Sprint Nextel volume picks up ahead of holiday break; WaMu, Lehman gain; Kodak climbs a bit

By Paul Deckelman

New York, Dec. 22 - Sprint Nextel Corp.'s bonds saw relatively active trading on Thursday, at least in comparison with a generally very thin market in junk bonds and distressed debt on the final full trading session of this week before Friday's abbreviated pre-holiday dealings.

But while activity in the wireless carrier picked up from Wednesday's sedate levels, not too much movement was seen, and traders quoted the bonds pretty much unchanged to a little mixed.

Sprint's bonds had recently risen in busy trading in the aftermath of bigger rival AT&T, Inc.'s decision to pull the plug on its controversial effort to buy another Sprint peer, T-Mobile USA - a deal Sprint vehemently objected to on competitive grounds.

Elsewhere, Washington Mutual Inc.'s bonds were seen better, some in brisk activity, and there was also some upside in Lehman Brothers Holdings Inc. notes, although there was no fresh news seen out on either failed financial institution, both of which went under during the financial panic in 2008.

A trader continued to see some residual gyrations in Eastman Kodak Co.'s unsecured notes, which have been bouncing around at lower levels for the past few days on delays in an important legal case the photo giant is involved in.

There were also some more dealings in MEMC Electronic Materials Inc.'s bonds, which have fallen steeply in recent days after the high tech company's ratings were put under scrutiny for a possible downgrade by both Moody's and S&P.

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

Sprint busy again

Sprint Nextel's bonds and those of its Sprint Capital Corp. subsidiary were among the busiest issues in the junk market on Thursday, although a trader allowed that "it wasn't as busy as DISH [DBS Corp.]," whose bonds have also been rising in busy trading over the last three sessions on the demise of AT&T's planned T-Mobile acquisition.

But he did say that the Overland Park, Kan.-based No. 3 U.S. wireless carrier's paper was "second only to DISH" in terms of activity levels. He called the bonds up a half-point to a full point on the day.

A second trader said that Sprint Capital's 6 7/8% notes due 2028 had "decent volume," trading most of the day in a 71-72 context before going out at 71, which he said was unchanged on the day.

Another market source, while seeing the bonds at 71 as well, called that down nearly 2 points, on volume of around $10 million.

He said Sprint Capital's 8¾% notes due 2032 were unchanged at 80½ bid on about $5 million of volume.

Parent Sprint's 6 7/8% notes due 2013 were trading firmer at an even par bid, with about $7 million traded.

Sprint's bonds had firmed smartly on Tuesday and stayed higher Wednesday and Thursday as the company saw its vocal objections to the combination of AT&T and T-Mobile vindicated.

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 from 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.

Financial names seen firmer

Away from the whole AT&T/T-Mobile deal fiasco, market sources saw some trading Thursday in the bonds of failed financial firms Washington Mutual and Lehman Brothers Holdings.

A market source pegged WaMu's 5% notes due 2012 going home at 113½ bid - up about three points on the session on a round-lot basis and 4½ points just compared to the most recent prior activity levels.

Over $3 million of the bonds traded on Thursday, although there was no fresh news out on the Seattle-based savings bank operator, which went bankrupt and 2008 and had its savings bank operations transferred to JP Morgan Chase via an auction.

Another financial firm that failed in 2008, New York-based investment banker Lehman Brothers, was also busy on Thursday. Its 5 5/8% notes due 2013 went home at 26 3/8 bid on over $8 million traded.

There was also no fresh news seen on Lehman.

The 5 5/8% notes were seen by a market source up more than 1½ points on Thursday versus Wednesday's close.

However, another source cautioned that strictly on a round-lot basis, the Lehman paper was actually ending about one-eighth point lower.

Kodak continues rebound

A trader said that that Eastman Kodak's unsecured 7¾% notes due 2013 continued to trade around on Thursday, although he said that "there really was no volume. It was a lot of small pieces that were trading, odd-lot trades."

He saw the bonds moving between 34 and 37 bid, which was up from around 32-35 on Wednesday.

That, in turn was higher 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.

The Rochester-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 - were quoted little changed Thursday in a 76-78 context.

The real movement has been in the unsecureds. At the start of the week, those 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 smart phone 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 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 was hoping to have a favorable ruling in the case against Apple and Research in Motion in hand by now to bolster its efforts.

A trader meantime noted that Kodak announced plans to sell its unit that makes gelatin used in photographic movie film and paper emulsions to Rousselot, which is part of the Vion Food Group. Financial terms weren't disclosed

MEMC moves continue

A trader said that MEMC Electronic Materials' 7¾% notes due 2019, which had been one of Wednesday's more active names, were still moving around on Thursday "up a bit" in a range of 71 to 74 bid.

"There was a lot of volume."

However, another market source said that round-lot dealings actually only totaled about $2 million, with most of the activity coming earlier in the day in odd-lot transactions.

And he said that while they had traded higher earlier, the bonds were going out little moved on the session. They were unchanged on a round-lot basis at 71 bid and actually off a half point at 70½ counting the final smaller trades of the day.

On Wednesday, the St. Peters, Mo.-based maker of the tiny, thin wafers used in semiconductors, switches, solar panels and other high-tech applications had been trading between 70 and 71, with over $14 million traded.

There was no fresh news out on the company. However, on Dec. 12, Standard & Poor's had put the company's BB ratings on watch for a possible downgrade, 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.

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