Bon-Ton extends gains yet again; energy names get busy, trade higher; Caesars active, firmer

By Stephanie N. Rotondo

Portland, Ore., Jan. 26 - The distressed debt market was "really hot this morning," a trader said Thursday.

He noted that things "cooled off" by the end of business.

Bon-Ton Stores Inc., however, continued to gain steam. The bonds were up again, extending gains from Tuesday, when the company announced the hiring of a new chief executive officer.

Energy names were getting a fair bit of focus, though without any name-specific news to spur the attention. Edison International paper was up as much as 7½ points on the day, and Dynegy Holdings LLC debt gained as much as 3 points.

Caesars Entertainment Corp. was again trading busily and better. The casino operator's debt has historically been an active trader. But in the last few weeks, there have been little goings-on in the name. The recent resurgence of activity has not been predicated on any fresh news.

Bon-Ton gains continue

Bon-Ton Stores' 10¼% notes due 2014 remained an actively traded issue, according to traders, and the gains continued to mount up.

One trader said the bonds were up another 2½ points, closing around 641/4. Another trader said the paper was up 3 points at 641/2.

The debt started to gain momentum on Tuesday on word the York, Pa.-based retailer had hired Brendan L. Hoffman as its president and CEO, effective Feb. 7.

Hoffman previously worked at Lord & Taylor LLC and at Neiman Marcus Direct.

Energy sector takes focus

Investors were focusing in on energy names Thursday, though without any name- or sector-specific news to act as a catalyst.

A trader said Edison International's notes were "way up," seeing the 7¾% notes due 2016 gaining 7½ points and the 7% notes due 2017 moving up 5 points. The former closed around 681/2, and the latter ended around 61, he said.

Another trader said Edison paper was "definitely up a bit." He also placed the 7% notes around the 61 mark and the 7¾% notes around "68 and change."

"In general, it looked like paper was up a few points," he said, though he had not heard any news that would have prompted the gains.

Meanwhile, Dynegy Holdings' 8 3/8% notes due 2016 were up "about 2 [points]" at 611/4, the first trader said. He also saw the 7¾% notes due 2019 around 60, up "almost 3 [points]."

The second trader said Dynegy paper was "up a couple" across the board, trading in the low 60s.

A third source pegged the 7¾% notes at 601/4, up just three-quarters of a point.

However, not all energy names were gaining ground.

A trader said ATP Oil & Gas Corp.'s 11 5/8% notes due 2015 fell about a point, closing around 67.

Caesars paper reignites

There was no fresh news out on Las Vegas-based casino operator Caesars Entertainment, but the bonds were trading actively and higher anyway.

One trader called the 10% notes due 2018 up three-quarters of a point at 771/2. Another market source deemed the debt up nearly 5 points at 79 bid.

Caesars' 10% notes are a highly liquid issue, which typically means the bonds trade on the active side. However, in recent weeks, the debt has been on the quiet side.

Reader's steady on sale

Reader's Digest Association Corp.'s floating-rate notes due 2017 were unchanged on the day despite favorable reports from both Moody's Investors Service and Standard & Poor's.

A trader called the issue "for the most part unchanged" around 841/4.

On Tuesday, Reader's Digest announced it is selling its Allrecipes.com website to Meredith Corp. for $175 million. Proceeds are expected to be used to pay down the company's $616 million of debt.

Both Moody's and S&P said the news is positive for the magazine publisher given that the funds will likely be used to deleverage the company. S&P placed the company's ratings on positive watch.

Kodak DIP launched

Eastman Kodak Co.'s 18-month debtor-in-possession credit facility emerged in the secondary market on Thursday. The $700 million term loan was quoted at 100 1/8 bid, 100 5/8 offered on the open and then it moved up to 100 3/8 bid, 100 7/8 offered, according to a trader.

Pricing on the term loan is Libor plus 750 basis points with a 1% Libor floor, and it was sold at an original issue discount of 98.

During syndication, the discount tightened from guidance at launch of 97 to 971/2. Also, prior to the bank meeting, price talk on the loan had been Libor plus 850 bps with a 1.5% Libor floor and a discount of 97, but due to strong early demand, the loan was launched with more aggressive pricing.

The $950 million DIP facility also includes a $250 million revolver priced at Libor plus 325 bps.

Citigroup Global Markets Inc. is the lead bank on the deal, which will be used to enhance liquidity and working capital.

Kodak, a Rochester, N.Y.-based provider of imaging technology products and services to the photographic and graphic communications markets, expects to exit Chapter 11 in 2013.

Realogy loan settles in

Realogy Corp.'s extended strip of 2016 bank debt was stronger in the morning in a good amount of trading volume on the back of the company's bond offering pricing, and then levels settled in a bit by the afternoon, according to a trader.

By late morning, $75 million of the strip had traded, leaving levels at 93¾ bid, 94 1/8 offered, the trader said, and by afternoon, the debt was seen at 93½ bid, 93 7/8 offered. By comparison, on the open the debt was quoted at 93¼ bid, 94¼ offered, and late Wednesday it was 93½ bid, 94 offered. Prior to the news, the extended strip was quoted at 90¼ bid, 91¼ offered

Realogy's rally began after it announced on Wednesday morning that it would issue $918 million of notes to pay down $629 million of first-lien term loans due October 2013, all $133 million drawn under the non-extended revolver due April 2013 and $156 million drawn under the extended revolver due April 2016. With the repayment, the revolver size will be reduced by the equivalent amount.

The Parsippany, N.J.-based provider of real estate and relocation services priced the notes late Wednesday with the $593 million senior secured first-lien debt coming at 7 5/8% and the $325 million senior secured half-lien debt coming at 9%.

Broad market firm

Elsewhere in the distressed debt realm, a trader said Clear Channel Communications Inc.'s 11% notes due 2017 were up over a point at 731/4.

Another trader said Kodak's 7¼% notes due 2013 were unchanged around 27.

The second trader also saw AMR Corp.'s unsecured notes trading up into the low 30s, around 32.

Sara Rosenberg contributed to this article

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