Charter recoups losses; Nortel stays active, edges higher; trader: Idearc will fall; Chrysler gains

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Jan. 16 - Distressed bonds ended the week on somewhat of a high note Friday, as traders said the overall tone was more positive.

Still, market sources seemed disappointed with the lack of activity, which was attributed to the short holiday session.

"I was hoping a little more would happen," one trader noted, especially as the week was littered with missed coupon payments and bankruptcy filings.

In missed coupon news, Charter Communications Inc.'s bonds recouped some of the losses incurred in Thursday's session after the cable provider failed to make an interest payment. On Thursday, the debt had lost anywhere from 3 to 8 points on the day. But come Friday, traders said the bonds had moved back up to levels seen on Wednesday.

Meanwhile, Nortel Networks Corp.'s notes remained an active trader. The bonds were also seen inching up some, despite the string of losses it had racked up since the company's Chapter 11 filing earlier in the week.

Idearc Inc. saw its debt hover at lower levels in somewhat active trading. Though there was no news out to provoke the interest in the name, one trader speculated that Idearc would eventually fall into bankruptcy.

The market will be closed Monday in honor of the Martin Luther King, Jr. holiday.

Charter recoups losses

Charter Communications' debt regained some ground it lost in the previous session after it missed a nearly $74 million interest payment.

One trader said the bonds were trading actively and better, its 8¾% notes due 2013 at 68 bid, 70 offered versus a low of 62 bid, 64 offered on Thursday. Another trader saw that issue rallying to 68 bid, 69 offered from 65 bid, 66 offered previously.

The second trader also saw the 11% notes due 2015 at 15 bid, 16 offered, up a couple points.

But another trader deemed the 11% notes "down a point or so" at 16.75, with $11 million changing hands. He remarked that he thought the bonds would trade more actively given that the company had missed the coupon. However, he noted that the lack of action was an overall market trend. For example, he said he saw "diddly" in Smurfit-Stone Containers Corp.'s debt "after all that yesterday," citing bankruptcy fears that weighed heavily on the company's bonds.

When asked why the bonds had moved back up, a trader said, "I think people realized that not paying the coupon is a positive for senior bonds. They could receive a good portion of the equity in any restructuring."

On Thursday, St. Louis-based Charter missed a coupon payment, which resulted in a 3- to 8-point loss in the company's bonds. Still, traders said they had expected the company would not make the payment and some speculated that the issues were part of the discussion the company is currently holding with bondholders.

"Since it was clear Charter was going to hit the wall when it ran out of cash this year or faced major bond maturities next year, we figure the company just decided to cut the chase and restructure while it still had liquidity," Gimme Credit analyst Shelly Lombard wrote in a morning report. She added that "we would be a buyer" of the operating company and CCO bonds at current levels.

On Friday, Standard & Poor's downgraded Charter to D from CC.

Nortel regains ground

Nortel Networks' bonds were also a little better on the day, following a string of losses in the bankrupt company's debt.

A trader saw $20 million of the 10¾% notes due 2016 trade around 19, calling that "a little better, about a point or so." Another trader quoted the paper at 18.5 bid, 19 offered, also "a little better from yesterday."

Earlier in the week, the telephone parts manufacturer announced it had filed for Chapter 11 protections. The filing came days before the Toronto-based company had about $100 million in interest payments due.

Trader: Idearc will fall

Trading in Idearc's 8% notes due 2016 was relatively active, a trader reported, though he saw the bonds essentially unchanged on the day.

The trader said the bonds were moving around 5, which was "right where it was yesterday, but lower than it has been."

"[Idearc] is another great example of a company that is not going to make it," he said. "The question is when."

Another trader called the notes "a little bit weaker," down half a point to three-quarters of a point, also around 5.

Idearc has struggled to keep afloat, as declining ad revenues and a shift to online technologies have made times tough. Its sector rival, R.H. Donnelley Corp., has dealt with similar issues and both companies have seen their stocks delisted due to an inability to keep the price at a minimum level.

Chrysler loan rallies

Chrysler Financial Services LLC saw its term loan rally by a couple of points during the shortened pre-holiday weekend session on word that the government will be providing the company with some financing, according to a trader.

The term loan was quoted at 65 bid, 70 offered, up from previous levels of around 60 bid, 64 offered, the trader said.

The U.S. Treasury Department will be giving Chrysler Financial $1.5 billion under its Troubled Asset Relief Program.

Chrysler Financial is a provider of automotive financial products and services.

Masonite moves up

Masonite International Inc.'s term loan regained some of the ground it lost earlier in the week during Friday's trading session as the company extended its loan forbearance agreement once again, according to a trader.

The term loan was quoted at 38 bid, 40 offered, up from Thursday's levels of 36 bid, 38 offered, the trader said. On Wednesday, the debt was seen at 38 bid, 39 offered and last Tuesday it was seen at 44 bid, 45 offered.

On Friday, the company announced that its credit facility forbearance agreement was extended to Jan. 30 from Jan. 15.

The company has needed the forbearance since it was unable to comply with covenants related to EBITDA metrics as of June 30 and Sept. 30.

Also possibly helping the bank debt trading levels was the completion of a recent trade. The trader explained that on Thursday, a piece of the Masonite paper needed to trade so levels softened to where that trade could clear. On Friday, since the trade cleared, investors started to push the paper back up.

Masonite also said on Friday that it is currently engaged in ongoing negotiations with its bank lenders regarding a potential amendment to the terms of the credit facility.

In addition, as was previously reported, the company has a forbearance agreement that expires on Jan. 31 covering a default for failing to make an Oct. 15 interest payment on its senior subordinated notes due 2015.

During the forbearance periods, the company is trying to develop an appropriate capital structure to support its long-term strategic plan and business objectives.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

Star Tribune files

The Star Tribune Co.'s first-lien term loan was quoted lower on the bid side on Friday after the company announced that it filed voluntary petitions to reorganize under Chapter 11, but the offer side was quoted a little higher, according to a trader.

The first-lien term loan was seen at 17 bid, 22 offered, compared with previous levels of 19 bid, 21 offered, the trader said.

Meanwhile, the company's second-lien term loan was quoted at zero, which is where it has been for a while, the trader remarked.

The trader went on to say that Chapter 11 filing did not come as much of a surprise to anyone.

When announcing the filing, Star Tribune said that it currently has sufficient cash to continue its operations and does not anticipate needing debtor-in-possession financing.

"We intend to use the Chapter 11 process to make this great Twin Cities institution stronger, leaner and more efficient so that it is well-positioned to benefit when economic conditions begin to improve," Chris Harte, publisher and chairman, said in a news release.

"With the significant deterioration in our revenue in 2008 and the challenging outlook for our industry for 2009, we simply could not wait any longer to take this step. Our plan is to use the court-supervised process to reduce our costs, strengthen our balance sheet and create a financially viable business," Harte added in the release.

Star Tribune is a Minneapolis-based news and information company.

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