ResCap moves higher despite downgrade warning; Rotech looks to regain ground; Exide debt firms

By Stephanie N. Rotondo

Portland, Ore., March 21 - Distressed debt continued to firm in Wednesday trading, though the new issue-focused market continued to take interest away from the lower-quality realm.

Residential Capital LLC was on the active side and better. The move came as the company said it was contemplating a restructuring of its Mexican subsidiaries debt and Standard & Poor's said it was keeping the company on negative watch.

Also higher were Rotech Healthcare Inc.'s bonds. The debt had fallen significantly last week on the back of dismal earnings.

Meanwhile, there was no news out on Exide Technologies Inc., but traders said paper was trading fairly briskly and stronger.

ResCap moves higher

Residential Capital could face a downgrade by S&P in the near-term, depending largely upon how a proposed restructuring of debt goes for GMAC Financiera, SA de CV Sofom, ENR (GMAC Fin), a company subsidiary in Mexico.

S&P said it was keeping the money-losing mortgage lending unit of Ally Financial Inc. on CreditWatch negative, where the ratings were placed in November.

Still, bonds were better on the day, according to traders.

One trader called the 9 5/8% notes due 2015 at 851/2, up a point from previous levels. Another trader pegged the issue around 85.

Minneapolis-based ResCap is considering a restructuring proposal in which debt linked to its GMAC Fin unit would no longer be guaranteed by ResCap. Bondholders would have to approve the measure, which is also predicated on a buyout of the Mexican unit by Adamantine Fund I LP.

Depending on how the deal is facilitated, S&P said it could be considered a distressed debt exchange, which would then result in a rating change.

As previously reported, parent company Ally Financial is hoping to sell assets of ResCap to Fortress Investment Group. The potential sale is valued at $1 billion or more.

Rotech seeks to recoup losses

Rotech Healthcare's debt was regaining some of the ground it lost last week when the company reported a wider-than-expected loss.

A trader called the 10½% second-lien notes due 2018 up a point at 65. Another trader saw the bonds trading around 65 as well, leaving them 64 bid, 66 offered.

"That's slightly better," he said.

Last week, the Orlando-based health care company reported a loss of 33 cents per share for the fourth quarter. That was more than double the loss from the year before and well over the 8 cents per share loss expected by analysts.

Exide rises on no news

Milton, Ga.-based Exide Technologies' bonds were rising in midweek trading, though there was no fresh news out that would have prompted the gains.

"There was a lot of trading, but not much movement," a trader said. He called the 8 5/8% notes due 2018 up just under a point at 841/2.

Another trader said there was "a little more action" in the debt, though he said the notes were steady around the 84 level.

Caesars bonds winning

A trader said "Caesars [Entertainment Inc. bonds] are all up" in Wednesday trading.

He called the 10% notes due 2018 up nearly a point at 79 and the 12¾% notes due 2018 at 87, also up nearly a point.

Another market source pegged the 10% notes at 78¾ bid, a modest gain from the day before.

Caesars is a Las Vegas-based hotel and casino operator.

Quiet on the Springleaf front

A trader said he had not yet seen any reaction in Springleaf Finance Inc.'s debt on news the company had hired restructuring lawyers Dewey & LeBouef. He noted that the news came out late in the day and speculated that there might be some action in the debt come Thursday.

In a regulatory filing released earlier in the week, the Evansville, Ind.-based loan origination firm said it was also being advised by Houlihan Lokey and Alvarez & Marsal.

Springleaf is owned by Fortress Investment Group.

More gains for distressed

Elsewhere in distressed debt land, Travelport LLC's bonds "continue to move up," according to a trader.

He said the bonds were up "maybe a couple points," the 9 7/8% notes due 2014 ending at 68.

Another trader said Lehman Brothers Holdings Inc.'s paper was active and stronger still. He placed the debt around 29¾ on "the best of the issues."

And, Circus and Eldorado Joint Venture's 10 1/8% notes that were to have matured on March 1 were "up a tiny bit" at 821/2.

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