Penn National takeover over, bonds lose 6 points; GMAC paper continues heavy

By Stephanie N. Rotondo

Portland, Ore., July 3 - With the market taking a short hiatus for the Fourth of July, Thursday's trading day was a short one and distressed bonds were largely deemed unchanged.

However, Penn National Gaming's bonds did not follow the crowd. The casino operator announced Thursday that a takeover announced last June was not going to happen. Under the terms of the $5.82 billion deal, a Fortress Investment/Centerbridge team would acquire the company. But as the deal fell apart, the company's debt did likewise, losing as much as 6 points.

Meanwhile, GMAC LLC's recently heavy paper only traded more heavily during the abbreviated session. There was no news out to cause the dip, but it is widely known that the mortgage lender has dealt with its share of obstacles in the recent past. A trader said that, generally speaking, the company's bonds were down at least a point.

Penn takeover over, bonds decline

Penn National Gaming announced Thursday that its $5.82 billion takeover deal has fallen through.

The news sent the rarely traded debt down as much as 6 points. A trader quoted the 6¾% notes due 2015 at 88, down from 94. Another trader called the issue wide at 86.5 bid, 88.5 offered. He also saw the 6 7/8% notes due 2011 at 90 bid.

Still, "even on the back of that news, the bonds were not all that active," the trader said.

The multi-million dollar buyout from Fortress Investment Group and Centerbridge Partners LP unraveled in the last year. The buyers had originally offered $67 per share for the casino operator last June. Since then, however, the company's stock has fallen well below that price.

In a statement, Penn said the deal could not move forward without "significant and lengthy litigation." The company also said that a renegotiated deal was not an option.

Wyomissing, Pa.-based Penn will receive $1.475 billion as a result of the failed deal. That includes a $225 million cash termination fee, as well as a $1.25 billion equity infusion from the buyers, along with Wachovia and Deutsche Bank. The company could use the funds to pay down debt.

GMAC bonds end heavier

GMAC paper "came under some pressure," a trader said, though there was no news to weigh on the bonds.

The trader said that the mortgage lending arm of General Motors Corp. lost "a solid point generally," its 7¾% notes due 2010 at 75 bid and its 5.85% notes due 2009 at 89.5 bid, 90.5 offered. He also saw the 6 7/8% notes due 2011 offered at 67, down from 70 in the previous session.

At another desk, a trader quoted the 8% notes due 2031 around 60.5, adding that the debt had a 64 bid on Tuesday. Yet another source deemed the 6 7/8% notes due 2012 down 2¼ points to 64 bid.

GMAC has fallen on rough times, ever since the subprime mortgage blowout left its Residential Capital LLC subsidiary barely treading water. GMAC has continuously bailed out its flailing offspring, leaving many market players to wonder when the well will dry up. However, GMAC has maintained that it believes ResCap will once again be able to generate cash.

Broad market mostly unchanged

With the market closing early in preparation for the Independence Day holiday, many distressed players were away from their desks. As a result, trading was thin and things that did trade were largely unchanged.

"Nobody really wanted to do much," a trader said. "They wanted to get to the three-day weekend and start over."

A trader said there has been "no change" in Rafaella Apparel Group Inc.'s 11¼% notes due 2011, which have remained at 58.

"There was some weakness in Charter [Communications Inc.], but they came back to about the same level they have been," the trader added. He quoted the 11% notes due 2015 at 73.5 bid, 74 offered, down a touch from the previous day's levels of 73.75 bid, 74.25 offered.

After trading actively on Wednesday, Blockbuster Inc.'s bonds experienced a lull. A trader placed the 9% notes due 2012 at 84 bid, 85 offered, unchanged.

Meanwhile, VeraSun Energy's 9 3/8% notes due 2017 traded at 53, while Travelport LLC's 11 7/8% notes due 2016 moved at 79.

Spheris' 11% notes due 2012 were quoted at a wide 70 bid, 75 offered.

Both Idearc Inc.'s 8% notes due 2016 and Neff Corp.'s 10% notes due 2015 were seen unchanged at 62.5 and 36.5, respectively.

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