ATP Oil drops, Patriot Coal pops, though quietly, as new deals overshadow distressed bonds

By Paul Deckelman

New York, Sept. 20 - Distressed-debt traders said Thursday that activity in their market dwindled in line with a generalized quiet in the high-yield bond market, apart from the red-hot new-deal sector.

Even though trading volumes were muted, the traders saw some price movements in the energy arena.

ATP Oil & Gas Corp.'s 2015 notes were seen having lost around a point in relatively brisk dealings, although there was no fresh news seen out on the bankrupt offshore energy company.

By the same token, Patriot Coal Corp.'s paper was seen gyrating around at mostly improved levels, although there seems to be no light at the end of the tunnel for the bankrupt mining concern.

There was also some activity seen in the underperforming Caesars Entertainment Corp. bonds, but again, no news out that might explain the action.

There meantime was no activity reported Thursday in the bank debt or convertible debt of troubled companies.

Little action seen

A trader in distressed bonds opined that in his market, anyway, "this September feels like what August usually feels like."

He elaborated that "high yield was terrific today" - more than $5 billion of new junk bonds priced, one of the busiest primaryside days so far this year - "but our stuff ..." He let the sentence just trail off, saying as much by not saying anything further as if he had completed the thought.

"My names were dead quiet. It was a pretty blah day," he said.

ATP relatively active

Probably the busiest name in the distressed-debt precincts was ATP Oil & Gas, whose 11 7/8% second-lien senior secured notes due 2015 have recently been languishing in the lower 20s.

On Thursday, a trader said the bankrupt Houston-based offshore energy exploration and production company's bonds were "still getting beat up." He quoted the paper finishing in a 221/2-to-23½ range, which he called "down a couple of points," estimating the volume in the name around $14 million to $15 million.

He later modified his assessment of the bonds' movement, calling them down ¾ of a point.

A market source at another desk saw $17 million of the bonds changing hands on a round-lot basis and even more in smallish odd-lot dealings.

He quoted the bonds going out around 22 11/16 bid, estimating they were down 13/16 point on the day.

There was no fresh news about the company, which filed for Chapter 11 protection about a month ago.

Coal names a mixed bag

While ATP was dropping, another energy name seemed to be popping - bankrupt Patriot Coal's 8¼% notes due 2018.

A market source said that those bonds were up more than 2 point on the day, going home around the 47 bid mark.

At another desk, a trader pegged the St. Louis-based coal mining company's bonds around a 49-to-50 context, with "the last few trades today" around 50 bid.

"That looks better by a couple of points from [Wednesday]," he said, "and a couple of days ago, they were quoted around 45 or 46."

While seeing them up several points, he said that volume was no more than $4 million or $5 million, "so there were not a lot of trades. But the quote is higher."

Another market source saw the bonds shoot up to 50 bid going out - well up from Wednesday's closing levels around 43½ bid.

However, he said that on Wednesday, late round-lot dealings in the bonds had already carried them to 50 bid, so they were not much changed on the session on that basis, which saw only $3 million of turnover.

Elsewhere in that same sector, a trader said that Arch Coal Inc.'s most active issue, the 8¾% notes, were at 99½ bid, 101 offered, calling the St. Louis-based company's bonds down about a point in general.

He said its 7% notes due 2019 "are down from the 90s. It took a few days," but they are now trading around 88 to 89. "They started the week around 92."

Caesars seen around

Caesars Entertainment's 10% notes due 2018 saw a little trading activity on Thursday. A market participant characterized the Las Vegas-based gaming giant's paper as "pretty active," relatively speaking.

He saw the bonds going home trading in a 69-to-70 context, with the last trade at 691/2, which he called down ¾ point.

Another market source pegged the bonds at 69¾ bid, which he said was down 12¼ points on the day.

The first trader said that volume was $11 million or $12 million, giving it a spot among the more active junk issues.

There was no fresh news seen out on the casino operator that might account for the rise in volume.

Kodak is quiet

A trader said that Eastman Kodak Co.'s 7% busted convertible notes due 2017 and 7¼% straight bonds due 2013 were hanging out in an 11-to-13 bid context on "no real volume, just quotes."

There was no fresh news out on the Rochester, N.Y.-based film, camera and digital imaging products maker, which is trying to restructure itself through the bankruptcy courts, having filed for Chapter 11 earlier this year.

Kodak is in the process of trying to sell off its big portfolio of digital imaging patents, hoping to reap billion of dollars with which to repay its creditors.

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