Nortel auction fetches $4.5 billion bid, bonds jump; Kodak paper declines on ITC patent ruling

By Stephanie N. Rotondo

Portland, Ore., July 1 - A trader said the distressed debt market had "a good bid again" Friday, though the looming Fourth of July holiday meant fewer folks were at their desks - and even fewer as the day wore on.

The nom du jour was Nortel Networks Corp. Late Thursday, the company announced the winner of its patent portfolio auction. The auction drew an unprecedented $4.5 billion bid, beating all market expectations. As a result, Nortel debt gained anywhere from 9 points to 35 points.

On the down side, Eastman Kodak Co.'s debt dipped following a ruling put out by the U.S. International Trade Commission in regard to its patent infringement dispute with Apple Inc. and Research In Motion Ltd. The ruling did not provide a final answer on the case, however, and the bonds declined in response.

NewPage Corp. meantime held in, just one day after the company made a much-speculated about coupon payment on its senior debt.

Nortel pops on auction outcome

A trader said Friday's "biggest notable" was Nortel Networks after the bankrupt company released the results of its patent portfolio auction.

The auction began Monday and the longer it drew on, the higher the bonds were heading in anticipation. Those gains were further extended Friday, as the bonds jumped 9 to 10 points on the day - and in some cases, even more.

The trader placed the 10¾% notes due 2016 around 1051/2, which he deemed up 9 points on the day.

Another trader pegged the 10¾% notes, as well as the 10 1/8% notes due 2013, in the 105-106 range, versus levels around 95 "just a couple days ago."

The trader also saw the 6 7/8% notes due 2023 popping "35 points-ish" from previous levels around 33½ bid, 34½ offered - in light trading - to trade between 65 and 72 on Friday, with a "multitude of trades" occurring.

"That was the trading that dominated the morning," he said.

A third trader said the 10¾% and 10 1/8% notes traded up to "106-ish." He said the final price for the auction was "higher than the most optimistic of estimates."

Nortel said late Thursday that a group led by Apple Inc. - and including Microsoft Corp., Sony Corp., Research In Motion Ltd., Ericsson AB and EMC Corp. - won the patent auction, bidding $4.5 billion for the portfolio of more 6,000 technology-related patents and patent applications.

Google Inc. had made the "stalking horse" bid of $900 million earlier in the year. As more and more interested parties began throwing their hat in the ring, the market began to speculate that the auction could raise proceeds as high as $1 billion.

"Following a very robust auction, we are pleased at the outcome of the auction of this extensive patent portfolio," said George Riedel, chief strategy officer and president of business units, in a statement. "The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world."

The outcome still needs to be approved by both the Canadian and U.S. bankruptcy courts. A joint hearing will be held on July 11 and, if approved, the sale is expected to close in the third quarter.

Kodak falls on ITC ruling

Eastman Kodak's debt dropped Friday following a late Thursday ruling from the U.S. International Trade Commission on the company's patent infringement case against Apple Inc. and Research In Motion Ltd.

"They were definitely lower but I didn't see any real trading," a trader said. He noted that the "converts were off a good bit," with the 7% convertible notes due 2017 falling about 7 points to the low-80s.

The 10 5/8% notes due 2019 meantime dipped "a couple points" to be quoted in the mid-90s.

Another trader said he was seeing "real wide markets" for the Rochester, N.Y.-based company's bonds.

He saw the 7¼% notes due 2013 trade at 91, down from 94 bid, 95 offered on Thursday.

"Right out of the gate, you saw low bids and wide markets," he said. Initially, the issue was quoted at 88 bid, 96 offered, then 90 bid, 95 offered. "Then it started to tighten up a little" to 91 bid, 95 offered.

Still, he said, trading was thin.

The case has to do with a patent that relates to a method invented by Kodak for previewing images, which was validated by the U.S. Patent and Trademark Office in December 2010. Kodak initially filed an ITC complaint against Apple and RIM on January 14, 2010, asserting that Apple's iPhones and RIM's camera-enabled Blackberry devices infringe a Kodak patent covering technology related to a method for previewing images.

In its ruling Thursday, the ITC elected to "affirm in part, reverse in part, and remand in part, the final initial determination issued by the presiding administrative law judge on January 24."

The panel did find in favor of Kodak on certain issues, such as "the meaning of the patent term 'at least three different colors,'" Kodak said in a statement. "The commission agreed with Kodak that all of Apple and RIM's accused phones infringe this term."

"We are gratified that the commission has decided to modify in our favor the judge's initial recommendation," said Laura G. Quatela, general counsel, chief intellectual property officer, in the statement. "As we have said from the start, we remain extremely confident this case will ultimately conclude in Kodak's favor."

A final ruling target date of Aug. 30 has been set.

NewPage steady, quieter

After trading heavily for several weeks, NewPage's notes went quiet after the company paid its $100.7 million coupon on the 11 3/8% notes due 2014 on Thursday.

On Friday, a trader said he "didn't see much" goings-on in the credit, deeming the 11 3/8% notes unchanged around 931/2.

"Everything is all honky-dory," said another trader.

Though the Miamisburg, Ohio-based papermaker made the interest payment - and thereby avoided a default - it is still looking to restructure. NewPage needs to repay or refinance its 10% notes due 2012 in the near-term in order to avoid the acceleration of other debt.

© 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.