Holiday season in full gear as distressed volume pressured; market holds firm; Toys debt drops

By Stephanie N. Rotondo

Phoenix, Dec. 23 - "The Christmas season is upon us," a distressed debt trader said Monday, lamenting the lack of activity.

Especially in the distressed world, where things have been muted for some time anyway, another trader said all the action was "window dressing or people looking for new ideas into the next year."

But while some were looking for new ideas to play come 2014, much of the day's distressed volume was in names that have typically been busy of late.

One trader said NII Holdings Inc.'s bonds continued to see a bit of play, though he said "levels were pretty much unchanged."

He pegged the 10% notes due 2016 around 53.

Another trader said Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 were also holding in around 111. The debt had risen to those levels last week when the bankrupt shipping company said it had inked a settlement with the Internal Revenue Service and that it had also received two competing term sheets from creditor groups.

Edison Mission Energy was meantime being quoted higher, according to a trader. He said the bonds - which tend to trade in line with one another - were around 76, which was up about a quarter-point.

Toys' loans decline

Toys "R" Us Inc. saw its term loans retreat even further in the secondary on Monday as investors continue to react to negative third quarter financial results that surfaced on Dec. 17, according to a trader.

The term loan B-1 was quoted at 90 bid, 91 offered, down from 90¾ bid, 91¾ offered, and the term loans B-2 and B-3 were quoted at 84 bid, 85 offered, down from 84½ bid, 85½ offered, the trader said.

By comparison, on Dec. 16, the day before financials were released, the B-1 loan was seen at 93 3/8 bid, 94 offered, and the B-2 and B-3 loans were seen at 87¾ bid, 88¾ offered, the trader added.

For the third quarter, the company reported net sales of $2.5 billion, a decrease of $118 million or 4.5% versus the prior year, an operating loss of $140 million, versus an operating loss of $75 million in the 2012 quarter, a net loss of $605 million, compared to a net loss of $105 million in the previous year, and adjusted EBITDA of negative $37 million, compared to $31 million in the prior year.

Toys "R" Us is a Wayne, N.J.-based toy retailer.

Sara Rosenberg contributed to this article

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