Nova bonds continue to retreat; R.H. Donnelley earns day's top spot; Ford loan gyrates; Level 3 firm

By Stephanie N. Rotondo

Portland, Ore., Feb. 2 - Nova Chemicals Corp.'s bonds continued their retreat Monday, as stricter requirements from lenders made some market players nervous.

The company saw its credit rating slashed not once, but twice during the session. The downgrades reflected worries that requirements to secure additional funding would not be met. As such, traders saw the bonds fall as much as 5 points on the day.

Meanwhile, traders could not explain why phonebook publisher R.H. Donnelley Corp.'s bonds made the most active list. The bonds were called slightly better, though there was no news to prompt the move.

As it waited for its recent drawdown to come, Ford Motor Co.'s term loan traded all over the place during the first session of the week. Ford is expecting to receive funds from its credit lines on Tuesday.

In the telecommunications world, Level 3 Communications Inc.'s debt traded modestly higher. But traders noted that volume in the name was light, even as news reports indicated that the company was running out of cash.

All in all, market sources deemed Monday's session a snoozer, as many were away from their desks at the JP Morgan Global High Yield and Leveraged Finance Conference in Miami. The conference will go through Wednesday.

Nova continues to retreat

Nova Chemicals' debt lost more weight on Monday, as investors became concerned about stricter requirements from the company's lenders.

One trader quoted 7.4% notes coming due in April at 64 bid, 65 offered, down more than 5 points. The 6½% notes due 2012 were also lower, but only by about half a point, at 29 bid, 30 offered.

Another trader echoed those levels.

On Monday, Fitch Ratings and Standard & Poor's downgraded the Canadian chemical producer, citing fears that the company would not be able to secure the additional financing required by its lenders.

Nova posted a $214 million loss last week, but stated it was still in compliance with its covenants after negotiating with lenders to relax the terms. However, under the terms of those discussions, Nova must now secure $100 million in financing by Feb. 28 and an additional $100 million by June 1.

"These financing requirements create considerable new hurdles for the company given the difficulties of locating new financing sources in today's high-yield chemicals markets," Fitch said in its statement. "They also suggest that the company's bank group may be less willing to show forbearance than Fitch had previously considered."

R.H. Donnelley takes top spot

Market sources seemed surprised that R.H. Donnelley paper made the most active list of the day, especially with no news out.

"That tells me it wasn't a very active day," a trader said.

The trader saw about $11 million of the 8 7/8% notes due 2016 trade at 11 bid, 12 offered. Another trader placed that issue at 11.25 bid, 11.5 offered, about half a point to three-quarters a point better on the day.

Elsewhere, the 8% notes due 2013 linked to Donnelley's Dex Media business were seen more than a point higher at 13.75 bid.

Idearc Inc.'s 8% notes due 2016 were also deemed half a point stronger at 4 bid, 5 offered.

Ford loan gyrates

Ford Motor's term loan levels were all over the place during market hours - with the end result being that the debt was slightly better on a day-over-day basis - as the company's draw should be completed soon, according to a trader.

The term loan was quoted at 35 7/8 bid, 36 7/8 offered late in the day, the trader said, up from Friday's levels of 35¾ bid, 36¾ offered.

However, earlier in the Monday session, the loan was seen as low as 35 bid, 36 offered, the trader remarked.

"Revolver funds tomorrow. [Term loan] been kind of jumping around because of this funding," the trader continued.

As for the revolver, on Friday levels were seen at 30 bid, 31 offered, but levels were nowhere to be found on Monday, the trader said.

"You would think it would tick higher, but haven't seen it," the trader added regarding the revolver's trading levels.

Toward the end of last week, Ford revealed that it would be drawing $10.1 billion under its available credit lines.

The company said that it expects to receive the funds on Tuesday.

Ford explained that the draw is being made as a result of the instability of the capital markets with the uncertain state of the global economy.

In conjunction with announcing the draw, Ford reaffirmed that it has sufficient liquidity to fund its business plan and product investments, with $24 billion in available automotive liquidity, including $13.4 billion in automotive gross cash, at the end of 2008.

The company also reiterated that, based on current planning assumptions, it does not need a bridge loan from the U.S. government, barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors.

Ford is a Dearborn, Mich.-based automotive company.

Level 3 slightly better

A trader said there was "almost no volume" in Level 3 Communications' debt during Monday's session, despite the fact that market players seemed concerned about the company's bottom line.

The Broomfield, Colo.-based company's 9¼% notes due 2014 were offered at 73.75, according to one trader. The trader also pegged the 12¼% notes due 2013 at 76 bid, 78 offered.

At another desk, a source called the 5 7/8% notes due 2015 nearly a point firmer at 92.5 bid.

The phone network provider, which will release fourth-quarter and full-year results on Feb. 11, might be running short of cash, according to a Bloomberg article. According to the report, Level 3 has nearly $700 million coming due in 2010 - not to mention several coupons coming due this month - and without refinancing, will likely be unable to pay the maturities.

However, the article also mentions that Level 3 has maintained it will be able to pay off the debt due to a tender offer completed in December.

Freescale loan slips

Freescale Semiconductor Inc.'s term loan B was a touch softer During Monday's market hours, although no real reason was seen behind the movement, according to a trader.

The term loan B was quoted at 51 bid, 52 offered, down from Friday's levels of 52 bid, 53 offered, the trader said.

The loan was moving around quite a bit at the end of last week following the release of quarterly results by the company, and even reached a low of around 48 bid, 50 offered on the news.

For the fourth quarter, Freescale reported a net loss of $4 billion, compared with a loss of $525 million for the previous year. Loss from operations was $4.2 billion, compared with a loss of $595 million the previous year, and adjusted EBITDA for the fourth quarter was $94 million.

As for the company's financial position, on Dec. 31, cash, cash equivalents and short-term investments were $1.4 billion, compared with $1.3 billion on Sept. 26.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the transportation, networking and wireless markets.

Broad market takes it slow

Lehman Brothers Holdings Inc.'s bonds were called "kind of active," in the words of one source, and slightly higher. Several sources pegged the bonds at 15 bid, 15.5 offered.

Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, ended a little better, a trader said, at 79.5 bid, 80 offered.

Meanwhile, a trader remarked that Sirius XM Radio Inc. "made its coupon, but that didn't stir up any activity in the bonds."

Sara Rosenberg contributed to this article.

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