Nortel Networks' notes head higher on Google's bid for patents; TXU, Dynegy debt stays strong

By Stephanie N. Rotondo

Portland, Ore., April 4 - It was "another strong market day," a distressed trader said Monday.

The day's "most notable mover" was Nortel Networks Ltd. The Canadian company's debt popped 1 to 2 points on the day on news Google Inc. had made a $900 million stalking horse bid for Nortel's patent portfolio.

The portfolio is the last significant asset the company has, having sold off most of its business since filing for bankruptcy protections in 2009.

Elsewhere, Energy Future Holdings Corp. and Dynegy Inc. continued to power up in Monday trading. Energy Future, or TXU as it is more commonly referred to, was Friday's big trader, as the company announced a plan to amend and extend a credit facility.

There was meantime little to no action in Sbarro Inc.'s paper, despite news the company had filed for Chapter 11 protections. A trader said the lack of activity was because the market had been expecting the filing for some time.

Nortel up on Google bid

Nortel Networks' debt was the day's "most notable mover," a trader said, as Google Inc. made a $900 million play for the company's patent portfolio.

The trader said the 10¾% notes due 2016 were "up a couple points" at 92½ bid, 93 offered.

Another trader deemed the bonds up 1¾ points to 2 full points, also at 92½ bid, 93 offered.

The second trader said the 10 1/8% notes due 2013 were also trading in that range, up 1½ to 2 points on the day.

Google's bid will be the stalking horse bid in an auction to sell off one of the Toronto-based telecommunications company's last remaining assets. It is expected that the price could climb much higher as bidders vie for the portfolio of about 6,000 patents and patent applications.

Nortel filed for bankruptcy protection in January 2009 and has been selling off assets ever since.

Proceeds from the sale of the patent portfolio will be used to pay off creditors. Equity holders will receive nothing from a potential sale.

TXU 'still grinding'

A trader said Energy Future Holdings' debt was "still grinding," a trader said, as another "couple $100 million" changed hands during the first trading session of the week.

The bonds had begun trading in massive size on Friday, as the Dallas-based power producer said it was seeking to amend and extend its senior secured credit facilities and that it was asking lenders to agree that it was not in a technical default. Aurelius Capital Management had previously alleged a default based on certain inter-company loans that it says were not done on an "arm's length" basis.

Though the bonds were trading actively again, they were not seeing the same gains as on Friday. A trader said the debt was unchanged to slightly better, seeing the 10¼% notes due 2015 at 66¾ bid, 67 offered, the 11¼% notes due 2017 around 89½ and the 9¾% notes due 2019 at 104 bid, 105 offered.

Another trader said the 10¼% notes were "active but pretty much unchanged" trading around "67 and change."

Dynegy picks up

Elsewhere in the energy space, Dynegy's paper was "up marginally," according to a trader.

He pegged the 7½% notes due 2015 around 85 and the 7¾% notes due 2019 around 79.

However, he added that less than $20 million of total debt changed hands.

Another market source pegged the 7¾% notes at 79 bid, a gain of nearly 1 point.

Dynegy is a Houston-based producer of energy.

No joy for Sbarro

Italian fast-food chain Sbarro announced that it filed a pre-packaged bankruptcy plan Monday, but the news did little to upset the status quo, according to a market source.

"It never really traded on a regular basis anyway," the source said of the 10 3/8% notes due 2015. He noted that he believed the paper was "tightly held" and that the filing came as no big surprise.

The Melville, N.Y.-based company said it had come to terms with its second-lien lender, as well as about two-thirds of its senior unsecured noteholders, in which all second-lien debt and notes would be converted to equity.

First-lien lenders would keep their holdings, which will mature five years after the company exits bankruptcy.

The deal is expected to reduce overall debt by $195 million to $173 million.

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