Wyndham International's "B" paper traded up to 81 from 78 last week as distressed buyers start to take an interest in the paper. Approximately $7 million changed hands. Traders also said that the credit has gone from being a par name and is now being traded by distressed dealers for the anticipated recovery. "Par guys are not in it anymore," said one. "Distressed players are making their bets on it." Dallas-based Wyndham manages 240 hotels. Richard Smith, cfo, referred questions to investor relations department which did not return calls.
Before Sept. 11, rumors of a buyout by London-basedBass Hotels propelled Wyndham paper into the 99 1/8 range. But Wyndham's bank debt was one of the first to drop after the Sept. 11 attacks, losing 10 points. Now that it's pulled back even further into distressed land, it illustrates a problem for some small desks that have very strict treatment of par and distressed credits. One par trader who once saw Wyndham as his bread and butter can no longer trade the paper because it's trading below 95, the cut-off point the bank has set for par dealers to trade names. The credit is technically distressed, now trading in the low 80s, but some par players continue to dabble in it, and distressed dealers are moving in on an anticipated recovery. The dealer is watching on the sidelines--and feeling frustrated at what he calls a catch-22. "My bank's in it heavy; they see it as a par recovery," he said. "But the same logic that keeps them in the deal should afford me the ability to trade it. It doesn't work that way, though."
Two weeks ago the dealer drafted a memo to management, asking for the terms to change and ultimately for a chance to get back into credits like Wyndham and Nextel Communications. These are two of the most liquid par credits that virtually overnight were erased from his radar because they dropped into the low 80s. "The rules were put in place in 1997, but it's a completely different ballgame now," the dealer said. "Back then, pro rata was being bought at par." Wyndham has a $1.3 billion deal that breaks down into three tranches. Pricing is LIBOR plus 33/ 4%. J.P. Morgan leads the deal.