator ATP Oil & Gas Corp., although no fresh news about the company was seen.

The recent news about Dynegy Holdings Inc.'s revised reorganization plan, though, was enough to spur that company's bonds several points higher, with junior holders slated to get more under that amended arrangement than they were originally looking at.

Fellow power-generating company Edison Mission Energy's bonds, recently under pressure, were also seen higher.

Also showing improvement was bankrupt air carrier AMR Corp., as speculation continued that some of its rivals might be looking to make an offer for it, at some point.

Eastman Kodak Co.'s paper, which had gyrated in the wake of the camera-maker's bankruptcy filing last week, was seen pretty steady on the session, on not that much volume. The company surprised some observers by announcing a new restructuring advisor and chief restructuring officer, this just a couple of days after its original appointments to both of those posts.

And the lately-busy Sears Holdings Corp.'s bonds continued to generate considerable activity, with the retailer's bonds seen holding at their recent highs, although its shares slid after having soared on Friday.

Petroplus gets pounded

A trader said that Petroplus Holdings' debt was "down a fair amount today" as its several series of bonds fell into the 40s, "depending on what flavor you're talking about."

He called that down 6 to 8 points on the session, spurred by the news that the problem-plagued refining company stopped making deliveries from one of its refineries.

The Zug, Switzerland-based company also requested that trading in its shares, which trade on European bourses and over the counter in the United States, be halted.

"Obviously, this is nothing overly positive in any of that," he said.

A market source at another desk pegged the company's 9 3/8% notes due 2019 at about the 46 level, down from levels above 50 bid that the paper had risen to on Friday, when it popped by several points on the possibility of an asset sale.

Its 6¾% notes due 2014, which had firmed to 53 bid on Friday, had slid back down to around 47 on Monday.

Petroplus, which operates five refineries in Europe, has been under pressure for some weeks since its lenders suspended the company's access to its credit lines. That forced Petroplus to stop buying crude oil for its refineries. It suspended operations at its plants in Switzerland, Belgium and France at that time, but managed to keep its British and German refineries operating, albeit at reduced capacity - until now.

A member of the European parliament representing the area in England where the company's Coryton refinery is located said on Monday that Petroplus' lenders had forbidden it from making any fuel deliveries to customers. There was no immediate confirmation of this from the company.

Petroplus last week said it would look to sell the Swiss, French and Belgian refineries while seeking strategic alternatives for its other two facilities.

That news had caused its bonds to move up on Friday between 3 and 5 points, to a lower 50s context.

ATP is active

A trader said that ATP Oil & Gas was one of the busier issues on the session, with turnover of about $16 million in the Houston-based offshore energy company's 11 7/8% senior secured notes due 2015 trading at 70 1/8 bid, which he called a gain of 2 points on the day.

A second trader said the bonds were up by 2 points on an intraday basis to a 70 - 71 region, although he quoted them going home trading between 69 and 70 bid, calling that a 1-point rise on the session. "But off the highs," the trader said.

There was no fresh news out on the company on Monday, a trader said.

New plan boosts Dynegy

Dynegy Holdings' bonds were seen better on Monday, a trader said, in the wake of the company's recent filing of an amended reorganization plan that is seen as more favorable to junior creditors.

"That was the catalyst," he said.

He quoted the bankrupt Houston-based power generating company's 7¾% notes due 2019 trading in a 57½ to 59½ context on those developments.

A market source at another desk quoted the bonds going out as high as 59½ bid, calling that up 2 points.

A trader at another shop said the bonds were being quoted at that same level, but described it as being 3 points better.

Under the amended plan filed last Thursday with the federal bankruptcy court, Dynegy said unsecured noteholders who are owed $4 billion will share $400 million in cash and $2.1 billion in new convertible preferred stock.

The new plan raises the amount in new senior notes they will receive to $1.015 billion, a $15 million increase.

Dynegy also said that holders of its subordinated notes, who are owed about $216 million, also will have the option of collecting 35 cents on the dollar for their notes, up from the 25 cents stipulated in the plan that the company filed last month.

Also in the power-generation sphere, a trader saw Edison Mission Energy's 7% notes due 2017 up by 1½ points to finish at 55 bid, on volume of $18 million. The notes are "actually up today," the trader said.

The Rosemead, Calif.-based utility operator's bonds had declined by several points last week

AMR improvement seen

A trader said that AMR's paper "has been trending better" with the bankrupt Fort Worth, Texas-based airline carrier's 7½% notes finishing Monday at 81½ bid, 82 offered, versus levels of about 79 bid last week.

