Windstream gets a default notice; CRC, Denbury remain firm; Toys’ debt continues to trade up

By Stephanie N. Rotondo

Seattle, Sept. 25 – The distressed debt market was “pretty quiet,” a trader said Monday.

However, he opined that Tuesday could bring a pick-up in activity, particularly in Windstream Holdings Inc. bonds.

He noted that the company had filed an 8-K late in the day that said that a holder of over 25% of the company’s 6 3/8% notes due 2023 was claiming the company was in default.

For its part, the company denies the allegations.

Meanwhile, California Resources Corp.’s 8% second-lien notes due 2022 continued to be “better,” a trader said.

The trader said the bonds got as high as 66½.

Another market source pegged the paper at 66¼, up 3½ points.

Sector peer Denbury Resources Inc. was also on the rise, as its 6 3/8% notes due 2021 added a point to close at 56½.

There hasn’t been any fresh news out on either oil and gas producer recently, but the bonds – as well as the energy sector as a whole – have been climbing higher, helped by a recent rise in domestic crude prices.

Among other notable distressed names, Toys ‘R’ Us Inc.’s 7 3/8% notes due 2018 continued to tick upward.

One trader quoted the issue in a 31 to 32 context. Another saw the bonds inching up half a point to 32.

The bonds are now trading flat, or without accrued interest, given the company’s bankruptcy filing on Sept. 19.

Windstream winds down

Trading in Windstream could surge on Tuesday, after the company reported late Monday it was served with a notice of default.

The default notice alleged that the company’s transfer of certain assets and the subsequent lease of those assets in connection with the spinoff of Communications Sales & Leasing Inc. – now known as Uniti Group Inc. – was a violation of the sale and leaseback covenant under the indenture.

The noteholder also alleged that the company violated a restricted payment covenant.

“That might spook some people,” a trader said, even though the company asserts that the claim is without merit.

Ahead of the 8-K filing, Windstream’s 6 3/8% notes continued to lose ground, falling nearly 2 points to 66¾, according to a market source.

GSEs, Novavax eyed

As for distressed preferreds, Fannie Mae and Freddie Mac preferreds once again topped the list of most active securities.

However, there was no fresh news to act as a catalyst.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) added a penny to close at $7.01, with about 1.29 million shares being traded. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were meantime up 9 cents, or 1.32%, at $6.93.

About 1.47 million of those preferreds were exchanged.

Meanwhile, in the world of distressed convertibles, Novavax Inc.’s 3.75% convertible notes due 2023 were a point firmer at day’s end, according to a trader.

The trader saw the notes at 48.

Another source quoted the issue at 48 bid, 48.5 offered. That compared to the last round-lot trades around 44.5.

Novavax’s stock (Nasdaq: NVAX) traded up a nickel, or 4.31%, to $1.21.

“The stock has been ticking up slowly,” the first trader said. “This one has been down in the doldrums from a long time.”

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