Sorenson remains weak; Nortel mixed on sale news; oil names trade down; broad market gets hit

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., June 29 - The distressed debt market took a backseat to the equity markets on Tuesday, as "everybody was kind of mesmerized by the stock market going down," a trader said.

Equity market indexes were down more than 2% across the board, as concerns about the global economy grew and certain economic indicators were not as good as expected.

"The equity markets took a beating and everybody else in the bond market was kind of frozen," the trader said.

As such, bonds were down as much as 3 points, generally speaking.

Sorenson Communications Inc. remained on the weak side, adding to the losses incurred in Monday's session. The bonds were down about 2 points on Tuesday, as the market reacted to lower-than-expected reimbursement rates from the Federal Communications Commission.

Elsewhere, Nortel Networks Corp. closed out the day mixed following news of a completed asset sale. The bonds were either better or worse, depending on whom you talked to.

The oil and gas arena - including such topical names as ATP Oil & Gas Corp. and Anadarko Petroleum Corp. - was also weaker, as oil futures fell as well. Oil might remain depressed in the near-term as a tropical storm heads for the Gulf area.

Sorenson remains weak

Sorenson Communication bonds continued to lose weight during Tuesday trading, following news regarding the Federal Communications Commission's recent changes to its reimbursement rates for video relay services.

A trader quoted the 10½% notes due 2015 at 64 bid, 65 offered. That compared with Monday's closing levels between 66 and 68, which were down 3 points as well.

"They had been going back and forth on these reimbursement rates," the trader said. "[The bonds] had the bulk of the loss yesterday, but they're still down with everything else."

Another trader said that there were "a lot of trades " in Sorenson paper around 65 bid early in the session, and saw the bonds going out later in the day "still hanging around" 64 bid, 65 offered, "where the trading was most of the day, a lot of activity." That was down at least a point from earlier in the day, and further down from around 66 at the end of Monday's dealings, when the bonds were heard to have slid about 3 points on the day.

The FCC has adopted an interim reimbursement rate of $5.07 per minute for providers of 500,000 minutes or more. While that is above the initially proposed rate of $3.89, it is still lower than the current rate of $6.24.

"Sorenson is disappointed that the FCC, despite having access to the detailed audited financial materials submitted by Sorenson, chose a rate significantly below the rate that is required for Sorenson to maintain existing service levels," the company said in a statement.

"In light of the FCC's reduced rate, Sorenson anticipates having to make certain operational changes and cost reductions. However, Sorenson intends to do everything possible to minimize the impact of reduced service levels to VRS consumers that this FCC action necessitates."

The statement went on to say that the Salt Lake City-based provider of telecommunications services to the deaf intends to seek a stay on the rate order.

Nortel mixed on sale news

Nortel Networks' debt ended the session mixed after the company announced it had completed an asset sale to Telefonaktiebolaget LM Ericsson (Publ).

A trader said the 10¾% notes due 2016 were up about 2 points at 80½ bid, 81½ offered.

But another trader saw the notes slipping about a point to 80½ bid, 81 offered, compared with 81 bid, 81½ offered previously.

The second trader also saw the floating-rate notes due 2011 weakening to 78 bid, 78½ offered, while the 10 1/8% notes due 2013 improved to 81 bid, 81½ offered from 80 bid, 80½ offered previously.

The Toronto-based telecommunications company announced Tuesday that its principal operating subsidiary, Nortel Networks Ltd., had completed the sale of its 50% plus one share interest in LG-Nortel Co. Ltd., a joint venture with LG Electronics Inc. Ericsson purchased the asset for $242 million in cash.

Also, on Monday, Nortel asked a the bankruptcy court overseeing its case to force Avaya Inc. to pay the company $22 million it believes it is owed from last year's sale of its enterprise business. Nortel is alleging the funds are being withheld in violation of the sale agreement, though Avaya has refuted the allegations.

Oil names trade down

A trader noted that oil prices were down more than 2 points - actually, crude for August delivery fell by $2.31, or 3%, on Tuesday on the New York Mercantile Exchange - and that helped push already beleaguered oil names, hurt by the continued problems stemming from the Deepwater Horizon oil-rig disaster in the Gulf of Mexico, even lower.

"It looks like they were just selling everything" in the sector, he said. "Oil itself was going down, and all the companies followed it."

He said that ATP Oil & Gas' 11 7/8% second-line senior secured notes due 2015 "weakened up a bit," quoting the Houston-based energy exploration and production company's issue down by "a couple of points" from recent levels, at a 72-73 neighborhood.

A trader said that BP Capital Markets plc's bonds were active - although he noted that the embattled British oil giant's paper "is always active." He saw its 5¼% notes due 2013 trading in a 91-92 range, but ending closer to the 91-91½ end of that range. "That's down a bit. BP is staying at the lower level" of its range.

He also saw BP's 4¾% notes due 2019 ending around 82 bid.

Another trader said that Transocean Inc.'s 6% notes due 2018 were around 91 bid, which he called down 1 point to 1½ points.

And, Anadarko Petroleum's 5.95% notes due 2016 lost about half a point to a full point to around the 86 bid level, where "most of their paper was trading, on real size."

Broad market takes a hit

As the rest of the market declined in sympathy with equities, the distressed debt market got rocked, a trader said.

The trader noted that, while bellwether names were down half a point to a point, some distressed credits were down as much as 3 points in reaction to the broader market.

For example, Smurfit-Stone Container Corp.'s 8% notes due 2017 were down "a good 3 points," he said, at 771/2.

First Data Corp.'s 10.55% pay-in-kind notes due 2015 were also down "at least 3," the trader added. He placed the paper around 731/2.

Also in the financial realm, American International Group Inc.'s hybrid notes - like its 8.17% notes due 2058 - slipped 2 to 3 points, ending at 77½ bid, 78½ offered.

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