Distressed bonds firm in busier market; NewPage gets boost on improved guidance; ATP moves up

By Stephanie N. Rotondo

Portland, Ore., Sept. 1 - The first day of the month saw an increased amount of trading, distressed debt traders reported Wednesday.

"The day really started cranking," a trader said, estimating that total volume in the secondary space was around $1.5 billion.

"The market was up across the board a pretty solid quarter to a half [point]," he added. "Real retail was buying again and that was good to see."

Still, another trader noted that the stronger market made it "harder to sell paper," although there were "better bids" to be had.

The nom du jour was NewPage Corp., whose bonds gained as much as 10 points on the day. The gains came after the company announced "better than expected" guidance for the remaining portion of 2010.

Meanwhile, ATP Oil & Gas Corp. also headed upward. There was no news out on the oil driller, but one trader speculated that investors were becoming more comfortable with the company's ability to continue as a going concern.

A dismal monthly sales report did little to move General Motors Corp.'s debt, according to traders. Still, the credit was one of the more active issues of the day.

NewPage jumps on guidance

The big news of the day was NewPage, as the company released new and improved guidance for the remainder of 2010.

One trader said that somewhere between $200 million and $300 million of the papermaker's various issues changed hands. The bonds were "up huge," he said, gaining 6 to 9 points on the day.

The trader placed the 11 3/8% notes due 2014 at 871/2, which was "up a solid 6 [points]," he said. He added that "well over" $100 million of those bonds traded.

Another $50 million to $60 million of the 10% notes due 2012 traded, he said, at 421/4. He called that up "almost 9 points."

"[NewPage] was certainly the bulk of the trading," he remarked.

"That was the big one," another trader said. He also pegged the 11 3/8% notes at 871/2, which compared to 81½ on Tuesday. The 10% notes meantime closed around 43, up "a good 10 points or so."

In an 8-K filed with the Securities and Exchange Commission, the Miamisburg, Ohio-based company increased its estimated projected EBITDA for the third quarter to between $90 million and $100 million. The company had posted EBITDA of $10 million in the second quarter of 2010 and $140 million in the third quarter of 2009.

Net loss was targeted at $75 million to $85 million, versus the second quarter net loss of $174 million and $138 million in the third quarter of 2009.

For the fourth quarter, NewPage expects to achieve EBITDA between $145 million and $165 million, which compared to $88 million in the fourth quarter of 2009. The company is aiming for a net loss of $10 million to $35 million.

"We currently expect that our levels of sales volume and pricing for the fourth quarter of 2010 will be indicative of the quarterly sales volume and pricing levels in 2011 after consideration of seasonal factors," the company said in the filing.

The new guidance was "better than expected," a trader said.

"If they meet them, they'll be in good shape," he opined. "But it remains to be seen if they will."

ATP bonds move up

ATP Oil & Gas' paper emerged as a winner of the day, according to traders.

A trader said the 11 7/8% notes due 2015 were "very, very active and also higher" at 821/2. He called that over a point better, with about $25 million to $30 million changing hands.

Another trader saw the bonds at 82, up a point on the day.

There was no credit-specific news out to explain the activity, but one trader surmised that the move had to do with investors' opinions about the company's ability to continue as a going concern.

"It is part of the expectation that they are going to work their way through this without the kind of legislation" that would have made that harder to do," he said.

ATP currently has several offshore oil rigs located in the Gulf of Mexico. When the BP plc-operated Macondo well exploded on April 20 - just one day after ATP released its 11 7/8% notes into the market - it was unclear if the company would be able to continue operating in that region.

GM steady on sales report

Detroit automaker General Motors announced its August sales numbers Wednesday and though the report was disappointing, the company's bonds were little changed.

A trader said $20 million to $30 million of the benchmark 8 3/8% notes due 2033 traded at 32 bid, 32½ offered.

"Not that much movement," he said.

Another trader said the bonds might have increased fractionally, also seeing them trading with a 32 handle.

The bonds' technical issuer of record is Motors Liquidation Co., the name assigned to what used to be GM Corp. before its pre-packaged Chapter 11 filing in June 2009 with the U.S. Bankruptcy Court in Manhattan, which has been overseeing the company's reorganization.

Motors Liquidation sold all of GM's profitable operating divisions, such as its Chevrolet, Cadillac, Buick and GMC brands, as well as trademarks and other usable assets, in July 2009 to a "New GM," General Motors Co. LLC, with the purchase financed by the U.S. Treasury. "New GM" now manufacturers those cars, plus several remaining overseas brands like Opel in Germany, Vauxhall in the U.K. and GM Daewoo in South Korea, and is currently planning an initial public stock offering for later in the year.

Meanwhile, Motors Liquidation - "Old GM"- was left holding and settling all of the carmaker's liabilities, such as its billions of dollars of bond debt and lawsuits and claims against the company, as well as disposing of its old, unwanted assets currently in the process of being sold off or else wound down and liquidated, like the remnants of the Hummer brand or various closed production facilities.

Liability transfer to trusts

Under the plan filed with the court on Wednesday, all of the remaining assets and liabilities will be transferred to four trusts, including an Environmental Remediation Trust, which will provide funds for the continuing cleanup efforts at the remaining old GM properties not transferred to the "New GM" and a General Unsecured Creditors Trust.

The trust will be responsible for resolving the outstanding claims of the company's unsecured creditors and will divide up among those creditors whose claims are allowed the 10% of the shares of the "New GM" and warrants exercisable for a further 15% of the "New GM" that are currently held by Motors Liquidation. A third trust will handle both present and future asbestos-related claims against the "Old GM," while a fourth trust will deal with certain litigation-related claims.

Since the "Old GM" became Motors Liquidation more than a year ago, the company said that more than 70,000 claims totaling some $275 billion have been submitted and are being managed, with over $150 billion of those claims already resolved or eliminated since then. Anticipating confirmation of its plan by next year's first quarter, Motors Liquidation said that it expects a majority of the unsecured claims to be resolved within the first two years after the plan is confirmed.

Also on Wednesday, the company reported its monthly sales figures. For the month of August, sales of GM's combined brands - including Chevrolet, Buick, GMC and Cadillac - fell 11% when compared year-over-year. When compared to the previous month, total sales dropped 7%.

The company noted the government's Cash for Clunkers program favorably affected last year's August results.

Paul Deckelman contributed to this article

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