Sprint runs up after AT&T news; Verso, Residential Capital lower; Sino-Forest seen active

By Paul Deckelman

New York, Dec. 20 - With AT&T Inc.'s plan to buy smaller wireless competitor T-Mobile USA now officially terminated, that helped to send Sprint Nextel Corp.'s bonds solidly higher on Tuesday.

Sprint, another considerably smaller AT&T rival, had opposed the proposed merger on anti-competitiveness grounds, since a bigger AT&T would have even more of an advantage over No. 3 industry player Sprint.

Aside from Sprint, whose trading was driven by news, traders in distressed-company paper saw a generally quiet session, in line with an overall quieter, though firmer, high-yield bond market as activity continued to wind down ahead of the year-end holidays.

A trader saw Verso Paper Corp. 's bonds several points lower - pretty much bucking the overall market trend - although he saw no news out about the Memphis-based papermaker that might explain such a downturn.

He also saw little activity in such Verso sector peers as NewPage Corp. or Catalyst Paper Corp.

Another distressed downsider on the day was Residential Capital LLC.

There was some activity but little movement seen in troubled wood-plantation owner Sino-Forest Corp.'s bonds.

There, meantime, were little or no dealings in the bank debt of distressed companies.

Sprint runs up

With the news now official that AT&T will not be buying smaller wireless carrier T-Mobile for $39 billion, choosing instead to pay a $4 billion breakup fee to the German-owned T-Mobile rather than go though a likely bruising court battle with the government, Sprint Nextel was one of the big gainers among junk issues.

A trader said that Sprint paper was up anywhere from 1 to 2 points, although he noted that most of the market was also up, so it was difficult to judge how much of that was due to the news.

He saw the Overland Park, Kan.-based No. 3 U.S. wireless carrier's 6 7/8% notes due 2013 up 3/8 point, at 99 7/8 bid, while its 6 7/8% notes due 2028 were up by around 1½ points, trading at 70½ bid.

A second trader agreed that Sprint paper was "up 1 to 2 points, across the board."

Yet another trader said that 2028s were up between 1 point and 1½ points. He said that he saw "a lot of trades" go off between 70 and 71 versus Monday's late levels of 68¾ bid.

"The bulk of the trades were around 70, up 1 to 1½ points."

"The long sprint was right up there with the volume leaders," he said, with over $15 million having been traded.

Sprint's 6 7/8% notes due 2013 were at 98½ bid, up 1½ points.

Sprint had vehemently opposed the efforts of No. 2 industry player AT&T to buy T- Mobile, now the No. 4 U.S. wireless firm, in hopes of being able to leapfrog the current industry leader, Verizon Wireless.

Sprint, already far back of both Verizon and AT&T in terms of subscribers and revenues, feared that letting the one-time "Ma Bell" buy T-Mobile would put it at an even greater competitive disadvantage.

Federal authorities agreed as both the Justice Department and the Federal Communications Commission filed objections on antitrust grounds that threatened to derail the whole deal, ultimately causing AT&T to forget about doing its transaction.

Verso lower, others steady

Away from the trading in Sprint, which was pretty much the big news in an otherwise quiet junk market and in the distressed debt precincts as well, a trader said that Verso Paper's 11 3/8% notes due 2016 were down 4 to 5 point on the session, trading in a 47 to 48 bid context.

He saw no fresh news about the Memphis-based paper producer that might explain the downturn; in fact, the company's stock was up nearly 8% on the day, though not on heavy volume.

Another trader also saw the Verso bonds down around 47-48, but he suggested that "volume was not big at all." In fact, he said it was only one trade, with the last previous trading in the notes having come back on Dec. 13, a full week ago, when they were at 52½ bid.

"So they're down, but it's hard to gauge what's with them - a dealer bought them at 47, then he piecemealed them out to a couple of accounts," the trader added.

One of the traders noted that at this time of the year, it was not unusual for a bond that has not traded for a week or so to suddenly begin trading again, several points lower. He noted that dealers are trying to move paper, while accounts are trying to clean up their books ahead of the end of the year, meaning that odd pieces of paper might be thrown out there just to get rid of them, even if a couple of points below where they were a week or two earlier.

Among other paper makers, a trader saw NewPage bonds at 73 bid, 75 offered, while its 10% bonds were not doing much of anything, quoting the 7 3/8%secured notes due 2014 at 73 bid, 75 offered, while its 10% unsecured notes due 2012 languished in a 6-to-9 context.

The Miamisburg, Ohio-based coater paper manufacturer's secured bonds were little changed, while the junior paper was down 1 or 2 points, both on "no real activity to talk about."

He also saw Richmond, B.C.-based paper maker Catalyst's 11%secured notes due 2016 at 51 bid, 52 offered, while its 7 3/8% unsecured notes due 2014 were at 3-to-6.

"They just keep drifting lower, though on not a lot of volume," he said.

He noted that having elected to not make a coupon payment this month on its bonds, "they're in the 30-day grace period, so they're trading flat and just barely breathing."

ResCap retreats

A trader said that Residential Capital's 9 5/8% notes due 2015 were down 1½ points at 67 bid.

He saw no fresh news out on ResCap, the Minneapolis-based mortgage-lending arm of Ally Financial Inc., the automotive lender and banking company formerly known as GMAC.

Elsewhere among underperforming bonds, a trader said that Sino-Forest's bonds saw some trading but were largely unchanged.

He had the Toronto-based Chinese wood plantation operator's 10¼% notes due 2014 at 26 bid, while its 6¼% notes were at 25½ bid, which he said was off slightly.

A trader said that MF Global Holdings Ltd's 6¼% notes due 2016 were trading around 33-34, which he said "covers all" of the failed New York-based futures brokerage's other issues as well, such as the 9% bonds due 2038 and the two busted convertible issues.

"They were pretty quiet," he said. "Maybe they were quoted a little higher - but there's no volume to prove it."

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