NewPage remains weak, coupon due this week; Nortel auction, bonds rev up; Nebraska Book files

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., June 27 - Despite signs of positivity - Greece seemed to be on its way to inking an austerity deal, and the United States' budget talks appeared to be moving forward - the distressed debt market was "lethargic," a trader said Monday.

"It's going to be a slow summer," posited another trader.

NewPage Corp. continued to get the lion's share of the focus as investors continued to ponder whether an upcoming coupon payment will get skipped or if the papermaker will pay it. The debt remained weaker in the first trading session of the week.

Moving higher was Nortel Networks Corp. The auction for the company's patent portfolio began Monday morning, and by market close, a winner had yet to be declared, a potentially positive sign for the bankrupt telecommunications company.

Nebraska Book Co., Inc. announced late Sunday that it had come to terms with a group of noteholders on a restructuring plan that includes a pre-packaged bankruptcy filing. Come Monday, however, the news had "absolutely no effect on the bonds," according to a trader.

NewPage remains weak

NewPage's 10% notes due 2012 fell to 25½ bid, 26½ offered from 26 bid, 27 offered previously, a trader said.

"That thing can't seem to get out of its own way anymore," he said.

Another trader said that NewPage was "one of the actively quoted names." He saw its 10% second-lien notes in a 25-26 context and then end the day around 26 bid, so he called the paper unchanged on the day.

"They were quoted lower this morning," he said, before recovering later on. He said that there had been "decent volume" in the credit.

He also saw the 11 3/8% first-lien notes due 2014 as having "decent volume," ending around 901/2-91 bid, versus an 89-90 context earlier, "so they're up a point on the day, with decent volume on that."

At another desk, a market source saw the 10% notes up a half point, at 26½ bid, on busy volume of over $17 million, making it one of the most active issues of the day in Junkbondland.

He also saw the 11 3/8% notes gain a point to end at 90¾ bid, with over $10 million changing hands.

Down has been the trend of late for the Miamisburg, Ohio-based papermaker, and the reason is two-fold. On the one hand, the company is facing a roughly $100 million interest payment on the 11 3/8% notes on Thursday. With the bonds heading lower and lower, it would seem the consensus is that the coupon will not get paid.

As previously reported, NewPage has not returned calls to Prospect News seeking comment.

On the other hand, the company is also looking to repay or refinance the 10% notes before the end of 2011. If the company fails to do so, it will accelerate other outstanding debt.

Lazard Ltd., FTI Consulting Inc. and law firm Dewey & LeBoeuf LLP are working with NewPage to develop a restructuring plan.

Catalyst quiets down

Elsewhere in the paper arena, a trader quoted Catalyst Paper Corp.'s 7 3/8% notes due 2014 at 61 bid, 63 offered, while its 11% senior secured notes due 2016 were at 85 bid, 87 offered.

He said there was "no real trading" in the 11% notes, adding that "they didn't seem to be active today." He said they were "quoted a little lower on Monday," by perhaps a half point to 1 point, after having dropped on Friday to 86 bid, 88 offered.

However, he said he "did not see much activity. I didn't see volume. You can't really tell how much of those are trading."

He said, "It seemed it was more NewPage [than Catalyst]. NewPage wasn't as active as last week, and Catalyst definitely wasn't."

But while he said that "last week, it seemed a lot more active" in both of the paper companies' respective bonds - Catalyst announced the hiring of UBS Securities to help the Richmond, B.C.-based paper manufacturer explore strategic alternatives, while NewPage gyrated on investor worries about the coupon payment - on Monday, "there was still some decent volume - 10 or 12 trades in each of them. You can't really tell the size of them, but there 10 or 12 trades in each issue."

Nortel higher, auction begins

A trader said Nortel's 10 1/8% notes due 2013 and 10¾% notes due 2016 were "up a little bit" as the auction for the Toronto-based company's patent portfolio got underway.

He pegged the issues around the 95 mark.

"There was a rumor that Intel [Corp.] was given status to bid," the trader said. If true, Intel would join the likes of Google Inc., Apple Inc., Research In Motion Ltd., Ericsson SA and RPX Corp. in bidding for the 6,000-plus patents.

There is also chatter that Microsoft Corp. has thrown its hat in the ring.

Google made the "stalking-horse" bid of $900 million earlier this year. As the list of interested bidders grew, the market has become convinced that the auction could bring in $1 billion or more.

"The more bidders that show up, the better it is supposed to be," the trader said. Additionally, the longer the auction takes, the higher the price could climb.

"They're slowly creeping upwards, so that is a sign," he said.

Nortel, which filed for Chapter 11 protections in January 2009, will use the funds to pay off creditors.

Nebraska Book files

Lincoln, Neb.-based textbook seller Nebraska Book filed for bankruptcy as part of a restructuring agreement with noteholders.

The news, however, had "absolutely no effect on the bonds," a trader said.

He said the 8 5/8% notes due 2012 remained in the mid-70s and the 10% notes coming due Dec. 1, 2011 were still around par.

But at another desk, a trader said the 8 5/8% notes were "5 points lower than where they had been" at 60 bid, flat. He said the market had been 65 bid, 75 offered on Friday.

He also saw the 10% notes inching up slightly to 993/4, up from a 98 bid, 99 offered context previously.

Still, he noted that there was little to no trading in the bonds.

Nebraska Book and its parent company, NBC Acquisition Corp., said the holders of more than 95% of the 8 5/8% notes and more than 75% of the 11% senior discount notes approved the restructuring plan that would "substantially reduce debt at the parent company level and position itself for future growth." The agreement will restructure about $450 million of loans and bonds, including the elimination of $77 million of debt linked to the parent company.

The company intends to operate business as usual, with about $20 million of cash on hand and commitments for a $200 million debtor-in-possession facility.

For fiscal 2011, Nebraska Book took in $598 million of revenues, generating EBITDA of more than $60 million. The parent company posted a loss of $98 million, due in large part to an $89 million goodwill intangible assets writedown.

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