ServiceMaster gives up gains; WaMu comes in on JPMorgan settlement news; NII debt busy, softer

By Stephanie N. Rotondo

Phoenix, Nov. 19 - It was a new issue-dominated day on Tuesday and distressed debt traders said that was leaving them with little else to do.

After rebounding in the previous session, ServiceMaster Co.'s bonds came back in on Tuesday. The gyrations indicate that investors are unsure what is up next for the company, according to one trader.

Washington Mutual Inc. debt also came back in after rising on Monday on chatter JPMorgan Chase & Co. was nearing a settlement with the Justice Department. The deal was announced on Tuesday and requires JPMorgan to pay $13 billion.

Away from those names, NII Holdings Inc. continued to be active. Like ServiceMaster and WaMu, the bonds had gained ground on Monday, but gave back some come Tuesday.

ServiceMaster stays topical

A trader said that there was "a lot of trading today" in ServiceMaster's 7% notes due 2020.

He saw the bonds in a 96 to 96½ range, down from trades with a 97 handle on Monday, which was up over 3 points from Friday, when the bonds had slid to 94.

"They bounced back [Monday] and then they came in a little [Tuesday]" the trader said. "They seemed to trade in the mid-sixes, mostly, as people again debate what's going on with the credit and whether they want to stick around and see whether they do the spin off of TruGreen and how that plays out."

Another trader called the issue off over half a point at 96 3/8.

The Memphis-based provider of home maintenance and cleaning, extermination, lawn care and other types of services released an 8-K on Monday in which it outlined its plans to largely divest itself of its underperforming TruGreen lawn care business via a spinoff through a tax-free, pro rata dividend to the stockholders of the parent company, with a target effective date of Dec. 31.

The company noted that over the past two years, "TruGreen's financial performance has declined substantially, in contrast to ServiceMaster's other business segments."

The company incurred about $1.6 billion total of impairment charges to TruGreen's goodwill and trade name - $913 million in 2012 and $673 million in the first nine months of this year.

Should it successfully rid itself of TruGreen, such a development "would accelerate a future public offering of Holdings [i.e., the parent company], the proceeds of which we currently expect to use primarily to reduce ServiceMaster's indebtedness."

WaMu moves on JPMorgan deal

WaMu paper gave back some gains on Tuesday after JPMorgan's settlement with the Justice Department was officially announced.

A trader pegged the bonds at 301/2.

JPMorgan - which took over Seattle-based WaMu in 2008 - inked a $13 billion settlement with the Justice Department, resolving several state and federal lawsuits that alleged the bank knowingly misled investors in regard to mortgage-backed securities it sold.

"It wasn't a huge surprise," a source said of the deal, given that various bits and pieces had been leaked to the media throughout the negotiation process.

Aside from having to pay $13 billion to the government, JPMorgan also had to make several concessions, including acknowledging a statement of facts that showed how the bank did in fact mislead investors when it sold them toxic bundles of mortgage-backed securities. The bank also failed to get Justice to agree to drop all related criminal investigations, leaving the bank open for criminal charges.

But one market source said that while a criminal case "would be disastrous," he noted that it would be a very difficult case to prove. Therefore, he doubted it would even get that far.

NII gives back gains

NII Holdings continued to be a focus for distressed investors, though the bonds failed to hold onto the gains incurred in Monday trading.

A trader called the 10% notes due 2016 a point lower at 611/2, while the 8 7/8% notes due 2019 fell over a point to 51.

Another trader pegged the 10% notes at 61 bid, 62 offered.

NII Holdings is a Reston, Va.-based provider of Nextel mobile phone service in Latin America.

Paul Deckelman contributed to this article

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.