ATP Oil continues erosion; ResCap rises on coupon day; Kodak unsecured bonds move up

By Paul Deckelman

New York, Nov. 15 - ATP Oil & Gas Corp.'s bonds continued to lose value on Tuesday, even though the energy exploration and production company's shares pulled out of their recent nosedive.

Junk bond and distressed-debt traders noted that ATP was by far the busiest high-yield issue of the day.

A new research report raised further questions about the company's prospects going forward.

On the other hand, Residential Capital LLC's bonds firmed solidly for a second consecutive session in fairly busy trading.

While there was no fresh news seen out on the mortgage lender - whose bonds took a pounding last week on investor bankruptcy fears - traders suggested that ResCap probably made a scheduled coupon payment on one of its issues, thus reassuring the financial community for now.

Eastman Kodak Co.'s unsecured bonds were seen several points better, although trading was limited. There was no ready explanation for the rise in the notes of the iconic but lately troubled photographic products manufacturer, whose secured bonds were meantime seen little changed.

Accellent Inc.'s bonds traded at sharply lower levels, likely in reaction to the disappointing numbers that the medical device manufacturer reported for the latest quarter.

ATP a loser, again

A distressed-debt trader exclaimed that "we've still got the oil-patch stuff percolating." ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were "the big name today" and at least $65 million to $70 million of the bonds changed hands.

He said that it was "the same thing" as over the last several days, with the Houston-based energy exploration and production company's debt on the downside.

However, he said that by the end of the day, "I think it stopped going down."

He saw the bonds - which on Monday had fallen to around 65 bid from previous levels in the higher 60s - get as low as a 60-61 context in early trading.

"But then it ticked back up" from those lows to end the session somewhere around 631/2-to-64 bid, down a point on the day on "a lot of volume."

The bonds declined even though ATP's recently hard-hit stock shot up by 88 cents, or 15.22%, on Tuesday to end at $6.66 on almost three times the normal volume.

The bonds have declined each session since ATP's release of third-quarter earnings and company guidance - and ATP's acknowledgement that it will produce less oil and gas going forward, raising some investor qualms about the company's ability to service its debt in 2012.

The latest blow to investor confidence in ATP came on Tuesday in the form of a research note from Jefferies & Co., which warned that output from the company's oil wells is "underperforming, putting further strain on an already precarious liquidity position."

The brokerage further cautioned that ATP will likely see widening losses in the fourth quarter and in 2012.

It said that ATP "will need additional external financing to carry out its 2012 program, but sources are difficult to identify."

ResCap rises again

Residential Capital's bonds moved up on the day, continuing the positive momentum that the Minneapolis-based residential lender's bonds had shown on Monday, when they were up several points.

The key issue was ResCap's 9 5/8% notes due 2015, which a trader saw up by several points at 62½ bid, 63½ offered after they started the day at 60½ bid, about where they had gone home on Monday.

"Call them up two points on the day, with a decent amount of activity," the trader said, with around $10 million of the bonds trading.

He said that he had no firm information about whether the company made the $110 million coupon payment on its $2.12 billion of outstanding bonds, "but based on the price, I think they did."

During Monday's session, traders said the bonds had risen on investor anticipation that the coupon would be met.

Kodak climbs

A trader said that Eastman Kodak's 7¼ notes due 2013 were up 5 points on the session, quoting the bonds at 46 bid, 46½ offered.

However, he said that it "did not seem like there was much volume. It was just a couple of trades."

He saw the Rochester, N.Y.-based photographic products and digital imaging technology provider's secured bonds - its 9¾% notes due 2018 and 10 5/8% notes due 2019 - sitting still at 69-72.

On the news front, a group of Kodak bondholders was reported to have hired the Blackstone Group as a financial adviser, and also recently retained the law firm of Akin Gump Strauss Hauer & Feld, in order to give itself a better position in the event the company undergoes a restructuring.

And a Kodak equity investor has asked the company to scrap a "poison pill" plan adopted in August that would effectively bar any parties from accumulating more than 4.9% of the stock.

Investment Partners Asset Management said in a letter to Kodak that it believes that the company's real motive in adopting the takeover defense was not, as management claimed, protecting Kodak's tax assets but rather was to prevent any unsolicited acquisition offers thus, in the investor's view, letting management and the board insulate themselves from being held accountable to shareholders.

Accellent trades off

A market source saw the 10% notes due 2017 of Accellent trading around 80 on Tuesday.

That was well down from prior levels around 86 where those notes had traded as recently as last week ahead of the release of the company's quarterly numbers.

About $4 million or $5 million of the bonds changed hands.

Accellent, a Wilmington, Mass.-based provider of manufacturing and engineering services to the medical device industry, reported that in the third quarter ended Sept, 30, net sales increased 6.4% to $133.1 million from $125 million in the 2010 third quarter. However, income from operations was $13.5 million in the third quarter of 2011, down from $17.6 million in the third quarter of 2010, while the company's net loss was $4.4 million in the latest quarter, wider than the net loss of $3.1 million in the third quarter of 2010.

MF Global gets better

A trader said that MF Global Holdings Ltd.'s bonds were "hanging out" around a 331/2-to-34 bid context, which he said was up 1½ points on the session, a reversal of Monday's decline in the bankrupt New York-based futures and commodities brokerage company's 6¼% notes due 2016.

He said that there was "decent volume" of around $15 million or so in the credit.

NewPage gets busy

A trader said that NewPage Corp.'s 11 3/8% senior secured notes due 2014 were trading around 71 bid, 72 offered, which he pronounced was down by 1 point from the levels seen on Monday.

He saw the bankrupt Miamisburg, Ohio-based coated-paper manufacturer's bonds racking up between $15 million and $20 million of trading on Tuesday.

Dynegy doesn't move

Elsewhere, Dynegy Holdings, LLC's 7½% notes due 2015 were seen unchanged on the day at 71 bid, 72 offered.

A market source said that the Houston-based power generating company, now restructuring under Chapter 11 was "unchanged to down a point, depending on which side was the last trade."

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