Distressed market 'kind of heavy'; market tone pressures NewPage; Angiotech bonds creeping up

By Stephanie N. Rotondo

Portland, Ore., Nov. 12 - There was "a lot more business than I would have thought," a distressed trader said of Friday's trading session.

Secondary market trading hit about $1 billion, he said, which was decent considering the midweek holiday on Thursday.

Still, the market was "kind of heavy," another trader said.

"It definitely felt subdued all day," said another.

The softness in the market helped NewPage Corp. bonds drop about 2 points from Wednesday levels. The debt was also among the more active credits.

However, Angiotech Pharmaceuticals Inc. managed to shake off the weak market undertone, as its bonds gained ground. The company reported earnings on Tuesday. It is in the midst of facilitating a recapitalization plan that includes a debt-for-equity exchange.

The fight for control of Dynegy Inc. continues to rage on, as yet another market player urged the rejection of Blackstone Group's bid and Carl Icahn sought to provide management with another option. The company's debt ended higher than opening levels, but still down from markets seen earlier in the week.

NewPage debt declines

NewPage's 11 3/8% notes due 2014 dropped "almost 2 points," a trader said.

He placed the notes around the 92½ mark, a level echoed by several other sources.

One such source said about "$20-odd million" of the bonds changed hands. That source also saw the 10% notes due 2012 fall "at least another point" to 581/2.

On Wednesday, Standard & Poor's revised the company's recovery rating on its senior secured first-lien notes to 4 from 3.

Other ratings remained unchanged.

S&P said that it continued to "value the company at approximately $1.5 billion and that our recovery percentage estimate for the first-lien notes has not changed materially since our Oct. 7, 2009, recovery report. Nonetheless, we believe that a '4' recovery more appropriately conveys the risk that the company's postdefault enterprise value may be affected by stresses more severe than what our analysis contemplates given the highly cyclical industry in which NewPage operates."

The Miamisburg, Ohio-based papermaker reported earnings on Nov. 4, showing a 19% increase in sales.

Angiotech gaining ground

Despite a generally weak market, Angiotech Pharmaceuticals' 7¾% notes due 2014 managed to earn "a couple points," according to a trader.

He placed the paper in the low-50s, while another quoted them at 52 bid, 52½ offered.

"They are slowly moving up," the second trader said.

On Tuesday, the Vancouver, B.C.-based biotech company reported a loss of $18.5 million, or 22 cents per share. That compared with a loss of $7.8 million, or 9 cents per share, for the same quarter of 2009.

Revenues, however, increased by 7% to $59 million.

Angiotech announced in late October a recapitalization plan that would reduce its debt by $250 million. Under the plan, senior subordinated noteholders would receive 93.5% of Angiotech's common stock.

The company would keep its $325 million of senior floating-rate notes outstanding.

Angiotech is seeking at least 98% of participation by debtholders. The consent deadline is Jan. 7.

Dynegy fight rages on

Dynegy debt closed up from its intra-day lows, but down from levels seen earlier in the week, a trader said.

He said the 7¾% notes due 2019 opened around 69, but "crept back up" to 70 bid, 70½ offered. While that was better on the day, it was down from a 71 bid, 72 offered market seen on Tuesday.

Another trader also pegged the notes around 701/2, which he said was "about unchanged."

The Houston-based energy producer is currently the target of a $4.50-per-share takeover bid by Blackstone Group. However, shareholders such as Carl Icahn and Seneca Capital have been aggressively objecting to the bid, calling it undervalued.

On Friday, Dynegy's stock got a boost as a Pritchard Capital Partners analyst said Blackstone could up its offer in order to win approval at a Nov. 17 shareholder meeting.

Blackstone had previously said it would not change its offer, which it deemed fair and firm.

Icahn was also reported to have offered Dynegy a $2 billion credit line in order to address near-term liquidity concerns. The Pritchard analyst called the move just another tactic to encourage shareholders to vote against the sale.

The analyst recommended rejection, claiming that Dynegy was worth at least $8 per share.

Broad market heavy

Elsewhere in the distressed debt arena, Harrah's Entertainment Inc.'s 10% notes due 2018 were "very active," a trader said, and down "about a point" around 891/2.

The trader also saw General Motors Corp.'s 8 3/8% notes due 2033 "hanging in there" around 353/4.

Meanwhile, Nortel Networks Inc.'s 10¾% notes due 2016 fell half a point to 83½ on the back of a $20 million quarterly loss reported Friday.

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