Distressed debt trends higher, taking mainstays like NewPage, Caesars with it; Hovnanian rises

By Stephanie N. Rotondo

Portland, Ore., Aug. 30 - A trader said Tuesday's session was a "replay" of the day before. That is, there was "not much activity and everything is trading higher."

While that strength carried over into distressed bonds, investors were more focused on higher-grade credits than riskier plays.

"Everybody was chasing after bonds," the trader said. "They weren't that successful very often."

NewPage Corp. had been on the quiet side on Monday, but experienced "a bunch of trades" on Tuesday, a trader said. The first-lien paper ended 1 to 1½ points higher.

Caesars Entertainment Corp.'s debt was also up by about that much, as was Hovnanian Enterprises Inc. There was no fresh news out on either to explain the gains.

NewPage gains with market

NewPage's 11 3/8% first-lien notes due 2014 moved up 1 to 1½ points, closing around 87, according to a trader.

"NewPage was definitely better," said another trader, seeing the paper trade around the 87 mark.

A third trader called NewPage's 11 3/8% notes "one of the top volume guys," quoting them up 1½ points at 87, on volume of about $20 million.

The Miamisburg, Ohio-based papermaker is reportedly attempting to secure a debtor-in-possession loan, according to news reports out last week. The company has warned of a potential bankruptcy filing at several points so far this year.

The latest buzz comes after the company failed to refinance its second-lien notes last month, which resulted in the acceleration of part of the company's credit facility. If the company fails to refinance or repurchase the debt by the end of the year, more debt could mature even sooner - a burden the company has said it could not withstand.

Elsewhere in the forest products space, a trader counted Sino-Forest Corp. among the day's losers, seeing the 6¼% notes due 2017 down another 2 points to 30, on "small volume."

The trader saw the 10¼% notes due 2014 off a point at 31, said "not a lot of buying signals in there" between the chief executive's resignation, the recent round of ratings downgrades and all of the sturm und drang that took place on Friday, including the halting of the company's stock on the Toronto Stock Exchange.

Caesars aims higher

Caesars Entertainment's 10% notes due 2018 were more active in the second session of the week than on Monday and continued to grind higher.

A trader said he saw a 76 bid by the end of the day, which he deemed up 1 to 1½ points.

Another market source, however, saw the notes climbing just a point to 76½ bid.

There was no fresh news out on the Las Vegas-based casino operator.

Hovnanian moves up

Red Bank, N.J.-based homebuilder Hovnanian Enterprises gained ground in trading, though volume was minimal, a trader said.

He pegged the 10 5/8% notes due 2016 around 88, up 1½ points from Friday levels around 861/2.

A second market source saw the paper at 88 bid, up half a point on the day.

The Standard & Poor's/Case-Shiller home-price index - which was published Tuesday -showed that home prices gained again in June from May in nearly all of the cities tracked. Prices were 3.6% better between April and June than from in the previous quarter.

The reading beat analysts' expectations.

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