Sorenson drifts on news; Capmark unchanged; Dynegy steady to softer; Anadarko stays top trader

By Stephanie N. Rotondo

Portland, Ore., June 28 - Distressed debt started the week "sideways to up a quarter," a trader said on Monday.

Still, there was some interest in paper, he said.

"There were big inflows last week," he said. "So there is still a bit of an underlying bid for paper."

Sorenson Communications Inc., a lightly traded name, saw activity in its bonds gain following news of its reimbursement rates from the Federal Communications Commission. The bonds were seen losing 3 points by the end of business.

Meanwhile, Capmark Financial Group Inc. saw its bonds trading unchanged to lower. The movement came a day ahead of a court hearing regarding a potential probe of the refinancing of a $1.5 billion loan.

Energy names were on the active side in Monday's marketplace. Dynegy Inc.'s debt was, like Capmark, steady to slightly softer, according to market sources. There was no news out on the company, but the sector has been popular of late, given the volatility of credits like Anadarko Petroleum Corp.

And, Anadarko continued to be the king of the market, as traders said that without any volume in that name, there would be little else to trade. The company's notes traded higher during the session.

Sorenson drifts on FCC news

A trader said that Sorenson Communications' 10½% notes due 2015 opened in a 70-70½ bid context, and by the end of the day, the bonds were trading into a 67½ bid, down 3 points. He said it was "one of the more active names," with news out that would affect the bonds.

Another trader, who saw the bonds "flopping around," said that they had traded into a 70 bid in the morning and then were going home offered at 68 with no bid.

Yet another trader said the bonds were finishing in a 65-67 context citing news out on the reimbursement rates the Federal Communications Commission announced on Monday for providers of video relay service, like Salt Lake City-based Sorenson, which allow hearing-impaired people to make phone calls by use of a videophone and a sign-language interpreter.

The trader said that the reimbursement rates, while higher than last year's, were "less than the market was expecting," causing the bonds to slide.

Sorenson's normally lightly-traded bonds had also slid back in May when the market first became aware of the controversy over reimbursement rates and procedures following a Sorenson filing with the FCC, urging it to reject a multi-tier reimbursement schedule suggested by the National Exchange Carrier Association, a telecommunications industry group representing major phone carriers, claiming that such rates could drive Sorenson into bankruptcy and force other providers to leave the business.

Capmark unchanged ahead of hearing

Capmark Financial Group's bonds were unchanged to nearly a point lower ahead of a Tuesday hearing in which the company's unsecured creditors are asking for an investigation of the refinancing of a $1.5 billion loan.

A trader said the 7 7/8% notes due 2012 were "pretty much unchanged" around 331/2.

But another market source deemed the notes down almost a point at 32¾ bid, 33¾ offered. That compared to 33½ bid, 34½ offered previously.

The creditors are alleging that the refinancing of the loan - which occurred six months before the company filed for Chapter 11 protections - was a tool used by Capmark's lenders to better their position ahead of the bankruptcy filing. The creditors are also claiming that the company is not being forthcoming with documents related to the transaction.

But Capmark is refuting the allegations that its lenders - or management - did anything untoward, noting that the creditors have been "heavily involved" in the bankruptcy proceeding.

"Any implication, the committee has been sitting on the sidelines, deprived of the information it needs to participate in plan and settlement discussion is belied by its active participation in the process," Capmark said in court documents filed Thursday.

Capmark Financial Services is based in Horsham, Pa.

Dynegy steady to softer

Dynegy debt was on the active side, according to traders, though there was no news out to explain the activity.

A trader called the 7¾% notes due 2019 a point weaker at 713/4, a level echoed at another desk as well.

Another trader quoted the notes at 71½ bid, 72 offered, down from 72 bid, 73 offered. The trader also saw the 7.67% notes due 2016 ending unchanged at 87½ bid, 88 offered and the 7 1/8% notes due 2018 closing at 67¾ bid, 68 offered.

The latter issue "rarely trades," he said.

Dynegy is a Houston-based power producer.

Anadarko remains top trader

A trader said that "if you took out Anadarko," trading in the distressed and high-yield arenas would have been virtually non-existent.

Anadarko's paper ended the day on a high note, gaining about a point on the day, according to market sources.

One source placed the 5.95% notes due 2016 at 86 bid, 87 offered, a point better than levels seen last week. He also saw the 7 ½% notes due 2031 around 85¼ and the 6.45% notes due 2036 around 81.

The source also saw ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 at 74½ bid, 75 ½ offered. He said that was unchanged to "maybe up half a point"

At another desk, a source deemed the 6.45% notes unchanged to slightly better at 80 bid, 81 offered.

The energy arena - particularly oil and gas - continues to be volatile and topical as the world waits to see what will happen with the Gulf of Mexico oil spill. Currently, workers in that area are being pulled off their jobs as a tropical storm heads in that direction. The storm is expected to reach hurricane status and it is not clear how that will affect cleanup efforts.

Paul Deckelman contributed t o this article

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