Nortel delays auction, bonds gain; Rite Aid, Clear Channel lighten up; NewPage debt gyrating

By Stephanie N. Rotondo

Portland, Ore., June 16 - It was "definitely a down day," a distressed debt trader said Thursday.

"The market in general was definitely weaker," said another trader.

Still, good news helped Nortel Networks Ltd.'s bonds gain a bit of ground. The move came after the company said it was postponing an auction for its portfolio of technology patents, due to excessive interest.

Other credits, however, were not as lucky as Nortel, as Rite Aid Corp. and Clear Channel Communications Inc. both ended lighter.

Market mainstays NewPage Corp. and OPTI Canada Inc. were also heavy. Newpage's declines continued as investors worried about a looming coupon payment and OPTI's debt fell once again following a rating downgrade.

Nortel gains, auction delayed

A trader said Nortel networks' debt was "stronger" after the company said it had postponed its patent portfolio auction due to a "significant level of interest."

The trader placed the 10¾% notes due 2016 "around 94."

At another desk, a trader said the bonds were "not all that different," the 10¾% notes at 93 bid, 93½ offered and the floating-rate notes coming due July 15 at 90½ bid, 91 offered.

The bankrupt Mississauga, Ontario-based telecommunications company is auctioning its portfolio containing 6,000-plus technology-related patents and patent applications. The auction was originally slated for June 20, but will now be held June 27.

Google Inc. made the stalking horse bid of $900 million in April. Companies such as RPX Corp., Research in Motion Ltd. and Ericsson AB have all reportedly considered making bids.

"Speculation is more the companies are interested, the higher the bids will be," a trader said. Some have speculated that the price could easily top $1 billion.

Rite Aid losing ground

Rite Aid's debt closed on the softer side, traders reported.

One trader called the 8 5/8% notes due 2015 "down a little bit" around 88. Another trader saw the notes fall over 1½ points to close at 871/2, while a third source pegged the issue at 88¾ bid, down almost a point.

Earlier in the week, CtW Investment Group - a stockholder activist group - sent a letter to the Camp Hill, Pa.-based drugstore chain's board of directors, in which it called for the appointment of more independent members and the dismissal of those too close with company management.

CtW said that the company's "lackluster performance" and "daunting circumstances... are inextricably tied to a lack of needed oversight by truly independent directors."

Rite Aid's board includes 11 members. Current chief executive officer, John Standley, has a seat, as do his two predecessors, Mary Sammons and Robert Miller. Three spots are taken by the Jean Coutu Group, which holds a 28% stake in the company.

A new board is slated to be elected at the company's annual meeting next week.

Clear Channel gets hit

Clear Channel Communications' bonds "got beat up," a trader said, though there was no fresh news out on the San Antonio-based multimedia company.

"There are still leverage concerns and the market is heavy," the trader surmised. "Over-levered names have been getting beat up in the market recently."

He said the 10¾% notes due 2016 fell to "85-ish" from the high-80s.

Another trader said the notes were "really active" and down 3½ points to 851/2.

The second trader also saw the 5½% notes due 2014 "down a couple points" to 86.

NewPage seniors gyrate

A trader saw NewPage's 11 3/8% senior notes due 2014 "bouncing all around" during Thursday's session, though he said they ended "probably not all that different."

The trader said the notes hit a low around 90 before coming back to close at 91 bid, 91½ offered.

The 10% notes due 2012 finished at 29 bid, 30 offered, he said.

Another trader said the seniors were "actually up" around 911/2, which he deemed a point better.

He called the 10% notes "pretty much unchanged" around 30.

There hasn't been any real news out on the Miamisburg, Ohio-based coated papermaker to cause the recent declines - the 10% notes were trading around 40 not all that long ago - but there is a $100.7 million coupon coming due June 30 on the senior notes. More than likely, investors are worried the struggling company will not be able to make the payment or that, if the payment is made, that it could severely impact liquidity.

Last month, NewPage said it had retained Lazard Ltd., FTI Consulting Inc. and law firm Dewey & LeBoeuf LLP to help create a restructuring plan. There has been no word on how that review is going.

OPTI gets downgraded, weakens

OPTI Canada got downgraded by Standard & Poor's Thursday, following the company's missed coupon payment on Wednesday.

A trader quoted the 7 7/8% and 8¼% subordinated notes due 2014 at 40½ bid, 41 offered, down from the previous day's levels.

The bonds are trading flat of accrued interest.

Another trader said the 8¼% notes were "down another couple of points" to around the 41 mark.

The Calgary, Alta.-based oilsands producer said late Tuesday that it was skipping the $71 million payment on the subordinated issues, though it did intend to make a $24 million payment on its 9% first-lien notes due 2012.

The company has 30 days to make the payment on the subs or else it will be in default.

S&P then dropped its long-term corporate credit rating on the company to SD from CCC-.

The rating on the second-lien debt was also dropped to D from CCC.

As of June 15, OPTI has C$220 million in cash and equivalents, the company said in a statement. There is also $73 million available in an interest reserve account.

OPTI said it was continuing to work with Lazard Freres & Co. LLC, Scotia Waterous Inc. and TD Securities Inc. to develop a strategic plan to deal with its overleveraged balance sheet.

Hovnanian slips

A trader said Hovnanian Enterprises Inc.'s 10 5/8% notes due 2016 were one of the day's "most active" issues.

He called the Red Bank, N.J.-based homebuilder's bonds down a point around 97.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.