Sino-Forest bonds quoted lower on coupon skip; AMR inches up; financials suffer in down market

By Stephanie N. Rotondo

Portland, Ore., Dec. 12 - The distressed debt market was holding on early in Monday's session, but ended up drifting lower with the broader market.

"The stocks obviously stunk it up good," a trader said referring to a 160-plus point drop in the Dow Jones industrial average.

Volume was also subdued as the typical holiday slowdown begins.

Sino-Forest Corp.'s debt wasn't trading all that actively, but was quoted significantly lower on news the company was forgoing its Dec. 15 coupon.

Meanwhile, AMR Corp. paper remained active and managed to gain a little altitude. However, there was no particular news out on the bankrupt airline.

Financials were seen drifting lower with the market. A trader said he was seeing an uptick in quotes for Springleaf Finance Corp., though trading was modest. Lehman Brothers Holdings Inc. was busy, but steady and MF Global Holdings Ltd. was "a little lower," a trader said.

Sino-Forest quotes come in

Sino-Forest's debt was quoted lower Monday after the company said it was not going to pay its Dec. 15 $9.78 million interest payment on its 4¼% convertible notes due 2016.

"They were a good bit lower," a trader said. "I don't know if there was really any trading."

He said the notes - including the 10¼% notes due 2014 - were quoted in the mid-20s, down from previous markets in the high-30s.

Another trader said the paper was down "about $10 or so," deeming "pretty much all of [the notes]" in the 25-27 context.

The forest products company - which has domiciles in China and Canada - will now enter a 30-day grace period. If the payment is not made in that time, or another agreement cannot be reached, the notes can be accelerated.

Sino-Forest also said it is talks with stakeholders and advisors and that it was considering all of its strategic options. The company has already breached covenants under its notes and, as such, remarked that its ability to continue as a going concern was contingent upon talks being successful.

"This is a real company with real assets and devoted employees," vice chairman and chief executive officer Judson Martin said in the release. "We will do everything within our power to maximize the return to our stakeholders and complete any work that is required."

Sino-Forest had come under scrutiny in June when Hong Kong-based Muddy Waters Research - an outfit run by known short-seller Carson Block - alleged that the company had fraudulently misrepresented land holdings in China. The company has since investigated the claims and come to the conclusion that the allegations were false.

AMG gains altitude

Trading in AMR bonds was "still in vogue," a trader reported Monday.

He saw the 6¼% notes due 2014 hanging in the 22-22½ range.

"I believe they are settling the CDS in a few days," he added.

Another trader said the 10½% notes due 2012 were better, though he "didn't see any particular news."

He called the issue up "probably 2 points" at 94½ bid, 95 offered.

Another trader said the issue was "up a shade" at 94.

AMR is the Fort Worth, Texas-based parent company of American Airlines. The company filed for Chapter 11 protections to deal with its high cost structure and debt burden on Nov. 29.

Financials fall with market

The financial space was losing ground, traders reported.

"Financials were drifting a bit with the market," a trader said.

The trader remarked that he was seeing an uptick in markets for Springleaf Finance paper. He pegged the benchmark 6.90% notes due 2017 around 70.

Another trader also saw the notes around 70, which he said was "down just a smidge." With no fresh news, he speculated that the losses were "probably more with the market" than anything else.

Meanwhile, another trader said "a fair amount" 'of Lehman Brothers' debt was trading, though still unchanged in the 26½ bid, 27 offered range.

Also, MF Global's 6¼% notes due 2016 trading down to 321/4, according to a trader.

Another trader saw the note falling 1½ points to end around 32, while a third trader called the issue down half a point at 321/4.

Rite Aid to report earnings

Rite Aid Corp. quieted down after trading actively in Friday's session and paper was mixed on the day.

"I saw a bunch of markets," a trader said, but actual trading was thin.

He called the 8 5/8% notes due 2015 down 1¼ points to 931/2, while the 8% notes due 2020 held steady around 1091/4. The 9¾% notes due 2016 inched up slightly to 1083/4.

Another trader called the latter issue unchanged at 1081/2.

The Camp Hill, Pa.-based drugstore chain is expected to post a wider loss on Thursday and analysts are estimating a loss of 12 cents per share.

LightSquared hit by GPS rumor

LightSquared's term loan was bid lower but offered higher in trading on Monday following a large slide on Friday that was sparked by news reports claiming that GPS devices would be disrupted by LightSquared's operation, according to a trader.

The term loan was quoted at 45 bid, 50 offered, versus 45¼ bid, 47¾ offered late Friday, the trader said. On Friday morning, before the news leaked, the loan was quoted at 54 bid, 56 offered, he added.

LightSquared issued a statement on Friday saying that these news reports were false and based on the illegal leak of incomplete government data.

"We are confident that a complete review of all the government data by respected industry experts will demonstrate that the overwhelming majority of devices tested exceeded the established standards and support LightSquared's network," the company added.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage.

Broad market softens

Among other distressed credits, a trader said Caesars Entertainment Corp.'s 10% notes due 2018 fell with the market, closing around 63.

Another trader quoted NewPage Corp.'s 11 3/8% first-lien notes due 2014 at 733/4.

That trader also saw Hawker Beechcraft Acquisition Co. LLC's 8½% notes due 2015 and 8 7/8% notes due 2015 offered at 17 and the 9¾% notes due 2017 offered at 9.

He noted that the company had hired Perella Weinberg Partners LP to help it secure an amendment to its revolving credit line.

Sara Rosenberg contributed to this article

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