Nortek bonds soften as company hires advisors; Smurfit-Stone mixed; broad market remains weak

By Stephanie N. Rotondo

Portland, Ore., June 18 - The distressed debt market remained on the weaker side Thursday, despite a half-hearted rally attempted by the equity markets.

Nortek Inc.'s bonds were reported to be declining. The losses came as the company hoped its newly hired advisors would come up with a restructuring plan.

Meanwhile, traders had no explanation for activity in Smurfit-Stone Container Enterprise Inc.'s debt. The bonds ended the day mixed in somewhat active trading on no news.

"I think the market is in a state of nowheresville," said one market source, lamenting the week's lackluster performance. "It doesn't know which way it wants to go."

The trader noted that accounts were "flooded with cash," but there was little to spend that cash on. Plus, given where the stock market currently is - and the recent run-up that got it there - "I think everything has kind of gotten ahead of itself."

Nortek softens on advisor hiring

Nortek bonds declined some, just one day after the company announced it had hired financial advisors to analyze its capital structure.

A trader placed the 8½% notes due 2014 around 28, down from 30 "a couple days ago." Another source deemed the issue down nearly 2 points, also at 28 bid.

The Providence, R.I.-based company said that current market conditions had resulted in the decision to retain advisors.

"In consideration of the current economic environment, our businesses are performing well and we remain focused on operating as efficiently as possible and executing our strategic business plans," said Richard L. Bready, chairman and chief executive officer, in a press release published Wednesday.

The Blackstone Group, as well as Weil, Gotshal & Manges are the hired advisors.

Nortek, along with its parent company NTK Holdings, "have substantial debt service obligations," the company said in a May 19 press release regarding its quarterly results. "During 2010, NTK Holdings alone has cash debt service obligations of approximately $162.3 million, including a payment of approximately $147.4 million due on March 1, 2010 under its 10¾% senior discount notes. The company has significant cash payments due on its indebtedness and certain other specified obligations in 2009 and thereafter. For the year ending Dec. 31, 2009, the company owes principal and interest payments on its indebtedness in the total amount of approximately $164.5 million. In the fiscal year ending Dec. 31, 2010, the total of principal and interest payments on indebtedness is approximately $146.6 million."

Smurfit weak, active

Smurfit-Stone Containers bonds were relatively active - especially considering that many distressed traders said very little action occurred Thursday - but mixed, on no news.

A trader quoted the 8% notes due 2017 at 32 bid, 33 offered, compared with 35 bid, 36 offered "a week ago."

Another market source saw the 8¼% notes due 2012 at 35.25 bid, a point better day over day.

There was no news to explain the movements, other than a press release announcing that the company was moving its Chicago headquarters.

However, as one source noted, in a week with very little happening, "sometimes there doesn't have to be a reason."

Broad market remains weak

Though the equity markets attempted to rally Thursday, the debt markets could not manage a similar comeback, aside from a few names here and there.

One name experiencing upside was First Data Corp. Its 9 5/8% notes due 2015 ended at 70.5, versus opening levels of 67 bid, 69 offered, according to one trader.

Also in the financials, Capmark Financial Group Inc.'s floating-rate notes due 2010 "keep getting hammered," a trader said. He placed the notes around 35, calling it "down a few more points."

Retailer Neiman Marcus Group Inc.'s 10 3/8% notes due 2015 "continue to get whacked," the trader commented. He saw the bonds closing around 56.

Fairpoint Communications Inc.'s 13 1/8% notes due 2018 dropped to 21 bid, 22 offered "from 36 a few days ago," a market source said. There was no explanation for the move.

Momentive Performance Materials Inc. was "another one that got whacked," with its 11½% notes due 2016 falling back to 27 7/8 from 32 on Wednesday.

"It seems like the more distressed, CCC area, seems to be getting hit more than the overall market," he said. "My guess is there's some profit-taking going on," following the recent strong run-up among the more distressed part of the junk market.

"Guys wanted to realize the gains before the gains were gone - because we know how quickly they could have been lost."

Paul Deckelman contributed to this article.

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