Distressed bonds lose ground in spooked market; NewPage, Catalyst debt drops; Dynegy, TXU fall

By Stephanie N. Rotondo

Portland, Ore., Aug. 2 - Despite Congress signing a debt limit deal that would allow it to avoid a sovereign default, distressed debt was overall weaker in tone on Tuesday.

"The market was weak," said a trader.

"Lots of things were getting trashed," said another trader. "Certain names were busy. But overall, not a ton [of trading] just because of the market being spooked.

"We'll see how it shakes out tomorrow," he added, noting that though the market was soft, it did result in "good volatility."

NewPage Corp.'s first-lien notes got knocked down a bit. The losses came one day after rival Catalyst Paper Corp. reported disappointing earnings. Catalyst's notes were about unchanged from Monday levels, but still down significantly from last week, a trader said.

The energy sector didn't get any love, either. Dynegy Inc. bonds fell in thin trading, as did Energy Future Holdings Corp.

General Maritime Corp. debt continued to get "smacked around," a trader said. The bonds have been falling since the company put out quarterly results last week and the hits just keep coming.

GenMar bonds lost as much as 3 points in Tuesday trading.

Also closing the session weaker was Caesars Entertainment Corp. and Eastman Kodak Co.

NewPage, Catalyst weaken

A trader saw NewPage's 11 3/8% notes due 2014 fall a point to end around 883/4.

Another trader also said the paper lost a point, pegging the paper at 89.

There was no fresh news out on the Miamisburg, Ohio-based papermaker. However, on Monday Richmond, B.C.-based Catalyst Paper posted a wider net loss for the second quarter.

Catalyst's 7 3/8% notes were seen trading around 43, which a trader said was down 8 to 10 points from last week. The 11% notes due 2016 were called unchanged from Monday around the 73½ bid, 74½ offered, but down 5 points from last week.

Catalyst said the wider loss was due to increased downtime as well as a stronger Canadian dollar and higher fiber prices.

Net loss came to C$47.4 million, or 13 cents per common share, with sales of C$297.8 million.

That compared to a net loss of C$12.9 million, or 3 cents per share, in the first quarter on sales of C$303.6 million.

Dynegy, TXU decline

Dynegy's debt "wasn't very active," a trader said, but it was weaker, in line with the rest of the market.

The trader called the 7½% notes due 2015 a point lower around 701/4, while the 8¾% notes due 2012 were "unchanged from Monday" at 951/4.

However, he noted that the latter issue was down 4 points from the previous week.

At another desk, a source called the 7¾% notes due 2019 about 2½ points softer at 66½ bid.

Last week, a Delaware Chancery court judge denied a temporary restraining order on the Houston-based energy producer's $1.7 billion debt refinancing plan. Word has it that the new loans under that deal are expected to hit the market this week.

Also in the energy realm, Energy Future's 10% notes due 2020 lost "almost 2 points" to close at 103 bid, 103½ offered, according to a trader.

The Dallas-based company better known as TXU reported a second quarter net loss of $705 million on Friday.

GenMar takes another hit

Oil containership company General Maritime saw its bonds continue to get knocked down after the company posted dismal earnings last week.

A trader said the 12% notes due 2017 lost another 2 points or so to close around the 62 mark. Another trader said the issue "got smacked around," finishing down "3 points or so" around 61.

For the quarter ending June 30, GenMar posted a wider-than-anticipated net loss of $24 million, or 21 cents per share. That compared to a net loss of $14.3 million, or 25 cents per share, the year before.

Revenues got knocked down 12.2% to $53.6 million.

Analysts polled by Thomson Reuters were expecting a loss of 27 cents per share on revenues of $56.05 million.

"General Maritime has continued to take important steps to strengthen its balance sheet and capital structure, which has enhanced the company's ability to operate in a challenging market environment and improved its future prospects," said John Tavlarios, president and chief executive, in the earnings release.

"During the second quarter and into the current third quarter, General Maritime has completed a number of important transactions aimed at increasing the company's liquidity and financial flexibility."

GenMar is based in New York.

Kodak, Caesars falls

Among other weaker distressed issues were Eastman Kodak's 7¼% notes due 2013.

A market source deemed the paper a point lower at 81¼ bid.

Another source, however, said the notes were "about where they were even from last week" around 813/4.

Caesars' 10% notes due 2018 also took a hit, traders reported.

One trader called the issue 3 points weaker at 853/4. Another said the bonds were "getting beat up pretty good," dropping to 85½ bid, 86 offered from the high-80s.

"It's just general market weakness," the trader said, also seeing Clear Channel Communications Inc.'s 10¾% notes due 2016 losing 2 points to end at 84½ bid, 85 offered.

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