Best Buy gains on formal buyout offer rumors; Edison Mission up as grace period nears end

By Stephanie N. Rotondo

Phoenix, Dec. 13 - Distressed bonds continued to see strength Thursday, as has been the trend of late.

However, as has also been the way of it, investors remained focused on new high-yield issues, traders said.

"That seems to be the bulk of the activity," one trader noted, adding that action in Sprint Nextel Corp. and Clearwire Corp. was also taking focus, as Sprint made a play to buy Clearwire.

But in the distressed realm, Best Buy Co. Inc. was the nom du jour. The electronics retailer's debt popped as much as 5 points on the day following reports that founder Richard Schulze intended to make a formal buyout offer for the company within the next week.

Meanwhile, Edison Mission Energy's debt was not overly active but did see higher bids. The company's 30-day grace period is set to expire at the end of the week. It is believed that a bankruptcy filing is imminent.

Best Buy up on buyout talk

A trader said Best Buy's bonds were "definitely a little bit better" on news the company's founder and former chief executive planned to make a formal bid for the company.

He called the 5½% notes due 2021 up 5 points to an 88 to 89 context.

Another trader saw the 3¾% notes due 2016 rising 4 points to 951/2.

Schulze's offer is said to be fully financed and is expected in the $5 billion to $6 billion range. In August, Schulze - who holds a 20% stake in the company - had said he could offer up to $24.00 to $26.00 per share, or a sum between $8.16 billion to $8.84 billion.

At $5 billion to $6 billion, the price per share would be about $15.00 to $18.00.

Best Buy has struggled to keep up as consumers search for good deals on electronics online. Because of the increase in online shopping, as well as shopping at discount retailers such as Wal-Mart, many have wondered if the "brick-and-mortar" business model was still useful to Best Buy, among other retailers.

In the last 10 quarters, same-store sales have declined in nine of them.

Edison inches upward

Time is running out for Edison Mission Energy, as a 30-day grace period on a missed coupon rapidly approaches.

The Rosemead, Calif.-based subsidiary of Edison International Inc. skipped a Nov. 15 payment on its 2017, 2019 and 2027 maturities. If the $97 million payment is not made by Dec. 17, the bonds will become due and payable immediately.

Upon skipping the payment, the company warned that a bankruptcy was possible. As reported previously, many in the market see the filing as a foregone conclusion.

Still, the bonds were rallying Thursday, rising to 50½ bid, up from 49½ bid previously.

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