Visteon announces tender, buoys structure; Retailers mixed; Harrah's notes come off highs

By Stephanie N. Rotondo

Portland, Ore., May 20 - Trading in Visteon Corp. dominated Tuesday's distressed debt arena after the company announced late Monday a $344 million tender offer for its 8¼% notes due 2010.

The exchange, an effort to extend maturities of upcoming debt, is a move other companies in the distressed world have already successfully maneuvered. The tendered-for notes gained as much as 5 points during the session, though its other bonds declined.

Meanwhile, as oil prices hit $129 per barrel and as retailers such as Home Depot and Target posted weak sales and forecasted a softer year ahead, distressed sector retailers ended mixed on the day. Burlington Coat Factory Warehouse Corp.'s bonds edged higher, but Bon-Ton Stores Inc.'s slipped. Linens n'Things Inc. bonds moved up 5 points, one trader reported, as investors reacted positively to the company's liquidation auction stalking horse bid.

Among gaming names, Harrah's Entertainment's bonds continue to be the more active in the sector. After inching upward over the last few sessions, the bonds came back from their highs. A trader speculated the move came as the overall market weakened.

While traders said there was more action in the distressed bond market Tuesday, they still see investors more focused on the plethora of new deals that have recently emerged. One trader said that the new Plains Exploration and Chesapeake Energy bonds were among the busier issues.

Visteon tender buoys debt

Following in the footsteps of companies such as Residential Capital LLC and Six Flags Inc., Visteon announced that it would exchange up to $344 million of its 8¼% notes due 2010 for notes with a longer maturity and higher coupon.

After late Monday's announcement, the 8¼% notes were actively traded during Tuesday's session, gaining as much as 5 points on the day.

One trader pegged the debt at 95.5 bid, 96.25 offered, up from 91 bid, 91.5 offered previously. At another desk, a trader called the bonds up 5 points to around 96.

However, the first trader saw Visteon's other issue, the 7% notes due 2014, down post-news, trading around 70. Another source deemed the notes nearly 2 points softer at 70.5 bid.

Visteon's term loan also headed higher in trading on Tuesday, according to a trader.

The term loan was quoted at 87 bid, 88 offered, up from previous levels of 85½ bid, 86½ offered, the trader said.

Under the terms of the exchange offer, holders of the 8¼% notes will receive 97.83 cents. Bondholders are then required to purchase at least 60% of their tendered sum in new 12¼% notes due 2016. Those bonds will be offered at 91.62 cents on the dollar.

Visteon is a Van Buren Township, Mich.-based automotive parts manufacturer.

Meanwhile, traders reported that activity in Delphi Corp.'s debt was relatively light. One source called the bonds better, however, at 42.5 bid, 43.5 offered.

Inflation worries leave retailers mixed

Inflation concerns dissipated some during Monday's session. But come Tuesday, increasing oil prices and weak quarterly numbers from stores like Home Depot and Target resulted in a mixed day for distressed retailers.

One trader said there was "not much material change" in the sector. He said Burlington Coat Factory's 11 1/8% notes due 2015 were up slightly at 86.25 bid, 86.5 offered, while Bon-Ton Stores' 10¼% notes due 2014 slipped to 73.5 bid, 74.5 offered.

The trader also called Michael's Stores Inc.'s 10% notes due 2014 unchanged at 93.5 bid, 94.25 offered.

But another trader saw distressed retail names "a little weaker," quoting Bon-Ton Stores' notes down a point at 73.5 bid, 74.5 offered, and Burlington Coat down half a point to 85.75 bid, 86.75 offered.

At another desk, a trader said Rite-Aid's debt "must have been on somebody's radar," as he saw a lot of quotes in the name but not as many trades.

The trader quoted the 8 5/8% notes due 2015, the 9½% notes due 2017 and the 9 3/8% notes due 2015 - which he said trade "about the same" - at 80 bid, 80.5 offered.

Elsewhere, Linens n'Things floating-rate notes due 2014 gained 5 points, a trader said. The trader placed the bonds around 40, adding that the debt was lifted on news late Monday that the company had named the lead bidder in its liquidation auction.

The hearing to approve the stalking horse bid was continued to Wednesday.

News reports have also indicated that two Indian companies, GHCL and Welspun India, are interested in the retailer.

The auction will take place on May 29.

Harrah's comes down from highs

Harrah's Entertainment's bonds came off their highs during Tuesday trading, a trader said - though he was not sure why.

The trader assumed that the notes dipped as the general marketplace experienced an overall weaker day.

Harrah's 10¾% notes due 2016 - considered by some to be one of the more active issues in the junk arena - fell to 87.75 bid, 88 offered from their highs around 89 previously. The 5 3/8% notes due 2013 also "saw some action," closing at 65.25 bid, 65.375 offered.

At another desk, a trader said Harrah's bonds retreated from their recent run up, the 10¾% notes down about a quarter-point to 87.75. The trader also saw the 10¾% PIK notes due 2018 trading at around the 80 level.

The trader added that in the gaming sector as a whole, prices were fairly firm to unchanged.

Harrah's is a Las Vegas-based casino and hotel operator.

Broad market mostly weaker

Rental Services Corp.'s 9½% note due 2014 traded in "little bits," a trader said, at 89 bid, 89.25 offered.

A trader said Charter Communications Inc.'s bonds fell slightly with the broad market, its 11% notes due 2015 ending down a half point at 84.5.

The trader said many of the junk market's "benchmark" issues, such as Idearc Inc.'s 8% notes due 2016, were weaker in line with the overall market. He quoted Idearc's bonds down a point at around 72.5.

Swift Transportation's 12½% notes due 2017 were unchanged at 36 bid, 38 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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