Eastman Kodak notes active, unchanged; CIT Group notes still strong; broad market remains firm

By Stephanie N. Rotondo

Portland, Ore., Aug. 4 - The market remained on the firm side Tuesday, though traders noted the mish-mash of trading that seemed to have no catalyst.

"Things keep ticking up," a trader said. However, "guys are reaching. There is not a lot of supply around."

That could have been the reason for activity in Eastman Kodak Co.'s notes. Sources saw the debt trading on the active side - though unchanged - with no news to be had. The stock also had a good day and again, there was no news.

Meanwhile, CIT Group Inc. continued to be busy and better. The bonds moved as much as 2 points higher, just one day after the company announced an amended tender offer.

Kodak gets active

Eastman Kodak's notes were one of the more active names "by far," according to one trader.

The trader saw the 7¾% notes due 2013 trading around 65 in active trading. However, he called the issue unchanged.

A second trader said the convertible notes - the 3 3/8% notes due 2033 - "traded a lot" around the 89 mark.

One other source pegged the 7¾% notes at 65 bid, 68 offered, unchanged, to slightly better on the day.

The first trader said there was "no news" in the name to explain the move, calling it "weird." Another deemed the activity "odd."

The company's stock also saw a surge Tuesday, gaining more than 24%. Again, with no news, there was little explanation. In a Reuters interview published Tuesday, optionMonster.com co-founder Pete Najarian said that there was some short interest in the stock, which could "be at least one reason for the exaggerated move to the upside," he said.

The film and digital photography company reported disappointing earnings July 30. For the quarter, Kodak posted a loss of $189 million, or 70 cents per share, compared with a profit of $495 million, or $1.72 per share, the year before. Revenue meanwhile decreased 29% to $1.77 billion from $2.49 billion and gross profit margin dipped 18.5%.

"There will be news out tomorrow," opined a trader. "There's always news the day after something happens."

CIT gains momentum

The day after announcing a sweetened tender offer, CIT Group's floating-rate notes due 2009 remained on the active side, though not as active as Monday's session.

A trader called the issue up "probably 1 or 2 points" at 94 bid, 95 offered. Another said the notes remained in the mid-90s.

On Monday, CIT increased the amount offered in its debt exchange to $875 per $1,000 principal amount tendered. The offer was previously announced at $825 per $1,000.

In addition, the early tender deadline was extended to Aug. 5 from July 31. CIT also lowered its necessary participation to 58% from 90% and had received more than 68% by the July deadline.

"While the tender offer appears to have been resolved favorably for bondholders, the game will get tougher from here on out," wrote Gimme Credit analyst Kathleen Shanley in an intraday comment. "CIT will have used nearly $1.0 billion in cash to pay off the August 17 maturity (plus just over $70 million of retail Internotes maturing on August 15), and it has reportedly committed $1.0 billion of its $3.0 billion 'rescue' loan to support its Trade Finance operations.

"In the fine print of its press release yesterday, the company said that it may still need bankruptcy protection, in part because the $3.0 billion loan may not provide enough liquidity to compensate for 'material negative changes to CIT's liquidity from draw down of loans by customers'," she continued. "CIT appears to have little wriggle room to conduct another round of negotiations with a broader group of its bondholders who hold longer-term maturities, unless it is able to generate cash by arranging the sale of large chunks of its portfolio. Any sale transaction is unlikely to be at a premium price, given CIT's weak bargaining position."

Broad market remains firm

In the wider world of distressed debt, Ford Motor Co.'s 7½% notes due 2012 continued to trade actively, though unchanged. A trader quoted the issue at 92 bid, 93 offered.

The bonds had gained momentum on Monday after posting an increase in month-to-month sales.

Meanwhile, Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 inched higher to 88, according to a trader.

TXU Corp.'s 10¼% notes due 2015 closed at 77 bid, 78 offered, a trader said.

MGM Mirage's term loan was once again higher on Tuesday in follow through on the company's recent second-quarter earnings results and the general strength in the secondary market, according to a trader.

The term loan was quoted at 84¼ bid, 85¾ offered, up from around 84 bid, 85½ offered, the trader said. During the previous session, the loan had traded up from around 82 bid, 83½ offered after numbers came out.

A trader said that Smurfit-Stone Container Corp.'s bonds "moved up higher," with its Jefferson Smurfit Corp. 8¼% notes due 2012 getting into the upper 50s.

"That's up a bit, some trading there,'" he said. "They're holding up at that level. I know they were there [Monday], but they're staying there." He noted that the issue has really and steadily "moved up" from levels just a few weeks ago, when the bonds were in the mid-30s.

A trader said that he did not think that Trump Entertainment Resorts Inc.'s 8½% notes due 2015 "didn't do very much" in response to the news that the company's former chairman, Donald J. Trump, and a Nevada bank will buy the casino company out of bankruptcy for $100 million.

"It seems like it wasn't much of an event," he said. He said that the bonds were quoted around 9 to 11 or 10 to 12, but added that "I've not seen any activity. All the news was him [Trump], and I didn't see any trading in the bond at all."

Swift Transportation Co. Inc.'s 12½% notes due 2017 moved up to a 53 to 54 context, "up a few points." He also said that there were "buyers around on the bank debt as well," quoting the latter "right around 80 for the term loan."

Sara Rosenberg and Paul Deckelman contributed to this article.

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