Smurfit bonds steady as battle begins; MGIC firms following results; Park-Ohio notes upgraded

By Stephanie N. Rotondo

Portland, Ore., April 20 - The distressed debt market was firm in Tuesday trading, though supply seemed to be an issue.

"Can't seem to get enough bonds out there," a trader said.

Smurfit-Stone Container Corp. saw its bonds ending unchanged to slightly better on the day. The company and those representing its shareholders met in court on Tuesday to debate a reorganization plan that leaves nothing for stockholders.

Meanwhile, MGIC Investment Corp. announced its first quarter results, which showed an improved net loss year over year. Though the loss did miss market estimates, the company's bonds gained some ground.

There was "all kind of stuff going on. The mortgage-insurance world is the exciting world today," a distressed trader said.

Park-Ohio Holdings Corp. received a rating upgrade form Moody's Investors Service. The agency had previously put the company on review for possible downgrade. Still, the bonds finished the day about unchanged.

Smurfit steady as battle begins

Smurfit-Stone Container's debt was unchanged to better in Tuesday trading, as a court battle between the company and its shareholders began.

A trader said all of the company's issues - the 8 3/8% notes and 8¼% notes all due in 2012, the 7½% notes due 2013, the 7 3/8% notes due 2014, the 8% notes due 2017 and the 7½% notes due 2025 - were trading in a 91 to 93 context. He said the market was "mostly" 92 bid, 93 offered.

Another source deemed the 8¼% and 8% notes unchanged at 92 bid, 93 offered, while another claimed the 8¼% notes were nearly a point better at 93 bid.

The Chicago-based manufacturer of paper packaging met its shareholders in court on Tuesday, as shareholders sought to fight the company's current reorganization plan.

The shareholders are alleging that the company's managers have undervalued the company, which resulted in the group receiving no recovery in the reorganization plan. The group believes that the current appraised value is based on the current economic climate and that it is therefore too pessimistic.

"You can't pick the trough and say for the next five years the world will be that way," said Rachel Strickland, the attorney representing the shareholders, at a hearing in bankruptcy court. "The debtor's projections are unreliable."

According to the current plan, which was already amended once, all secured debtholders will be repaid in full with cash. Most unsecured debtholders will receive new equity in place of their debt holdings.

All current existing equity would be canceled.

Paper products sector

And, going on in the rest of the paper products sector, a market source saw NewPage Corp.'s 10% notes due 2012 unchanged at 71 bid, 72 offered. He also saw Verso Paper Corp.'s 11 3/8% notes due 2016 at 94 bid, 95 offered, which he said was probably down a point from Friday's levels.

A brokerage house analyst meantime noted that while there had been recent activity in names like NewPage and Verso, mostly to the upside, based on positive analyst commentary about the coated-paper sector in general and about the publicly traded Verso in particular from such houses as Credit Suisse, JP Morgan and Goldman Sachs, "there's been no positive data" on that segment of the paper business. "There's been a lot of forward looking [positive] commentary - but we haven't seen any price increases," for instance.

He was of the opinion that NewPage, notably, was "rallying a little ahead of itself," but said that for now, he was "not going to be positive" on the sector absent price increases. He also cited other signs that what he called the "secular decline" in the coated paper market was continuing.

MGIC firms following results

Milwaukee-based private mortgage insurer MGIC Investment reported its first quarter results Tuesday.

In response to the numbers, the company's bonds improved some, though trading was mostly in odd lots, according to traders.

A trader quoted the 5 3/8% notes due 2015 at 87 bid, 88 offered. He noted that the paper had traded in the high-70s just last week.

Another market source also pegged the debt at 87 bid, 88 offered. The source said that was up from the intraday lows in the low-80s.

For the quarter ending March 31, MGIC posted a net loss of $150.1 million, or $1.20 per share. That compared to a net loss of $184.6 million, or $1.49 per share, in the first quarter of 2009.

Though the loss was an improvement year-over-year, it was the 11th consecutive quarter the company had reported a loss.

Total revenues were weaker at $370.8 million, versus $435.2 million the year before. Net premiums written during the quarter also declined, to $256.1 million from $347.5 million.

MGIC also announced it had commenced a $700 million public offering of common stock, along with a $300 million offering of convertible senior notes due 2017.

The stock offering has a 15% greenshoe, while the convertibles issue has a $45 million over-allotment option.

The company intends to use proceeds from the offerings to repay at maturity or to repurchase before maturity approximately $78.41 million outstanding principal amount of its 5 5/8% notes due 2011, as well as for general corporate purposes.

Other financial news

Elsewhere in the financial realm, a trader said that MBIA Inc.'s 14% surplus notes due 2033 got up to 77 bid on Monday - which he called "a big move," a gain of 5 points from the lower-70s - and then added on another point on Tuesday, ranging between 77 and 79, although he said there was "not much action in it" on Tuesday.

He also saw Ambac Financial Group Inc.'s 6.15% notes due 2087 "traded actively," but he saw little movement from the 10½ to 11½ context, finishing about unchanged on the day at 11 bid, "so they had activity but they didn't have the other names did, because they're in different businesses."

He added that Ambac's 9 3/8% notes due 2011 were at 67 bid, which he called up a couple of points, although he noted that the movement came in smallish odd-lot dealings not really representative of anything, and opined that throwing out those small pieces, the bonds were probably unchanged a few points below that 67 level.

"This whole sector" has firmed up, he said.

Park-Ohio notes upgraded

Cleveland-based Park-Ohio Holdings received a rating upgrade during the trading day, but the bonds were little phased by the news.

A trader said the 8 3/8% notes due 2014 were "probably in the high-80s, low-90s" on Tuesday. However, he noted that it was a "small issue" and that "they only trade in odd lots."

Moody's Investors Service upgraded its rating on the senior notes to Caa1 from Caa2. Park-Ohio's corporate family rating was confirmed at B3.

ParkOhio is a diversified logistics and manufacturing company providing customized supply chain solutions and highly engineered manufactured products to every major industrial sector.

Broad market stronger

In the rest of the distressed marketplace, a trader saw Blockbuster Inc.'s 9% senior subordinated notes due 2012 were up about a point on Tuesday in the 25-25 ¼ area, on "good volume."

A market source at another desk said trading in the Dallas-based movie-rental company's bonds was brisk, with volume of over $22 million recorded by mid-afternoon, and probably more after that.

A trader said that Claire's Stores Inc.'s 9¼% notes due 2015 were trading at 90½ bid, 92 offered, "probably up a point - not much trading, but nevertheless up."

Rotech Healthcare Inc.'s 9½% notes due 2012 also "moved up a little bit," according to a trader, to an 89ish context. "There was some activity in that name - not a lot, because you don't see it trade much, but there were some trades in that 89-89½ area. You don't always see activity in that name."

Paul Deckelman contributed to this article

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.