Nortel bonds active in reaction to mediation failure; Lucent notes gain as loan repriced again

By Stephanie N. Rotondo

Phoenix, Jan. 25 - Nortel Networks Corp. and Alcatel-Lucent USA Inc. were taking up a fair bit of distressed investors' focus on Friday.

Late Thursday it was learned that Nortel's mediation between bondholders and retirees had failed to provide an agreement on how to split $9 billion in assets. Come Friday, the bonds were actively moving around, as the market pondered what was next in the company's already four-year long bankruptcy case.

Meanwhile, Alcatel-Lucent paper- which had been gaining earlier in the week due to a new loan deal being shopped around - continued to gain ground. The loan deal was reported to be doing well and the company revised pricing on it for the second time during the week on Friday.

Nortel notes gyrate

A trader called Nortel Networks' 10¾% notes due 2016 and 10 1/8% notes due 2013 down 5 points on Friday, following news out Thursday regarding yet another failed mediation attempt.

The trader pegged the notes around 112.

But another trader said the debt had managed to push up a few points. The bonds had dropped to 110½ bid, 111 offered late Thursday, he said, and were going out Friday at 112½ bid, 113.

Nortel has been laboring in bankruptcy for the last four years and its third and most recent mediation attempt failed to produce a liquidation settlement regarding the remaining $9 billion in assets. The mediation included bondholders and company retirees from the United States, Canada and the United Kingdom.

In a prepared statement, the Canadian Auto Workers Union said it was "outraged" at the failure and blamed bondholders for being greedy.

Don Sproule, president of Nortel Retirees and former employees Protection Canada, also placed the blame on bondholders.

"For four years, our retirees and former employees have been fighting for a fair share of the pie, Sproule said in a statement posted on the group's website. "We have been treated as pawns in this game by vulture bond funds. We will continue the battle. Canadian pensioners and disabled employees have already taken their hit financially with the cutback of pensions and loss of long-term disability income, as well as all other medical and insurance.

"Nortel pensioners in the [United States] and [United Kingdom] have suffered no such cutbacks."

The Toronto-based former tech giant filed for bankruptcy in 2009 and has since been in process of winding down.

Lucent up as loan revised

Alcatel-Lucent bonds "continued to move up," according to a trader, as the company revised pricing on a new loan deal for the second time in a week.

The trader placed the 6.45% notes due 2029 at 81. Another market source also pegged the debt at that level, deeming it up nearly a point on the day.

On Friday, the Paris-based telecommunications services and equipment company revised the original issue discounts on all of its term loans to 99½ from revised talk of 99 and initial talk of 98, and the Libor/Euribor floors were changed to 1% from 1.25%, according to a market source.

The debt includes a $500 million 31/2-year term loan, a $1.75 billion six-year term loan and a €300 million six-year term loan.

Pricing on the 31/2-year loan is Libor plus 525 basis points, after reverse flexing earlier in syndication from Libor plus 600 bps.

The U.S. six-year term loan is priced at Libor plus 625 bps. Previously, this tranche was upsized from $1.275 billion and pricing was cut from Libor plus 700 bps.

And, the euro six-year term loan is priced at Euribor plus 650 bps. Earlier, this loan was increased from €250 million and the coupon was reduced from Euribor plus 700 bps.

Proceeds will be used to refinance existing debt and for general corporate purposes.

ATP holds, Ambac rises

Among other distressed names, a trader pegged ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 at 7 1/8 bid, 7¼ offered.

"There seems to be a large seller around, but there's also somebody nibbling at it, so it's stable," he said.

The trader also saw Ambac Financial Group Inc.'s bonds - which trade on top of one another - inching up to "44 and change."

Sara Rosenberg contributed to this article

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