NewPage bonds end mixed; Dynegy debt dips; Sorenson paper ends steady; Harrah's notes decline

By Stephanie N. Rotondo

Portland, Ore., June 30 - Distressed debt was "sideways for the most part," a trader said Wednesday.

That was due in part to it being month-end, but investors were also likely gun-shy after the big losses seen in Tuesday's equity markets.

NewPage Corp. bonds were unchanged to lower, traders reported. The notes were on the active side - though a trader noted that "nothing was really all that active," aside from one or two specific credits - as a new study released Wednesday said that Chinese subsidies were hurting the U.S. paper industry.

Energy names were slightly more active than others - Anadarko Petroleum Corp. made up the bulk of the activity, however - and Dynegy Inc. counted itself among them. Traders saw the bonds slipping in trading, echoing the losses in the stock seen on Tuesday.

Meanwhile, trading in Sorenson Communications Inc. died down a bit after the company's notes spent the last couple of sessions being touted as one of the more active names. Still, after incurring about 5 to 6 points in losses so far this week, traders said the bonds were essentially unchanged on the day.

And, Harrah's Entertainment Inc.'s debt ended down, while General Growth Properties Inc. held its ground.

NewPage bonds finish mixed

NewPage bonds ended the midweek session unchanged to weaker, according to market sources.

A trader said the 10% notes due 2012 "look kind of unchanged" around 541/2.

But at another desk, the notes were seen lower at 53¾ bid, 54½ offered, compared to 54 bid, 55 offered previously. The 11 3/8% notes due 2014, however, were deemed unchanged at 90 bid, 91 offered.

The movement - or in some cases, lack thereof - came as a new study showed that Chinese subsidies - about $33.1 billion from 2002 to 2009 - were hurting U.S.-based papermakers. The Economic Policy Institute, a nonprofit Washington-based think tank, released the study on Wednesday.

"In 2008, China overtook the United States to become the world's largest producer of paper and paper products," the study said. In November 2008, China's National Bureau of Statistics indicated the paper industry had generated 9.6% more paper and paper products than the year before. And, in 2009, China exported$7.6 billion in paper and paperboard.

"Yet China has no competitive advantage in this capital-intensive industry and lacks the natural resources to fuel it," the study said. "With saturated domestic markets, proportionately much smaller per capita than in developed countries, exports have served, and are expected to continue to serve, as the primary engine of growth for China's paper industry, adversely affecting the U.S. and global economies."

NewPage is a Miamisburg, Ohio-based manufacturer of coated paper.

Dynegy debt dips

Houston-based energy producer Dynegy saw its debt fall a point or more during the session.

A trader said the 8 3/8% notes due 2016 were "maybe down a point" around 781/2. Another source saw the 7¾% notes due 2019 slipping over a point to end at 69¾ bid.

On Tuesday, Dynegy's stock had declined following a dip in natural gas futures. According to analysts quoted in a Business Week article, lower prices for the fuel mean lower prices to the consumer.

Also in the energy arena, Anadarko Petroleum remained the biggest trading credit, as one trader said that five out of the six most active bonds were Anadarko.

"Those and BP [plc] were basically up about a half," the trader said. He pegged the 5.95% notes due 2016 at 86 1/8, while another saw the issue around 86, "pretty much unchanged."

Sorenson ends steady

After trading on the active side for the last two sessions, Sorenson Communications' paper saw "hardly any action," a trader said.

The trader quoted the 10½% notes due 2015 at 63 bid, 65 offered.

"They certainly weren't better," he said. "Maybe a little lower on the bid side again."

Another trader called the bonds unchanged around 64.

Salt Lake City-based Sorenson saw its bonds drop about 3 points on Monday and another 2 points on Tuesday following word of new reimbursement rates imposed by the Federal Communications Commission on video relay services. The rate was lower than what was anticipated.

The adopted interim reimbursement rate is $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 issued Tuesday.

"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 company intends to seek a stay on the rate order.

Harrah's notes slip

Harrah's Entertainment's bonds finished the day on the weaker side, even as the company said it was going ahead with a delayed construction project.

A trader called the debt down half a point, the 10% notes due 2018 at 81¾ and the 10¾% notes due 2016 around 80.

Another source said the 10% notes had fallen nearly 2 points by the end of business, closing at 81¾ bid.

The Las Vegas-based casino operator said it was going ahead with a plan to build a retail development between the Flamingo and O'Sheas casinos on the Las Vegas Strip. The project had previously been postponed due to market conditions.

The new retail center is expected to include bars, restaurants, shops and other entertainment, including a giant Ferris wheel.

General Growth debt unchanged

General Growth Properties' debt was about unchanged on the day as the company said it hoped to file its plan of reorganization and related disclosure statement "on or around" July 9.

One trader called the 5 3/8% notes due 2013 down a quarter-point at 107. Another said the paper was unchanged at 107 bid, 107½ offered.

The second trader also called the 7.20% notes due 2012 steady at 113 bid, 114 offered.

The Chicago-based mall operator also said it had requested an exclusivity extension. The current deadline will expire July 15, but General Growth wants to extend that to Oct. 18.

Broad market still weak

Elsewhere in the world of distressed, Smurfit-Stone Container Corp.'s 8¼% notes due 2012 fell nearly a point to close at 781/2. The Chicago-based paper packaging producer emerged from Chapter 11 protections on Wednesday and its new stock is expected to being trading on Thursday.

A trader said that General Motors Corp.'s 8 3/8% notes due 2033 were "a bit active," but unchanged at 31¾ bid, 32 offered.

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