Sprint Nextel holds its ground; Clear Channel, Dynegy weaker on no news; ResCap recoups losses

By Stephanie N. Rotondo

Portland, Ore., Feb. 9 - The distressed debt market ended Thursday flat despite a decent level of high-yield inflows.

And, traders reported that new issues continued to dominate the market.

After reporting an earnings miss on Wednesday, Sprint Nextel Corp. paper closed unchanged, according to traders. The bonds had lost 1 to 3 points after the earnings release.

Clear Channel Communications Inc. was on the decline, though there was no fresh news out to explain the move. Dynegy Holdings LLC was also weaker, "just with the market, I don't think there was any news out," a trader said.

Elsewhere, Residential Capital LLC's bonds managed to recoup some of the ground lost in the previous session. The debt had dropped on news that its parent company, Ally Financial Inc., was looking for a buyer for the money-losing mortgage lender.

Sprint holds steady

Sprint Nextel paper was unchanged Thursday, just one day after reporting a wider fourth-quarter loss.

A trader pegged the 8¾% notes due 2032 at 86¼ and the 6 7/8% notes due 2028 at 76.

Another trader said the credit remained active but "not all that different" from the previous session. He saw the 2032 maturity around 86 and the 8 3/8% notes due 2017 at "96-ish."

A third market source called the 6% notes due 2016 up a quarter-point at 90 bid.

On Wednesday, the Overland Park, Kan.-based telecommunications provider reported a net loss of $1.3 billion and a diluted loss of 43 cents per share for the quarter, which includes pre-tax, non-cash charges of $241 million, or 8 cents per share. The charges included asset and impairment charges of $78 million on property, plant and equipment, $135 million on Sprint's investment in Clearwire Corp. and $28 million in severance costs.

In terms of subscribers, the company added 1.6 million new customers in the fourth quarter, the best in six years. The additions also gave Sprint its highest level of subscribers in its history.

But, the addition of the iPhone was not generating the turnaround previously expected. Sprint did sell 1.8 million of the Apple Inc. phones - fewer than was expected by analysts - and of those sales, 40% were to new subscribers.

Subsidy expenses - that is, the losses providers will take on a device in order to get a multiyear contract with a customer - were up about 40%, based in large part on the iPhone.

Clear Channel ends softer

Clear Channel Communications' debt was weakening Thursday, but there was no fresh news out on the San Antonio-based multimedia company that would have acted as a catalyst.

A trader said the 10¾% notes due 2016 fell "a couple points" to 781/2. Another trader called the 9% notes due 2021 "down about a point" around 89.

Dynegy powers down

Dynegy Holdings' debt was "down a couple bucks," a trader said, pegging the bonds generally around 651/2.

He opined that the gains were market-based, as there was no fresh news out on the Houston-based subsidiary of Dynegy Inc.

Another source called the 7¾% notes due 2019 down 2½ points to 65 bid.

ResCap recoups losses

A trader said activity in Residential Capital was muted, though the bonds were trading better.

He said the 9 5/8% notes due 2015 "moved back up a little bit" to end with an "81-ish handle."

He called that a 2-point gain.

Another trader said the issue was up "almost 2 [points]" at 811/2.

ResCap had ended softer on Wednesday on news that parent company Ally Financial Inc. was seeking buyers for the money-losing mortgage lender. News outlets reported Wednesday that parent company Ally Financial was talking to such buyout groups as Fortress Investment Group LLC and Cerberus Capital Management LP. Additionally, ResCap is reported to have contacted Centerbridge Capital Partners LLC and Leucadia National Corp. The plan would be to find a buyer and then put ResCap into a prepackaged bankruptcy to facilitate the sale.

The reports cited "people with knowledge of the matter."

ResCap has been losing money for some time now and is also currently facing at least 22 mortgage-linked securities lawsuits. Though the parent company has provided support for the unit thus far, it has expressed its desire to decrease its amount of support in the near term.

But bondholders have already stated they would oppose any situation where ResCap would be forced into bankruptcy. Some believe bondholders might fight a bankruptcy and any attached sale by saying that ResCap was not ring-fenced and therefore cannot be separated from its parent organization.

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