Sears bonds rise after CEO exit news; AMD downgraded, but debt firms; Exide paper loses ground

By Stephanie N. Rotondo

Phoenix, Jan. 8 - After a sideways day on Monday, the distressed debt market on Tuesday saw a return of strength.

Sears Holdings Corp.'s bonds moved up following Monday's announcement that its current chief executive would leave his post in February. The exit was attributed to "family health matters." Edward S. Lampert, chairman, will take over the role.

Even Advanced Micro Devices Inc. was inching higher, despite a downgrade from Standard & Poor's. The downgrade was based on the belief that the chipmaker will continue to struggle as competition increases.

But the firm day did not help Exide Technologies Inc. A trader said activity in the name has been picking up recently, seeing the debt drifting in Tuesday trading.

Sears up on CEO exit

Late Monday, retailer Sears announced that its CEO, Louis J. D'Ambrosio, is leaving his position in February due to family health issues. The company's chairman of the board, Edward S. Lampert, will take over the role.

For his part, Lampert was responsible for bringing in Kmart to the Sears fold in 2005.

The company's bonds reacted positively to the news, as a trader saw the 6 5/8% notes due 2018 rising "almost" 1½ points to end around 95.

Sears has struggled to boost its financials during the recession and same-store sales have been pressured for the last six years.

Lampert - who is also the head of hedge fund ESL investments - is rumored to have a plan to wring out value from the company. However, the plan is said to include selling off the brands under Sears that have retained good reputations.

Though Lampert has enjoyed success in the financial realm, some have expressed concerns about his lack of retail expertise.

"While we acknowledge Mr. Lampert's insight and expertise when it comes to 'financial engineering,' we are concerned about his lack of merchandising experience at a time when the retailer is struggling to turn around its core Sears and Kmart chains," wrote Gimme Credit LLC analyst Evan Mann in an afternoon report released Tuesday. Despite a decent liquidity cushion, "Sears has a lot of work to do righting the ship."

AMD rises despite downgrade

S&P downgraded AMD on Tuesday, citing expectations that revenues and earnings will remain weak because of declining demand in the overall PC market, as well as a loss of market share to competitors such as Intel.

Still, the company's bonds were unchanged to better on the day, according to a trader.

The trader pegged the 8 1/8% notes due 2017 at 92 5/8 and the 7¾% notes due 2020 at 853/4.

Despite the downgrade, S&P did note that AMD has good liquidity, along with an "opportunity to stabilize its operating performance in 2013."

Exide loses ground

A trader said there has been "a fair amount of activity" in Exide Technologies' paper of late.

That continued on Tuesday, as the 8 5/8% notes due 2018 dropped over a point to 87.

There was, however, no fresh news to act as a catalyst for the Alpharetta, Ga.-based battery maker.

Travelport gains continue

Travelport LLC's debt continued to post gains on Tuesday.

A trader called the 11 7/8% notes due 2016 up 4½ points to 57 3/8. Another trader said the issue was "up dramatically," trading around 57.

Word has it that the travel services company recently inked a new deal with bankrupt AMR Corp. and that it is considering a refinancing deal as well.

AMR considers equity committee

In AMR news, the Fort Worth-based parent of American Airlines filed an 8-K after the close that indicated it was exploring the possibility of appointing an equity committee.

When AMR originally filed for Chapter 11 protections in November 2011, it was decided that there was not enough value at the time to both appointing a committee for shareholders. However, since then, the company has seen a "dramatic increase in value" - the benchmark 6¼% convertible notes due 2014 recently broke through 90 - a trader said.

"So this thing may crank," he said, should a committee be appointed.

The decision to appoint such a group was spurred by one equity investor - Simon Mark Tabashnick - who had contacted counsel representing AMR, asking for a committee to be created.

"As you know from media reports, the debtors, the [unsecured creditors committee] and others are currently in the process of exploring strategic alternatives to effectuate the reorganization of the debtors, as contemplated by the provisions of chapter 11 of the Bankruptcy Code," wrote attorney Harvey R. Miller of Weil, Gotshal & Manges LLP in a letter to U.S. attorney Brian S. Masumoto.

"In that connection, it appears that the value of the debtors has significantly appreciated. Depending upon the ultimate strategic alternative adopted and pursued, there exists a reasonable possibility that there may be value for AMR equity holders consistent with the absolute priority rule."

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