NII debt dips after cell tower sale closes; AMR up on Justice settlement; PDVSA ratchets down

By Stephanie N. Rotondo

Phoenix, Nov. 12 - The distressed bond market was pressured Tuesday after a long three-day weekend in honor of Veteran's Day.

NII Holdings Inc. announced Monday that it had closed its sale of tower sites in Mexico to American Tower. Come Tuesday, the bonds were down to unchanged, even though the news was expected.

AMR Corp.'s debt was meantime popping following news the bankrupt airline and its planned merger partner, US Airways Group Inc., had reached an anti-trust settlement with the Justice Department.

In the emerging market space, Petroleos de Venezuela SA saw its bonds crumble by as much as 5 points on the day. The decline came amid negative headlines regarding the oil producer's home of Venezuela. Late in the day, it was reported that the state-owned company was planning to sell $4.5 billion in new debt in order to deal with shortages of goods and incredibly high inflation.

NII closes tower sale

NII Holdings' 10% notes due 2016 lost a point on the day on the back of news the company had closed its sale of Mexican cell tower sites to American Tower.

A trader placed the issue at 711/2, down from an intraday high around 73.

He said volume was "pretty active."

However, the 8 7/8% notes due 2019 were unchanged at 561/2.

On Monday, the Reston, Va.-based provider of Nextel mobile phone service in Latin America said it had closed on its sale of nearly 1,500 tower sites in Mexico to American Tower.

The company received about $375 million from the sale.

The terms of the sale "provides for a post-closing adjustment period, after which [NII Holdings] will recognize the sale of the sites and any associated gain, which will be recognized over the lease term," according to a press release. "At that time, the company expects to record a capital lease liability of approximately $80 million to $125 million."

AMR goes sky high

AMR's convertible bonds popped following news that the bankrupt airline and its merger partner, US Airways, had reached a settlement with the Justice Department.

The 6¼% convertible notes due 2014 were pegged in a 135½ to 136 range by a market source shortly before noon. That compared to previous trades with a 134 handle.

By day's end, the source saw the issue at 142 bid, 142½ offered.

AMR's stock (OTCBB: AAMRQ) was meantime up as much as 33% in early trading, in well above average trading volume. The equity finished the day up $2.48, or 26.05%, at $12.

Trading in US Airways' stock was halted.

In August, the Justice Department filed an anti-trust lawsuit against AMR and US Airways over its plan to merge - a key component to AMR's bankruptcy plan. Chatter has been going on for weeks that the parties would come to some sort of settlement, which was expected to include giving up slots at Reagan National Airport in Washington, D.C.

Under the terms of the settlement, the airlines will give up 104 flight slots at Reagan and another 34 at LaGuardia Airport in New York. Slots will be lost - though not in such high a quantity - at five other airports as well.

"We have doubted ever since [Justice initially filed the lawsuit on Aug. 13] that the case would even go to trial given our view that Justice will struggle to produce arguments sufficient to convince a judge, especially given that AMR and US Airways offer far less competitive overlap versus all three previous airline mergers that Justice approved," wrote Gimme Credit LLC analyst Vicky Bryan in a report released Tuesday afternoon.

"Moreover, we have argued that blocking the merger is actually harmful - to AMR's bankruptcy progress, its employees, creditors and other stakeholders, and [sic] well as consumers and the airline industry - and that Justice's efforts to block this seemingly less conflicted merger versus the previous mergers it supported could arguably be anti-competitive."

PDVSA turmoil continues

PDVSA debt dropped as much as 5 points on the day following a string of negative headlines.

A trader said the 8½% notes due 2017 were the most actively traded issue in the entire high-yield space, with "nearly $40 million" bonds changing hands. He called the issue down over 2 points at 81.

The 9¾% notes due 2035 lost 5 points, closing at 671/2.

Late in the day, Rafael Ramirez, president of the state-owned oil producer, said the company was planning to issue $4.5 billion in new debt this week in order to increase its dollar supply - which helps pay for imports.

The company is also hoping the debt sale will relieve a shortage of goods that has resulted in a 54% per year rate of inflation.

News of the bond offering came after a volatile weekend. PDVSA experienced two fires in different locations, which pressured already below-expectation production levels.

And, President Nicolas Maduro sent the military to one retail chain, claiming the store was charging "speculative" prices. The government further warned retailers to cut prices to more moderate levels.

All of this comes ahead of Dec. 8 municipal elections.

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