Radian gains on tender offer; Kodak convertibles tumble; Exide active; Sears busy post numbers

By Paul Deckelman

New York, Feb. 23 - Radian Group Inc.'s bonds moved higher in busy trading Thursday after the mortgage insurance concern announced plans to tender for one of its outstanding issues. A trader noted that it was "a pretty big deal for a relatively small name."

There was not too much follow-through seen in the bonds of some sector peers like MGIC Investment Corp. and MBIA Inc., although both credits, along with Radian, have recently been firming.

There was heavy trading, to the downside, in bankrupt photographic technology provider Eastman Kodak Co.'s convertible notes. The company's other bonds were pretty much little changed.

Traders saw continued activity in Exide Technologies, Inc., although the battery maker's bonds were pretty much unchanged from the overall levels they have held since the company reported unfavorable quarterly numbers earlier this month.

Sears Holdings Corp. had numbers out on Thursday and they were not particularly good. However, the retailer's bonds were actively traded, though not much changed price-wise, in line with a stock surge prompted by the company's announcement that it was monetizing some assets and company executives' assertions on their conference call that Sears is in a solid liquidity position.

Radian rallies on tender news

A trader said that Radian Group "announced a tender offer today, so the bonds jumped up. That was pretty exciting."

He saw the Philadelphia-based mortgage insurance company's 5 5/8% notes due 2013 push up to around an 86-87 context on volume of more than $10 million, "so they were one of the tops in activity."

He said the bonds were up at least 2½ to 3 points on the day.

He also saw the company's 5 3/8% notes due 2015 finishing "up a couple of points," at 70½ bid, 71 offered, also on volume of $8 million to $10 million.

It was the second straight session the company's bonds had risen. The 5 5/8% notes moved up by 1 or 2 points on Wednesday, and the 5 3/8% notes were quoted up by as much as 4 points during that previous session.

The trader said, "It's a big move for such a small name. Both of those bond deals are not terribly liquid" at $250 million in size.

The Radian bonds headed northward after the company announced plans for a modified Dutch auction tender offer for a portion of the 5 5/8% notes. That tender offer is scheduled to expire on March 21. Holders who tender by 5 p.m. ET on March 7 will receive an early participation payment of $40 per $1,000 principal amount.

The company is offering to buy up to $100 million of the 5 5/8% notes at a price between $780 and $860 per $1,000 principal amount, including the early participation payment.

The trader noted that Radian's bonds have been moving up steadily.

"It wasn't so long ago," he said, that "they were at least 10 to 15 points lower."

He said the 5 5/8% notes finished 2011 in the 60s and started this year in a 70-72 context.

He said the 5 3/8% notes were "lower because they were longer in duration," ending last year around 50 bid.

Not much carryover

The trader said that "[Radian] announced the tender, so that's what did it for them."

He did not see much in the way of coat tails to carry the bonds of Radian's sector peers like Milwaukee-based MGIC Investment or Armonk, N.Y.-based MBIA.

He saw MGIC's 5% notes due 2017 up 1 point at 74 bid but said that there was "not much volume, just a couple of trades. There wasn't much follow-up in that."

He saw MBIA's 14% surplus notes due 2033 pretty much unchanged at 60 bid, 62 offered.

Sears busy but stable

One of the busiest bonds of the day, with over $30 million changing hands on a round-lot basis, was Sears Holding's 6 5/8% notes due 2018. But they were seen about unchanged to either up or down a half point in an 87 context, even though the Hoffman Estates, Ill.-based department store operator's stock surged following the company's release of its fourth-quarter results and announcements of two big asset sales aimed at boosting liquidity.

"Sears had a big day; its stock popped," a trader said, seeing the bonds vying for supremacy among the most-actives with the Chesapeake issue.

But he saw the bonds little changed in the 87¼ bid area, calling them maybe a half-point different from where they had been, "but there was a lot of volume."

Another trader said the Sears bonds were about unchanged up around the 87-plus level. He said, "I guess the news was in the wind, because it was unchanged on Trace."

Sears' Nasdaq-traded shares zoomed by as much as 24% in intra-day dealings before finally settling in up by $9.72, or 18.66% on the day, at $61.80.

While the fourth-quarter results themselves were disappointing - both the chief executive officer and the chief financial officer called the results "unacceptable" - the executives touted the company's solid liquidity, at over $3.2 billion, and the strong roster of assets that back up its secured credit facility and that are available for possible sale.

And Sears on Thursday separately announced plans to sell 11 of its stores to a shopping-center real estate investment trust company to generate $270 million of proceeds and plans to spin off to its shareholders some of the specialty stores that it runs in addition to its iconic Sears and Kmart department store chains. The spinoff will be done via a rights issue that aims to raise between $400 million and $500 million for the parent company.

Exide still active

A trader said that Exide Technologies remains one of the more active names from the distressed-debt sector, seeing the Milton, Ga.-based automotive and industrial battery maker's 8 5/8% notes due 2018 with turnover of at least $10 million to $12 million on Trace, "and obviously, it's a lot bigger than that" since Trace tends to undercount junk bond trading because its largest trade is $1 million-plus - which could be a dollar more or $5 million more.

He saw the bonds at 76½ bid, 76¾ offered, calling them unchanged. "But a lot of activity in that name."

A second trader also noted the activity in Exide, saying there were "still sellers around."

He pointed out that the 761/2-to-77½ level at which the bonds have recently been trading "was the low tick after [disappointing] earnings" earlier this month.

"They've been in that range for about a dozen sessions," he said, "and they're still there now."

Kodak converts get crushed

Elsewhere, a trader noted "a lot of activity" in Eastman Kodak's 7% convertible notes due 2017, which slid down to about a 23-24 context on Thursday from prior levels around 27.

"They were down 3 or 4 points on the day," he said. "It seemed like the bond of the session."

Several other traders also said that the bonds had, in fact, slid into the lower 20s from the upper 20s previously and on considerable volume.

One market source said that over $46 million of those notes changed hands on the day, gyrating between lows around 23 and highs around 28 before ending at 23 7/8 bid.

The same kind of movement had also been seen on Wednesday, but they ended that session at 27 bid.

There was no fresh news out about the bankrupt Rochester, N.Y.-based photographic products maker that might explain the sudden surge in the convertibles' activity level.

One of the trader meantime said that he had not seen much trading going on in Kodak's 7¼% straight bonds due 2013, pegging them as staying up around 27.

However, another participant said those bonds too had come in, to around the 25 5/8 bid level, on volume of more than $9 million.

Rebecca Melvin contributed to this report

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