NewPage, OPTI hold steady; Capmark, Nortel up as exit nears; Dynegy debt pressured by net loss

By Stephanie N. Rotondo

Portland, Ore., May 9 - The distressed debt market was on the slow side Monday, as investors focused on "new issues, new issues, new issues," according to a trader.

"It was a typical Monday," the trader said.

For the most part, distressed action consisted of the "same old names," another trader said, such as NewPage Corp. and OPTI Canada Inc. Neither credit was all that much changed on the day and there was no news to drive movement.

However, Capmark Financial Group Inc. and Nortel Networks Corp. were somewhat busy and better. A trader opined that the bonds experienced gains because both are in the "late-stage arbitrage" phase of their bankruptcy cases.

Dynegy Inc. debt meantime ended the day a bit weaker, though traders said volume was quite thin.

NewPage, OPTI hold steady

A trader said both NewPage and OPTI Canada were "about the same" at Monday's close.

He saw NewPage's 10% notes due 2012 trading around 58 and OPTI Canada's subordinated issues - the 7 7/8% and 8¼% notes due 2014 - trading with a 52 handle.

Another trader said OPTI was unchanged to up a quarter at 521/4.

There was no news out on either the Miamisburg, Ohio-based coated papermaker or the Calgary, Alta.-based oilsands producer.

Capmark, Nortel brighten

Both Capmark Financial and Nortel Networks are nearing the end of their bankruptcy cases and one trader is speculating that the bonds are heading higher because investors are "getting more comfortable."

He called Horsham, Pa.-based Capmark's 6.30% notes due 2017 and its 5 7/8% notes due 2012 a point better at 57 3/8 bid, 57½ offered, up from 56½ on Friday.

Nortel's 10 1/8% notes due 2013 and its 10¾% notes due 2016 meantime were "up a little," the trader said, "near 92."

"They are getting close to their intellectual property auction," the trader remarked. As previously reported, Google Inc. has made a $900 million bid for the patent portfolio, but some are expecting a bidding war to ensue, potentially pushing the purchase price up to $1 billion or more.

At another desk, a trader called Toronto-based Nortel's bonds unchanged in a 911/2-92 context.

Earnings weigh on Dynegy

Dynegy's debt was weaker after the company reported disappointing first-quarter earnings.

However, market sources noted that trading in the name was light.

One trader called the bonds down half a point to a point, the 7½% notes due 2015 at 87 and the 8 3/8% notes due 2016 at 861/2.

Another source deemed the 7¾% notes due 2019 half a point weaker at 77 bid.

Houston-based Dynegy posted a net loss of $77 million, or 64 cents per share. That compared with net income of $145 million, or $1.20 per share, the year before.

However, the loss marks the fourth straight quarterly loss.

Dynegy said the loss was based in part on lower sales. Sales declined 41% to $505 million.

Cash flow dropped 69% to $167 million and available cash and equivalents sunk to $1.2 billion.

In March, the energy producer warned that it could fall out of compliance with its credit facilities in the second half of the year. Dynegy hired Lazard Ltd. last month to help with a restructuring effort.

The company has also spurned two takeover offers, one from Blackstone Group LP and one from billionaire investor Carl Icahn.

Hawker gets busier

A trader called Hawker Beechcraft Corp. "a name you don't see much - but today, it seemed like it picked up in activity. There seemed to be a lot of activity in the name," particularly in its 8½% notes due 2015, which he was quoting around the 843/4-85½ area, up a half-point.

He said that the company's 8 7/8% notes due 2015, most recently seen trading around the 89 range, "wasn't the one with the volume - that was the 8 1/2s.

"So there's a different name that's percolating today."

There was no fresh news seen out on the Wichita, Kan.-based maker of small-to-medium-sized aircraft, which released quarterly numbers a week ago - a mixed bag, showing revenues off versus a year ago and operating losses up in its business and general aviation segment, although deliveries, backlog and net new orders increased, while operating income was up in its military aircraft segment.

The company also recently lost a case filed against it with the International Chamber of Commerce by British aircraft maker Airbus UK, which two years ago had filed a case seeking up to $60 million in damages from Hawker Beechcraft, alleging the U.S. company unilaterally reneged on a previously negotiated contract to buy a certain amount of fuselages, wings, track kits and spare parts from Airbus. The body ordered Hawker Beechcraft to pay Airbus $14.2 million.

Paul Deckelman contributed to this article

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