AMR stays busy, ends mixed; Sprint calls bonds, trades actively; Lehman plan OK'd, debt rises

By Stephanie N. Rotondo

Portland, Ore., Nov. 30 - Distressed bonds were "all a-flutter," a trader said Wednesday, as the market reacted to new moves by central banks to provide liquidity to the markets.

"Everything was flying high," he said.

AMR Corp. continued to be active after the parent company of America Airlines filed for bankruptcy protections on Tuesday. The unsecured issues, which had taken a massive beating in the previous session, were seen coming back a bit, but senior paper was losing altitude.

A Sprint Nextel Corp. issue had one of the highest volumes of the day. The 8 3/8% notes due 2012 were trading busily and better after the company announced a call for the issue.

Meanwhile, Lehman Brothers Holdings Inc. rallied some after the defunct investment bank released the latest voting results on its bankruptcy plan.

AMR bonds end mixed

AMR, the parent company of American Airlines that filed for Chapter 11 protections on Tuesday, saw continued action in its debt as market players attempted to quickly get up to speed on the situation.

The filing had caught some off guard, while others claimed to have been expecting it for some time.

One trader said the 10 ½% notes due 2012 made the top five busiest trading issues, calling the debt down "a point and change" at 88 3/4.

He said the unsecured paper, which had plummeted in the previous session given the belief that recoveries will be slim, was still in the teens.

At another shop, a trader said the unsecureds, such as the 9% notes due 2016, had risen to 18 bid, 19 offered from 16 bid, 17 offered.

Another trader said the 10½% notes "traded up early in the day," hitting a high around 91, though he added that the paper "finished closer to 89."

The airline announced it had filed for bankruptcy on Tuesday, stating that the action would help it shed its debt and cut costs.

"It came down, in our view, to a necessary move to preserve the cash AMR has left," wrote Gimme Credit LLC analyst Vicki Bryan in a report sent to clients Wednesday morning. "It's not even clear to us that AMR will ever reemerge from bankruptcy as a going concern. The industry is chronically oversupplied and AMR has no dominance or significant competitive edge in any particular market - we are not convinced that a reinvented, scaled down iteration will change that."

Bryan also noted that AMR is not the most attractive of merger targets and that the "most logical prospect" was U.S. Airways. Still, Bryan said that such a partnership would likely not solve AMR's problems, as "U.S. Airways is even more cash strapped than AMR and its competitive position is even weaker."

Sprint busy on call news

Sprint Nextel's 8 3/8% notes due 2012 had "the highest volume by double," a trader said, as investors reacted to news of a redemption.

The trader said over $50 million of the paper "traded to the short call," leaving the debt up about a point at 101 7/8 bid, 102 offered.

The Overland Park, Kan.-based wireless telecommunications provider said late Tuesday that it would redeem all $2 billion of the notes in full on Dec. 29.

Among the company's other issues, a market source saw the 6% notes due 2016 gaining nearly a point to end at 79¾ bid.

Meanwhile, Sprint's network partner Clearwire Corp. saw its debt gaining ground on word the company was nearing a funding agreement with it majority stakeholder.

A trader saw the 12% notes due 2015 closing at 85 bid, 87 offered, up from the low-80s, while the 12% notes due 2017 moved into the low-50s from the mid-40s.

Lehman up as plan approved

Late Tuesday, Lehman Brothers' released the latest voting results on its bankruptcy plan, which showed a 95% approval rating.

The approval pushes the now defunct investment bank one step closer to paying back its creditors.

The news gave the company's bonds a boost, according to a trader. He saw bonds rallying half a point to three-quarters, quoting them at 26½ bid, 27 offered.

The plan is now set for a confirmation hearing on Dec. 6. Lehman filed for bankruptcy in September 2008.

Paper arena mixed

A trader said the paper sector was mixed on the day and that he had heard there was a report from Citigroup that cut newsprint price targets.

NewPage Corp.'s 11 3/8% notes due 2014 moved up "a little bit" to 70½ bid, 71 offered, while Verso Paper Holdings LLC's 8¾% notes due 2019 were seen around 66.

Another market source deemed Verso's bonds unchanged to weaker, the 8¾% steady around 66 and the floating rate notes due 2014 unchanged at 64. The 11 3/8% notes due 2016, however, fell 7 points to close around 60.

Caesars gains, Dynegy dips

In the broader distressed arena, Caesars Entertainment Corp.'s 10% notes due 2018 shot up right out the gate, a trader said to 64. That compared to levels around 61 previously.

Another trader said that Dynegy Holdings LLC's bonds - which now trade in line with one another - "dribbled down" to 71 bid, 72 offered after a credit default swap auction set the price of the debt at 711/4.

"It was fairly active as well," he said.

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