NewPage bonds get whipped; Sprint could be seeking buyer for MetroPCS; MGM notes lose ground

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Feb. 8 - The distressed debt market was called "pretty anemic" Monday, with many names under that umbrella falling by at least half a point.

"Generally, the market was weaker," a trader said, and trading was "kind of light."

Another source noted that total volume hit "barely over a billion."

Whether it was general market softness or overall concerns about the industry, NewPage Corp. bonds were among the day's biggest losers. Sources saw the bonds dropping as much as 5 points on the day and buzz was that a paper industry research report was the cause.

Sprint Nextel Corp. debt also finished weaker, though only by about a point, according to traders. A new research report indicated that Sprint might be looking at buying another prepaid wireless service company.

Meanwhile, MGM Mirage's notes couldn't withstand the market declines, dropping about a point or so. The declines came even as Moody's Investors Service said it was considering upgrading its rating on the casino.

And, FairPoint Communications Inc. finally filed its plan of reorganization, which will give lenders majority control of the cable company. The news gave the bank debt a boost, but did not much affect the bonds.

NewPage gets whipped

NewPage bonds were "down a lot," a trader said, adding that he had heard there was some "negative" research report out regarding the coated paper industry.

"That probably didn't help their cause much," he said.

The trader said the 11 3/8% notes due 2014 were a "good 3 to 4 points" weaker around 91, compared with 94 bid, 95 offered previously. The 10% notes due 2012 were meantime down 4 to 5 points "trading below 60."

"The long ones had a little joy," another market source said, referring to the total amount traded - about $20 million - and not the price declines. He pegged the issue as ending at 90¾ bid, 91 offered, which was "higher than the lows, but lower than the highs."

There was no fresh news out on the Miamisburg, Ohio-based papermaker. However, it comes as no surprise that industry analysts are seeing a long and slow recovery for the sector as a whole. Coated papermakers have seen revenues declining as magazines - one of the major purchasers of glossy paper - have seen ad revenues drop.

Elsewhere in the wide world of paper, Catalyst Paper Corp.'s bonds were on the quiet side as the company extended its tender offer yet again.

A trader said there was only one trade in each of the Richmond, B.C.-based company's bonds. He saw the 8 5/8% notes due 2011 - the subject of the aforementioned tender offer - down a point around 841/2, while the 7 3/8% notes due 2014 also dipped a point to 65.

The new deadline for the exchange is Feb. 12. It was last extended to Feb. 5 from its original deadline of Dec. 24.

Sprint: A buyer for MetroPCS?

Sprint Nextel notes were among the day's "real active" credits, according to a source.

However, as with the rest of the market, the activity did not result in gains. The source said the 6% notes due 2016 closed the session at 85 bid, 86 offered, which was a "little bit cheaper" than it had been last week. He added that $30 million to $40 million of the issue changed hands.

At another desk, the 6% notes were also seen a point softer, also at 85 bid, 86 offered. Yet another source placed the paper at 86 bid, down over a point.

In the news, the Overland Park, Kan.-based wireless telecommunications provider is being touted as a potential buyer for the pay-as-you-go company MetroPCS.

Buying the company would give Sprint a way to boost its prepaid service, according to Collins Stewart analyst Greg Miller. Sprint already has Virgin Mobile USA and Boost Unlimited on its books.

"It helps Sprint continue to consolidate its position in the increasingly competitive prepaid marketplace in densely populated major metro centers while allowing MetroPCS shareholders an avenue to continue to participate in the market from a position of greater strength," Miller in a research note.

Last week, Leap Wireless International Inc. said it was actively seeking a buyer. MetroPCS was dubbed the obvious choice, but the company has said it was not interested. That turned eyes toward Sprint's direction, as the company seeks to steal market share from rivals like AT&T and Verizon.

MGM debt loses ground

Weakness in the broader market did not help MGM Mirage's bonds Monday.

One trader called the name unchanged to lower, seeing the 7½% notes due 2016 "a little active" and steady at 78 bid, 79 offered. However, he said the 13% notes due 2013 "might be a little bit lower" at 114 bid, 114¾ offered.

But another source said the 7½% notes were "about a point lower" at 78 bid, 79 offered, with about $15 million turning over.

And, another trader saw the 6 5/8% notes due 2015 slipping a point to 79¾ bid.