There was no fresh definitive news out on the stricken airline giant. The company and its main operating unit filed for Chapter 11 protection on Nov. 29 in order to address its uncompetitive cost structure.

There has been recent chatter that rival carriers Delta Air Lines Inc. and US Airways Group, Inc. have been considering making offers to acquire AMR, as has private equity firm TPG Capital Group.

The Wall Street Journal recently reported that Tempe, Ariz.-based US Airways hired Millstein & Co. to help it examine American. Atlanta-based Delta retained the Blackstone Group to advise it. None of those companies has confirmed or denied the reports.

Ironically, both Delta and US Air were among a number of large U.S.-flagship airline operators that preceded American into bankruptcy over the last several years using the Chapter 11 process to shed burdensome debt loads and unfavorable labor and airline leasing contracts so they could emerge leaner and more financially fit.

Until recently, American was one of just a handful of major carriers that did not crash land in Chapter 11.

Sears still in the spotlight

A trader said that Sears Holdings' 6 5/8% notes due 2018 were off by a half point, trading at 84 bid.

However, a second trader said that the troubled Hoffman Estates, Ill.-based retailer's bonds "traded up some more" to go out around the 85 level.

"That one's obviously been topical," he added.

Another trader said that the 6 5/8s were going home on Monday at 85 bid, after "rallying over the last few days and hitting a new high today."

Sears bonds remained in their usual slot near the top of the high-yield most-actives list, with a market source seeing more than $14 million trading by late afternoon.

The same bonds and the company's Nasdaq-traded shares, have been on a tear over the last week or so, bouncing back after taking a beating in the immediate aftermath of the Dec. 27 news that Sears' and Kmart's same-store sales were down 5.2% from a year ago during the crucial two-month selling period heading into Christmas.

Sears then announced that it would close up to 125 underperforming Kmart or Sears stores.

The bonds are nearly all of the way back up to the mid- to high-80s, bouncing back from around 70 bid immediately after the news.

Sears has reportedly been meeting with lenders to give reassurances about the basic health of the company. It met with CIT Group Inc., a major lender to the middle-market companies that make up much of Sears' vendor base.

Earlier this month, it was reported that CIT would no longer extend credit to those companies to finance their deliveries of merchandise to Sears.

But last week, the news was that the New York-based financial firm decided to reverse that decision and once again supply credit to the vendors.

Meanwhile, Sears' shares have been Wall Street's hottest ticket of late, gaining more than 50% last week alone.

Much of the buying was spurred by speculation that majority owner Edward S. Lampert - who took advantage of the stock's drastically lower price to buy another $159 million - may take the company private.

But while the shares zoomed by more than 13% on Friday on over four times their normal volume, there was a pullback on Monday with the stock losing $1.61, or 3.29%, to end at $47.39, on volume of 8.4 million shares, almost five times the norm.

Kodak firm amid advisor shift

A trader said that Eastman Kodak paper "was not overly active" on Monday.

But he saw its 7¼% notes due 2013 and convertible 7% notes due 2017 were a little bit softer, around a 29-30 bid context.

He saw the bankrupt Rochester, N.Y.-based photographic products and printer company's secured paper - its 9¾% notes due 2018 and 10 5/8% notes due 2019 - still hanging in around the 88-89 level.

A second trader called the company's bonds unchanged from Friday, when they had firmed just a day after the not-totally-unexpected Chapter 11 filing by Kodak, once a proud symbol of American manufacturing greatness.

The company has been affected over the last few years by the abrupt shift in the photography world to digital, which rendered most of venerable Kodak's most profitable products obsolete.

The bonds rose on Friday as investors tried to hash out anticipated recovery values from the restructuring.

While the slide into bankruptcy was really no surprise, Kodak did make an unexpected move of sorts on Monday, when it announced the hiring of James A. Mesterharm of AlixPartners LLP as its chief restructuring officer, replacing Dominic DiNapoli of FTI Consulting Inc. That came less than a week after it announced DiNapoli's appointment.

Kodak said this allows it to leverage AlixPartners' knowledge of the company due to its pre-existing operational enhancement advisory engagement over the past several months.

However, FTI Consulting is expected to remain on board and continue to work on some post-bankruptcy matters alongside AlixPartners, Kodak said.

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