NewPage, Sino-Forest report earnings, bonds slow to react; LyondellBasell bonds modestly gain

By Stephanie N. Rotondo

Portland, Ore., Aug. 15 - Distressed debt was mostly firm in Monday trading, according to traders.

"There was a very strong tone," a trader said. "But then it got a little lethargic." By the end of business, however, things picked up again, allowing some credits to gain more ground.

"Things were definitely better," a trader said. "A lot of stuff kind of snapped back a couple points."

NewPage Corp. was an outlier on the day, however, as the papermaker reported a narrower loss. Still, the company said part of its revolving credit facility was being accelerated because it had not refinanced its second-lien paper by July 4. Overall, the company's bonds ended lower to unchanged.

Sino-Forest Corp. also reported numbers Monday and, despite a decent showing, the company's bonds were largely unaffected.

NewPage weakens post-numbers

NewPage put out quarterly results late Friday and despite a narrower loss, the company's bonds traded down to unchanged, traders reported.

One trader said the 11 3/8% notes due 2014 were "about unchanged" around 80. There wasn't much action in the 10% notes due 2012, he said, estimating a 10 to 11 bid for paper.

"All NewPage was weaker," said another trader.

The trader said that initially, the 11 3/8% first-lien notes moved under 79, then popped back up to 80 bid, 80½ offered.

He also remarked that there was not much going on in the 10% second-liens, saying that they were trading around $10.

For the second quarter, the Miamisburg, Ohio-based papermaker reported net sales of $888 million, down from $890 million the year before. Higher paper prices were offset by fewer sales, the company said in a statement.

Net loss, however, narrowed to $132 million from $174 million.

"During the quarter, we were able to realize improved pricing even as we experienced inflationary pressure and some softening in demand for our core products," said George F. Martin, president and chief executive office, in the earnings release.

At the end of the quarter, NewPage had $136 million in available liquidity, consisting of $9 million in cash and equivalents and $127 million under its revolving credit facility.

However, the company also said in its 10-Q that it will have to repay $30 million of its $500 million revolving credit facility by Oct. 3, as it was unable to refinance its floating-rate notes and 10% notes by July 4.

If the company does not refinance or repurchase the notes by Dec. 2, the remaining $470 million will be accelerated to March 1, 2012 from Dec. 21, 2012.

And, if the debt is not dealt with by Jan. 31, 2012, the 11 3/8% notes will be accelerated to March 31, 2012.

NewPage has been working with advisors to come up with a restructuring plan but has yet to announce any plans. The company said that if it cannot find a way to deal with its debt obligations, it could be forced to file for Chapter 11 protections.

Standard & Poor's downgraded the company, giving it a CCC rating, down from CCC+.

Sino-Forest reports earnings

Elsewhere in the forest products arena, Sino-Forest - the Chinese-based, Canadian-listed timber company that was plagued with allegations of fraud from Muddy Waters Research LLC earlier this year - also posted second-quarter earnings.

However, the results did little to move the bonds, according to a market source.

The 10¼% notes due 2014 were seen at 70, which was about unchanged. The 6¼% notes due 2017 opened around 62, but fell back to 59¾ bid, 60 offered by the end of business.

Still, that was up from levels around 58 last week.

For the quarter, the company saw a 6% gain in revenues at $317 million. Net income spiked 125% to $447 million.

After Muddy Waters published its research report in June claiming that the company's land holdings were overstated, Sino-Forest said the charges were meritless, but that it would nonetheless appoint an independent committee to look into the matter. In the earnings statement, the company said that the review was taking longer than anticipated due to "a prolonged data collection and review process."

The company also said that it was planning to redeem nearly $88 million of its 9 1/8% guaranteed notes.

Lyondell hangs in

LyondellBasell Industries NV's 11% notes due 2018 inched higher in trading, though the company said in a regulatory filing that the issue has been accruing penalty interest since May 4.

One trader quoted the notes at 111 bid, 111¼ offered. Another placed the paper at 110½ bid, remarking that the bonds were "approaching levels that we haven't seen in weeks."

In its 10-Q filing, Lyondell said the increase was because the company had failed to conduct an exchange for the 8% notes due 2017. The company had also not filed a registration statement on the 11% notes that would allow the resale of paper held by affiliates of the Securities and Exchange Commission.

As such, the interest rate increased 25 basis points for the first 90 days. The rate will increase by 25 bps for each additional 90 days that the statements are not filed, with a maximum of 100 bps.

LyondellBasell Industries is a chemical company based in Rotterdam, the Netherlands.

Broad market gains strength

In the rest of the market, a trader said Clear Channel Communications Inc.'s 10¾% notes due 2016 were unchanged, trading actively in the mid-70s.

Dynegy Holdings Inc.'s 7¾% notes due 2019 were also better, rising "a couple points" to end around 63.

The trader also saw Caesars Entertainment Corp.'s 10% notes due 2018 trading "somewhat actively" at 82 bid, 83 offered, up from levels around 81.

"Everything was strong," he said.

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