Distressed debt stalls on jobs data; Nortel gives back some gains; Caesars weakens with market

By Stephanie N. Rotondo

Portland, Ore., July 8 - The distressed debt market "kind of stalled out after that jobs report," a trader said Friday.

He was referring to new jobs data, which showed only 18,000 jobs being added and a third-consecutive gain in the jobless rate. The rate rose to 9.2% for June.

Still, the market hung in surprisingly well.

"A lot of things tried to come off, but they seemed to catch a bid and end just slightly off to unchanged," another trader said.

"It was a pretty lackluster day," he added.

Nortel Networks Corp. was still taking the majority of distressed investor focus, though one trader noted that even trading in that credit was slow. And, as the market was somewhat weaker, so were Nortel's bonds.

Meanwhile, Caesars Entertainment Corp.'s debt was called "pretty active, relatively speaking." The bonds lost a little bit of ground in trading.

Nortel notes give back

A trader said Nortel's 10¾% notes due 2016 were "basically kind of unchanged" around 108.

But another trader said the debt had come off of the previous day's highs around 109 to end at 107½ bid, 108½ offered.

A third trader said the bonds - including the 10 1/8% notes due 2013 - were down a point, also around 108.

On Wednesday, the Toronto-based manufacturer of communications equipment announced that a court-ordered mediator had been appointed in its bankruptcy case, thereby causing many to believe that the drawn out case - Nortel filed for Chapter 11 protections in January 2009 - might soon be coming to a close.

Investors have also been reacting positively to the results from last week's patent portfolio auction, which garnered a $4.5 billion bid from a consortium that included Apple Inc. and Microsoft Corp. Google Inc. had originally made a "stalking horse" bid of $900 million. The inflated price tag has led to expectations that recoveries will be greater than anticipated.

Still, the patent sale still has a few obstacles to clear, including a possible review by the U.S. Department of Justice for antitrust issues. Also, on Wednesday, Canada's Industry Minister, Christian Paradis, said that he is looking into whether the government should review the sale under the Investment Canada Act, which governs foreign investment in Canadian assets.

Caesars bonds decline

Caesars' 10% notes due 2018 were deemed "pretty active," by a trader, though he noted that it was all relative, considering that trading in the distressed market was subdued anyway.

He called the 10% notes a point weaker around 901/2, while the 11¼% notes due 2017 fell half a point to three-quarters to 110½ bid, 110¾ offered.

Another trader said the 11¼% notes saw "a little bit of activity, there were a handful of trades" around 110½ bid, 110 5/8 offered. He said that was "off a little bit."

A third source saw the 10% notes losing a point to end at 90¼ bid.

Caesars, formerly known as Harrah's Entertainment, is a Las Vegas-based casino operator.

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