Newfield new issue falls with market; Default fears pressure ATP Oil bonds; Ally weak

By Stephanie N. Rotondo

Portland, Ore., Sept. 30 - High-yield bonds remained heavy Friday, though volume was a bit subdued due to Rosh Hashana and month- and quarter-end activities.

"Everything was really heavy today," a trader said. "It's a little dicey."

"Stuff in general is down half a point, but there's not a lot of volume," said another trader.

ATP Oil & Gas Corp.'s debt fell at least 4 points on the day, as the company attempted to assuage worried investors that it could avoid a default in 2015.

The bonds had lost at least 5 points in the previous session.

Meanwhile, concerns about Ally Financial Inc.'s mortgage exposure continued to pressure the company's bonds.

Also falling considerably were Eastman Kodak Co.'s notes. The debt has been declining all week after the company said it had drawn down its revolving credit facility. On Friday, word came out that the company had hired restructuring lawyers from Jones Day, which only enflamed bankruptcy fears.

For its part, the company has said that a Chapter 11 filing was not imminent.

Investors also remained wary of Hovnanian Enterprises Inc. paper, despite the news out Thursday regarding a private exchange offer. One trader deemed the homebuilder "one of our biggest losers of the day."

Market ends week heavy

Market indicators did not fare well Friday as the high-yield market came tumbling down.

The KDP High Yield index fell to 69.82, with a yield of 8.53%, from 70.27, with an 8.4% yield, on Thursday.

The CDX North American Series 17 High Yield index meantime dropped 1¼ points to 87 1/16 bid, 87 7/16 offered.

Even bellwether names experienced some softness, though not as much as other credits.

Community Health Systems Inc., for example, saw its 8 7/8% notes due 2015 falling about three-quarters to 983/4, according to a market source.

Newfield new issue slips

Newfield Exploration Co.'s recent $750 million issue of 5¾% senior notes due 2022 had big volume on Friday, though like the rest of the market, the issue was down, according to traders.

One trader said the notes were down nearly a point to around 99.

"That wasn't bad compared to where everything else was trading," he said.

At another desk, the issue was seen down just half a point at 98¾ bid, 99½ offered.

And a third source placed the paper at the 99 level, down three-quarters on the day.

The issue priced on Tuesday at 99.956.

Newfield is an oil and gas exploration and production company based in the Woodlands, Texas.

ATP falls on default fears

Elsewhere in the oil and gas arena, investors are worrying that ATP Oil & Gas might not have enough cash flow and asset base to fulfill its debt obligations come 2015 and have therefore been putting pressure on the bonds.

One trader said the 11 7/8% notes due 2015 - a $1.5 billion issue - fell "another 4½ points," ending around 69 7/8 on "pretty good volume."

The debt had lost at least 5 points in the previous session as well.

Another market source placed the notes around 70.

Earlier in the week, Moody's Investors Service published a report on the Houston-based oil exploration company in which it said there was a "high likelihood" that some form of restructuring was inevitable. The agency said that cash flows and asset base were not sufficient to cover the 2015 maturity.

On Thursday, ATP attempted to calm investors' fears by saying that its new Gulf of Mexico drills should produce enough oil for the next three years to avoid a default.

Production is expected to begin this year.

Ally debt pressured

Fears about Ally Financial's mortgage lawsuit exposure have been weighing on the company's debt of late.

"They've been drifting," a trader said.

Friday's session was no different, with the trader seeing the 8% notes due 2031 slipping nearly 2 points to 881/4.

Another market source pegged the notes at around 91.

Though the Detroit-based former financing arm of General Motors Corp. has said that it has put aside $829 million to repurchase bad mortgages, some are wondering if that will be adequate. And, if the company's mortgage exposure turns out to be more than expected, the bank could face serious problems staying afloat.

No flash for Kodak

It looked as if Eastman Kodak might be headed toward bankruptcy Friday after the company announced that it had hired restructuring attorneys from Jones Day.

"They're headed toward a bankruptcy," a trader said, though the company itself has said a filing is not imminent.

The trader saw the 7¼% notes due 2013 falling to 33 from 42 bid, 45 offered on Thursday.

A second source deemed the issue down nearly 18 points on the day at 30 bid.

Yet another trader said there was "not a huge amount" of the debt trading, seeing the paper decline to the low-30s from the low-40s.

"Some really odd-lots were trading in the teens," he added.

As for the 10 5/8% senior secured second-lien notes due 2019 and the 9¾% senior secured notes due 2018, those bonds were trading up, the third source said.

He saw a 74 bid for paper after the Jones Day news came out, versus a 70 bid prior to the report.

"So the senior paper is being kind of better bid," he said, noting that the belief is that the notes "have some value in a restructuring."

Kodak has dropped considerably since the beginning of the week, when the company said it had drawn down $160 million from its revolver. The draw increased fears of cash burn at the 131-year-old company.

Kodak burned through $847 million in the first half of 2011. It had $957 million in cash as of June 30. The company is hoping that the number will improve by the end of the year, as it attempts to generate more income from its patents and potentially sell non-core assets.

Lazard Ltd. is advising the Rochester, N.Y.-based company on its patent sales.

Hovnanian bonds 'punished'

Red Bank, N.J.-based homebuilder Hovnanian Enterprises saw its bonds "punished" in the wake of a report put out by Gimme Credit LLC on Thursday, according to a trader.

"It was one of our biggest losers of the day," the trader said.

In the report, analyst Vicki Bryan commented on the company's announcement that it was privately exchanging up to $220 million of unsecured notes due 2014 through 2017 for new 2% senior secured notes due 2021.

"We long have been concerned that Hovnanian can't support even the interest costs of its current debt - EBITDA and especially free cash flow are decidedly negative and the housing market is likely to remain depressed for several more years - but we don't see how investors will be happy with this deal either," Bryan wrote in the report.

Indeed, investors have not reacted favorably to the exchange offer.

The trader saw the 10 5/8% notes due 2016 dropping 4½ to 5 points to around 75.

Another market source called the issue 3 points weaker at 76½ bid, while a third source saw the notes losing 4½ points to 75.

The third source also said the 11 7/8% notes due 2015 fell to around the 45 mark.

Caesars loses ground

Caesars Entertainment Corp.'s 10% notes due 2018 continued to feel the pressure of a generally weak marketplace, according to traders.

One trader called the notes down 1½ points to 59¼ bid, 59½ offered, and another echoed that market.

A third trader said the bonds dropped 1½ points to 591/2.

There has been no fresh news out on the Las Vegas-based casino operator.

Travelport, Dex decline

Elsewhere in the market, Travelport LLC's 9 7/8% notes due 2014 and 11 7/8% notes due 2016 were "off a little bit," a trader said, as the company's lenders unanimously consented to push out the maturity of the PIK loans.

The trader saw the former trading between 63 and 66 and the latter around 40, down from 42 previously.

Also, a trader said Dex One Corp.'s 12% notes due 2017 were not doing too well after the company said it would pay its coupon half in cash and half in kind.

"20 bid flat was best I saw," he said, noting that he had also seen bids as low as 10, all of them flat, or without accrued interest.

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