Springleaf paper boosted by RMBS sale; Overseas Shipholding debt slides on lender talk rumors

By Stephanie N. Rotondo

Phoenix, Oct. 17 - The distressed debt market had a firm tone in midweek trading, according to market sources.

"In general, the market was fairly strong overall," a trader said.

For distressed credits, Springleaf Finance Corp. was "the biggest one on the upside," a trader noted. The former American General Finance Corp.'s debt put on as much as 3 points on the day following news of a $787 million residential mortgage-backed securities sale.

Though the day was generally positive for most names, there were a few that came under pressure.

Overseas Shipholding Group Inc.'s bonds were either unchanged or down significantly, depending on whom you asked. One trader noted that the paper has been "cracking over the past couple of days," and were likely not helped by rumors circulating Wednesday regarding a breakdown in lender talks.

Also weaker were Sorenson Communications Inc.'s notes. A trader said the bonds had fallen dramatically on Tuesday and continued to slide in Wednesday's session. He added that the declines were due to a proposed phone rate cut.

Springleaf pops on RMBS sale

Springleaf Finance, the former American General Finance, saw its bonds up a good bit Wednesday as the company announced a massive sale of residential mortgage-backed securities, or RMBS.

"The bonds were up significantly on the news," a trader said, seeing a whopping $30 million of the 6.9% notes due 2017 change hands.

"That's a big day for them," he said.

The notes ended the day around 90, up 3 points. The 5¾% notes due 2016 and the 5.4% notes due 2015 were each up about 1½ points, at 90 and 931/2, respectively.

Another trader saw their paper up 2 to 3 points in heavy volume, with the 6.9% notes going out at 89½ bid, 90½ context.

Springleaf announced Wednesday that it intended to issue $787 million of the RMBS, which are bonds backed by residential mortgages. The company will repackage older loans into the securities, some of which are expected to receive an "AAA" rating.

The company is majority owned by Fortress Investment Group LLC.

Overseas Shipholding takes hit

A trader said Overseas Shipholding Group's 8 1/8% notes due 2016 dropped 6 points on the day to end around 40.

Another trader, however, said the issue was unchanged straddling 40.

The second trader did note that the bonds have been under pressure for the last few days.

The debt was likely not helped by circulating rumors regarding its ongoing talks with its lenders to fill a $100 million gap in its $1.5 billion fully drawn revolving credit facility.

OSG has been in talks with lenders, which include DnB NOR Bank, Swedbank AB, Citibank NA, HSBC Bank plc and Credit Agricole Corporate and Investment Bank, since August. The time is ticking on reaching a deal, as the facility in question matures in just four months.

It has also been reported that the company has hired Proskauer as restructuring counsel.

It has been no picnic for the oil transporting company, which has posted 13 consecutive quarterly losses. Shipping rates for have also been hit hard, further dampening the bottom line.

Sorenson gyrates

Sorenson Communications' 10½% senior secured notes due 2015 were "bouncing around" Wednesday, according to a trader.

On Tuesday, he said, the paper had fallen from 88 to 82. Wednesday's session saw a low around 77 before the debt attempted to inch back up to an 80-81 context.

The trader said the declines were based on news of proposed rate cuts from the Federal Communications Commission.

Late last month, the FCC proposed cutting phone rates for prison inmates. Sorenson is a Salt Lake City-based provider of telephone services, primarily for the deaf community.

James River's run continues

James River Coal Corp.'s bonds continued to gain ground, traders reported Wednesday.

The bonds - along with the debt from rivals like Alpha Natural Resources Inc. - began moving up Tuesday as hopes of increased coal demand from China increased.

"They continued yesterday's rally," a trader said, seeing the 7 7/8% notes due 2019 rising another 1 point finish at 62 7/8.

Another trader said that "coal continues to move up," pegging James River's debt at 63.

Elsewhere in the energy space, ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 closed firm around 22, according to a trader.

Another trader said Petroleos de Venezuela SA's 9¾% notes due 2035 lost 1½ points, closing at 82 7/8.

Supervalu, Nokia rise pre-earnings

With earnings set to come from Supervalu Inc. and Nokia Corp. on Thursday, both companies saw their bonds inching upward ahead of the releases.

A trader remarked that Supervalu was not all that active, though he deemed both the 8% notes due 2016 and the 8% notes due 2026 higher at 84¼ and 83 7/8, respectively.

Another trader said Nokia's 5 3/8% notes due 2019 were "more active" than they had been on Tuesday. The trader also said the bonds were better, trading at 82½ bid, 83 offered.

Paul Deckelman contributed to this article

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