Distressed debt buoyed by new issues, but focus elsewhere; iStar unmoved by bankruptcy chatter

By Stephanie N. Rotondo

Portland, Ore., Sept. 21 - Market sources continued to see busy trading during Tuesday's session, leading to a stronger secondary market overall.

"Lots of trading and good stuff happening," enthused one trader.

Still, as "new issues were all the rage," as one trader put it, activity in distressed land remained muted.

iStar Financial Inc.'s debt held its ground following word the company was considering a possible pre-packaged bankruptcy filing sometime next year. The plans come after creditors refused to allow the company to amend its bank loans.

Also, NewPage Corp. had cause to celebrate as the U.S. Commerce Department ruled to impose tariffs on Chinese and Indonesian glossy paper imports. But even with that good news, the company's bonds were little moved.

iStar bonds hold ground

iStar Financial bonds were unchanged following news the company was planning to file a pre-packaged bankruptcy, possibly sometime next year.

"There's been some trading, nothing huge," a trader said. "They are relatively unchanged."

He pegged the 5½% notes due 2012 around 81½ and the 5.95% notes due 2013 around 76.

Another trader said he "heard some people mumbling about it," though he didn't see much trading volume. About "$30-odd million" total of the company's various issues changed hands, with $15 million to $20 million of that being the 5½% notes.

He also placed that issue around the 81½ mark.

The New York-based real estate investment company is reported to be planning for a pre-packaged bankruptcy after attempts to amend its loans were blocked by creditors.

The creditor negotiations on the bankruptcy filing are expected to begin next month. Lazard Ltd. and Kirkland & Ellis LLP are said to have been brought on board as advisers.

Other options the company has in the way of restructuring efforts are to extend maturities or launch an exchange offer.

iStar has about $2.6 billion in debt maturing within the first six months of next year.

NewPage steady on tariff ruling

Trading in NewPage paper was not as active as usual, traders said, and the bonds ended unchanged to higher.

One trader, calling the debt unchanged, saw the 11 3/8% notes due 2014 at 91 bid, 91 5/8 offered and the 10% notes due 2012 at 51½ bid, 52 offered.

Another trader said the 11 3/8% notes were "still higher" around 911/2, while the 10% notes were "also a little bit higher" around 511/2.

The Miamisburg, Ohio-based coated papermaker - along with Appleton Coated LLC and a unit of Sappi Ltd. - scored a victory as the U.S. Commerce Department ruled that Chinese and Indonesian glossy paper imports received unfair subsidies, allowing them to sell their products at a discount to what domestic papermakers' sold their paper for.

As such, those paper imports will face duties as much as 136% for China and 20% for Indonesia.

The tariffs will become final once the International Trade Commission enters their ruling, expected late this year.

Blockbuster slips

A trader said Blockbuster Inc.'s 9% notes due 2012 slipped down to 7 from previous levels around 8, though he added it was just one small trade that caused the decline.

"Not that that really matters, but I guess a point is a point either way," he said.

Blockbuster is a Dallas-based movie rental chain.

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