Blockbuster bonds quiet on filing chatter; Nortel unmoved by asset sale; NewPage sitting tight

By Stephanie N. Rotondo

Portland, Ore., Aug. 27 - As was widely anticipated, Friday's trading session was quite lackluster.

"It's pretty much shut," a trader said shortly before the market closed. He said that total trading volume in the secondary space had yet to hit $500 million.

"Everything is onesies and twosies," he said, adding that in terms of price, the distressed market was on the positive side.

"People are just happy to keep their heads down and call it a day," he said.

"It's basically been a vacation this week and next week," another trader said. That trader called the market unchanged to up half a point, "depending on where you look."

"It's about as dull a day as you can get," he remarked.

Even news that Blockbuster Inc. was preparing a bankruptcy filing did little to move the company's debt. The subordinated paper did head up, but the senior secured notes were seen holding around the levels they had risen to on Thursday.

NewPage Corp. and Nortel Networks Corp. were also unchanged on the day, and trading in both credits was thin. For its part, Nortel announced Friday that it was considering another asset sale.

Blockbuster quiet on filing chatter

Blockbuster's 9% notes due 2012 gained some ground, ending around the 4 bid, 5 offered level, traders reported.

The 11¾% notes due 2014, however, saw little action and sources opined the bonds were holding on to Thursday's gains. The paper had closed at 50 bid, 52 offered previously.

According to a Los Angeles Times report, the movie rental chain is in process of creating a "pre-planned" bankruptcy filing and, in doing so, has met with a number of film studios to ensure that movies will keep coming in.

The report cited anonymous sources who said the filing could come by mid-September.

A bankruptcy filing would not come as a big shock, as Blockbuster has been losing money - and market share - for some time. The Dallas-based company is currently operating under a forbearance agreement, which it secured after missing a July 1 coupon payment.

The agreement prohibits the company from making another coupon payment on Sept. 1.

The forbearance expires Sept. 30.

Nortel not moved by asset sale

Nortel Networks' bonds showed little reaction to news that the company was looking to sell its multi service switch unit.

A market source deemed the 10 1/8% notes due 2013 unchanged at 78 bid, 78½ offered.

The Toronto-based company said it had entered into a "stalking horse" asset sale agreement with PSP holding LLC, a special purpose entity funded by Marlin Equity Partners and Samnite Technologies Inc.

The purchase price is set at $39 million in cash.

This is not the first asset sale Nortel has done since entering bankruptcy in January 2009. The company has sold off various units in an attempt to scale back and focus on its core businesses.

NewPage sitting tight

NewPage notes remained steady, even in the wake of the recently published research report from CreditSights Inc., in which analysts recommended investors stay away from the credit.

Several sources placed the 11 3/8% notes due 2014 at 81½ bid, 82½ offered.

On Wednesday, CreditSights put out a note that called the Miamisburg, Oho-based papermaker's debt "increasingly toxic." The analyst opinion falls in line with market sentiment, which has been on the decline.

The problems center around the company's financials and uncertainty regarding management. Earlier this month, Newpage reported yet another loss for the second quarter.

And, in June, the company announced a management shakeup, replacing its top executive, not six months after he first took the post.

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