On Monday, Moody's Investors Service said it was considering upping its rating on the Las Vegas-based casino operator. The agency said the company's recently proposed amendment to its credit facilities had resulted in the rating review.

FairPoint files plan, loan improves

FairPoint Communications' term loan gained some ground on Monday following the company's filing of its plan of reorganization and disclosure statement after a couple of delays, according to a trader.

The term loan was quoted at 77 bid, 79 offered, up from 76 bid, 77 offered, the trader said.

Bond traders saw little to no activity in the company's 13 1/8% notes due 2018.

Under the reorganization plan, FairPoint will convert $1.1 billion of credit facility debt into equity so that lenders will have approximately 98% of the equity ownership in the reorganized company.

Meanwhile, the company's $570 million senior notes due 2018 and its other unsecured debt will be converted into about 2% of the equity. These creditors will also be issued warrants to purchase up to 5% of the ownership interest in the company.

As part of the restructuring plan, FairPoint expects to get a new $1 billion five-year secured term loan.

Pricing on the term loan is Libor plus 450 bps with a 2% Libor floor.

Amortization is $10 million in years one and two, $50 million in year there and increasing annual amounts thereafter through maturity.

Holders of pre-bankruptcy credit facility claims will receive a share of the new term loan, as well as common stock and cash distributions.

FairPoint is a Charlotte, N.C.-based provider of communications services.

Rite Aid weaker

Rite Aid Corp.'s debt continued to trade weaker, according to market sources.

A trader said the name opened a point lower, falling another 1 to 2 points "depending on where you look," throughout the day. He said the 8 5/8% notes due 2015 settled into a 78 bid, 79 offered level, while the 9½% notes due 2017 closed at 77 bid, 77½ offered.

"I can't get anybody to care about Rite Aid around here," he said.

The 8 5/8% notes were deemed down a deuce at another desk, ending at 79 bid.

Rite Aid is a Camp Hill, Pa.-based pharmacy chain.

Freescale loans dip

Freescale Semiconductor Inc.'s term loan debt was basically weaker in trading as the company disclosed that there is a possibility that its recently launched amend-and-extend proposal may have to be delayed or withdrawn, according to traders.

The old term loan was quoted by one trader at 93 bid, 94 offered, down a half a point, however, two other traders had the debt unchanged on the day at 93¼ bid, 93¾ offered.

As for the new term loan, that was quoted by one trader at 102½ bid, 103½ offered, down from 103 bid, 104 offered, and by second trader at 102¼ bid, 103¼ offered, down a quarter of a point on the day.

The drama surrounding Freescale's amendment proposal is a result of a complaint issued by a group of lenders under the company's senior secured credit facility on March 25, 2009 challenging the issuance of incremental term loans.

In response to that complaint, the New York state appellate court ordered the trial court proceedings stayed pending the disposition of Freescale's appeal from the denial of its motion to dismiss the case. This stay, however, can be vacated if the company issues new debt.

As a result, on Feb. 5, the complaining lenders filed a motion to vacate the stay and to stop the company from continuing with the amendment and extension until a ruling on a temporary restraining order is obtained.

Freescale said on Monday that it has agreed to an expedited briefing process on the plaintiffs' motion, with all briefings to be completed by Tuesday.

It is unclear when the appellate court will rule on the complaining lenders' motion, or, if the stay is lifted, when the trial court might rule on a temporary restraining order.

If a court stops the company from going forward with the amend-and-extend, the transaction will have to be delayed or withdrawn, and so will the related offering of senior secured notes.

Freescale added that it believes that all claims made by the lenders are without merit and is vigorously defending this action.

As was previously reported, Freescale wants to extend the maturity on its term loan to Dec. 1, 2016 from Dec. 1, 2013, and increase pricing to Libor plus 425 basis points, compared with Libor plus 175 bps on the non-extended loan.

In addition, the amendment would allow for the issuance of $750 million senior secured notes that would be used to repay bank debt, and would permit the company to sell additional senior secured notes, so long as the net cash proceeds from any such issuance are used to prepay bank debt at par.

JPMorgan is the left lead bank on the amendment.

Lenders are being offered a 25 bps amendment fee.

Late last year, the company had attempted to amend its facility to allow for the issuance of secured and unsecured debt to reduce term loan debt dollar-for-dollar, and to gain the ability to amend and extend its credit facility at a later date - however, that amendment did not get enough approvals to pass.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial and networking markets.

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