MEMC trades busily at lower levels; Sprint action fades; Kodak sub bonds gyrate

By Paul Deckelman

New York, Dec. 21 - With overall activity in the junk bond and distressed-debt markets seen light on Wednesday as part of the market's continuing pre-holiday winding-down process, traders saw some notable volume - though little real price movement - in semiconductor maker MEMC Electronic Materials Inc., whose ratings were recently put on review for a possible downgrade by both Moody's Investors Service and Standard & Poor's.

But volume was declining in Sprint Nextel Corp., whose bonds had been busy and better on Tuesday following the demise of AT&T Inc.'s controversial $39 billion purchase of T-Mobile USA, which Sprint had vehemently opposed for competitive reasons.

There also was not much activity in Sprint's 49%-owned affiliate Clearwire Corp., whose bonds had also traded busily on Tuesday on market speculation that it might be able to sell a big chunk of the wireless communications spectrum it now holds to AT&T - which is desperately seeking more spectrum space - for a pretty penny.

Elsewhere, Eastman Kodak Co.'s unsecured bonds were seen gyrating around on Wednesday in the lower 30s - up a couple of points from the levels they had fallen to on the news that the ruling in Kodak's big patent-infringement case against several smart-phone makers had been delayed.

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

MEMC trades

A trader said that MEMC Electronic Materials' 7¾% notes due 2019 were among the most actively traded issues on the day, quoting them at about 70½ bid, which he called unchanged.

"It was kind of interesting," he said, "there were something like 14 trades, most right around 701/2.

A second trader said that the St. Peters, Mo.-based maker of the silicon wafers used in semiconductors, switches, solar panels and other high-tech applications, had "decent volume" of some $14 million.

He said that earlier in the week, the bonds had been trading as high as a 77-80 context, but had traded at around 70 on Tuesday, with between $3 million and $6 million changing hands, and stayed there on Wednesday on better volume.

Yet another trader said that around the middle of the month, the bonds had been pegged around a 721/2-73 range.

He noted that on Dec. 12, Standard & Poor's had put the company's ratings on watch for a possible downgrade of its BB ratings, citing its large exposure to the currently struggling solar power equipment sector.

Several days earlier, Moody's Investors Service had also warned that a downgrade of its B1 ratings was possible, citing an anticipated fourth quarter $700 million restructuring charge, an amount roughly equal to the reported sales for the third calendar quarter.

The agency also said the possible downgrade also considers the lower than expected liquidity position, which results from negative free cash flow and cash restructuring costs.

Sprint activity trails off

While trading in Dish was going great guns, traders saw a distinct lessening of activity in Sprint Nextel's paper, which had also been actively traded on Tuesday in the wake of the AT&T/T-Mobile news.

A trader said that Sprint, the Overland Park, Kan.-based Number-Three U.S. wireless service provider was "not trading as much as [Tuesday]," when its Sprint Capital Corp. 6 7/8% notes due 2028 were among the most actively traded issues, moving up about 2 points on the session on volume of over $15 million.

On Wednesday, he said, those bonds traded between 70 bid and 70¾ bid, which he said was "really not much different" than the levels at which they had risen to on Tuesday, on less volume than on Tuesday.

A second trader saw "just a couple of trades in them," also seeing the bonds unchanged in a 70-71 context.

"There wasn't much activity in them," he continued. "Usually, that's the somewhat active one."

On Wednesday, he said, the parent company's 6% notes due 2016 saw a little more volume, what he called "a moderate amount of trading," ending up ½ point at 81 bid, 82 offered.

A market source saw about $7 million of the bonds traded, ending just below the 82 level.

Sprint's bonds had firmed smartly on Tuesday and stayed higher Wednesday, albeit in much lighter volume the second day, as the company saw its vocal objections to the combination of AT&T and T-Mobile vindicated.

Sprint had vehemently opposed the efforts of Number-Two industry player AT&T to buy T- Mobile, now the Number-Four 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, with both the Justice Department and the Federal Communications Commission filing objections on antitrust grounds that threatened to derail the whole deal, ultimately causing AT&T to forget about doing its transaction.

Clearwire seen little traded

Sprint's 49%-owned affiliate, Clearwire Corp.'s bonds had also risen on Tuesday, but on Wednesday were seen little moved

A trader said that the Bellevue, Wash.-based wireless broadband service provider's 12% first-lien notes due 2015 were trading Wednesday at 93 bid, 95 offered, while its 12% second-lien notes due 2017 were at 82 bid, 84 offered. He said both were unchanged.

With the downfall of the AT&T effort to buy T-Mobile, Clearwire was being mentioned around the market on Tuesday, along with Dish as a possible seller of communications spectrum space to AT&T.

Clearwire, which is currently in partnership with Sprint to develop the next generation of advanced LTE networks, has large amounts of communications spectrum it is currently not using, and could theoretically sell some or all of it to AT&T to generate the cash it needs for its buildout, which is currently being partly funded by Sprint but which will need additional funding over the next three or four years to successfully complete.

Kodak climbs back

Staying just a little longer in the high-tech realm, a trader said that that Eastman Kodak's unsecured 7¾% notes due 2013 were bouncing around at somewhat higher levels than where they had been on Tuesday, when the bonds slid on the news that a much anticipated ruling in a patent-infringement case would be delayed substantially.

He saw those notes trading on Wednesday in a 32-35 context, "so they bounced back up maybe around 3 or 4 points," from the levels in the upper 20s at which those bonds had begun the day.

He said there was "not a lot of volume, but mostly small pieces."

At the start of the week, the bonds had been in the mid-to-upper 30s, but slid badly after a federal trade disputes referee announced a delay in Kodak's high-stakes patent-infringement claim against Smartphone makers Apple Inc. and Research in Motion Ltd.

The administrative judge overseeing the two-year dispute at the U.S. International Trade Commission - which had been expected to issue a ruling in the case by the end of this month - said that the decision now will not be forthcoming until mid-September of 2012.

The delay puts further pressure on cash-hungry Kodak, which is trying to negotiate a licensing deal for some of its patents that it estimates could be worth up to $1 billion - but which was hoping to have a favorable ruling in the case against Apple and RIM in hand by now to bolster its efforts.

The trader meantime said that the Rochester, N.Y.-based photographic products and digital imaging technology company's secured 9¾% notes due 2018 and 10 5/8% notes due 2019 - which earlier in the week had actually moved up a few points to around a 75-76 context, despite the bad news on the trade case - continued to gain on Wednesday, rising another ½ point to 77 bid.

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