First Data notes weighed by rating review; AIG mixed following quarterly report; Nortel posts wider loss

By Stephanie N. Rotondo

Portland, Ore., March 2 - Whether it was the snow in New York or the massive loss in the equities, distressed bond traders saw the market decidedly weaker on Monday.

"A lot of people are working form home," one trader said. "The market is weaker in sympathy."

The trader added that, in general, things were about a point lower day-over-day, "more in spots."

"The market definitely felt weak today, but there isn't a ton going on," said another trader.

First Data Corp.'s bonds fell about a point, market players said, after Moody's Investors Service placed the company's ratings under review. Moody's said the review was due to the likelihood that numbers would not improve until 2010.

Meanwhile, American International Group Inc.'s paper closed the day mixed following the company's record-breaking fourth-quarter loss. Plans for a second government bailout are going strong despite the dismal numbers.

Nortel Networks Corp. also reported numbers on Monday. But the company's wider loss did little to affect the bonds.

In other earnings news, Clear Channel Communications Inc.'s term loan ended the session softer. The declines came on the back of cable provider's quarterly results, which showed a swing to a loss.

As the day wound down, traders were already speculating what Tuesday might bring.

"Either one of two things will happen," a trader said. "Either the market will come to a grinding halt or everyone will decide that they have to own it."

First Data weighed by review

First Data's debt slipped during Monday trading after Moody's Investors Service placed the company's ratings under review.

One trader quoted the 9 7/8% notes due 2015 at 53.35 bid, 54.25 offered, while another pegged the bonds more than a point lower at 53.5 bid, 54.5 offered.

Yet another trader saw the bonds offered at 54.

Moody's said the review for possible downgrade was due to concerns that profit and free cash flow would not increase, as was expected when the company was purchased in a leveraged buyout in 2007. At that time, Moody's gave First Data a B2 corporate family rating, but stated that it was weakly positioned at that level.

Still, Moody's said it believed leverage ratios would improve in 2010.

First Data is a Greenwood Village, Colo.-based leader in information technology.

AIG mixed on quarterly report

AIG paper ended somewhat mixed following the release of the company's fourth-quarter results.

One market source pegged the 4% notes due 2009 at 39.5 bid, 40.5 offered, down nearly 9 points on the day.

But another trader said the bonds were slightly better to unchanged, the 5.45% notes due 2017 at 52 bid, 53 offered.

"I think the market was just trying to digest that news," the trader said, adding that there was "not a ton" of activity in the name.

Another trader said that some of the company's International Lease Finance paper was "floating around," though he was not involved.

"There were some buyers of the short paper and sellers in the longer maturities," he said.

At another desk, a trader said the bonds were 2 to 3 basis points higher on the day.

AIG posted a record-breaking $61.7 billion, or $22.95 per share, loss for the quarter, compared to a loss of $5.29, or $2.08 per share, the year before. All told, the company's loss for fiscal 2008 came to nearly $100 billion.

But despite the loss, the U.S. government is going ahead with a $30 billion bailout, the second the insurer has gotten during the economic meltdown. The first bailout came in September 2008 and totaled about $150 billion.

Among other financials, Citigroup Inc.'s Tier 1 "long ones" fell to 40, a trader said, with $20 million trading.

"I actually think they traded lower than that," he said.

Nortel posts wider loss

A wider fourth-quarter loss at Nortel Networks did little to inspire investors, traders reported.

One trader saw the floating rate notes due 2011 at 13.25. However, he said there was few, if any trades or markets, noting that the bonds are already on the low side.

Bankrupt Nortel posted a loss of $2.14 billion, or $4.28 per share. That compared to a loss of $844 million, or $1.70 per share, the year before.

Sales declined 15% to $2.72 billion. Revenue from selling equipment to phone companies dropped 8.3%.

The results included a goodwill impairment charge of $1.24 billion. The company decreased the value of tax-deferred assets by $951 million.

"At every level, our employees are working hard in an extremely difficult environment to deliver on our customer commitments and drive our business forward," said Mike Zafirovski, Nortel's chief executive, in a statement.

Nortel is a Toronto-based telecommunications company.

Clear Channel loan dips

Clear Channel Communications' term loan was seen at weaker levels in little to no activity following the release of fourth quarter numbers, according to a trader.

The term loan was quoted at 35 bid, 40 offered, down from Friday's levels of 40 bid, 43 offered, the trader said.

On Monday morning, CC Media Holdings Inc., Clear Channel's parent company reported a net loss of $4.997 billion, compared to net income of $320.6 million is the same period last year.

The loss for the quarter before discontinued operations was $4.996 billion, compared to income of $228.3 million last year, primarily attributable to a pre-tax impairment charge of approximately $5.3 billion.

Revenues for the quarter were $1.6 billion, a decrease of 14% from the $1.9 billion reported for the fourth quarter of 2007.

And, trailing 12-month consolidated EBITDA was $2.144 billion.

Also on Monday, Clear Channel's parent company disclosed that as of Feb. 27, there was only approximately $18 million available on its revolving credit facility.

On Feb. 6, the company borrowed about $1.6 billion under its $2 billion revolver to improve its liquidity position as a result of continuing uncertainty in credit market and economic conditions.

At Dec. 31, 2008, secured leverage was 6.39 times.

"The current global economic slowdown has resulted in a decline in advertising and marketing services among the company's customers, resulting in a decline in advertising revenues across its businesses. This reduction in advertising revenues has had an adverse effect on the company's revenue, profit margins, cash flow and liquidity, particularly during the second half of 2008," the company said in a news release.

Beginning with the quarter ending March 31, Clear Channel will have to comply with a maximum consolidated senior secured net debt to adjusted EBITDA ratio under its senior secured credit facility.

In addition, Clear Channel's parent company said that it expects to refinance its $500 million 4¼% notes due May 15 with a draw under the $500 million delayed-draw term loan facility that is specifically designated for this purpose.

The company's remaining $69.5 million of debt maturing this year will either be refinanced or repaid with cash flow from operations or on hand.

Clear Channel is a San Antonio-based media and entertainment company.

Broad market weaker

Freeport-McMoRan Copper & Gold Inc.'s 8¼% notes due 2015 slipped to around 85, a trader said, with about $40 million changing hands.

"It looks like somebody is beating up Aramark [Corp.]," another trader said. He saw the 8½% notes due 2015 fall to 89 from 91 on Friday. Another trader echoed that level.

Sara Rosenberg contributed to this article.

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