Distressed debt takes backseat, snowstorm looms; Cliffs rises on debt cuts; NII selling assets

By Stephanie N. Rotondo

Phoenix, Jan. 26 – The snowstorm hitting New York was the main topic of discussion Monday and investors weren’t all that focused on the distressed debt market.

However, there were a couple newsworthy names that did make it onto the radar.

Cliffs Natural Resources Inc. announced Monday that it had reduced its net debt by over $400 million. As part of that reduction, the company repurchased over $200 million principal amount of senior bonds.

The news helped Cliffs’ notes move higher in trading.

Also higher were NII Holdings Inc.’s bonds, which gained 10-plus points after the company said it was selling its Nextel Mexico unit to AT&T.

NII has been in bankruptcy since Nov. 24.

Cliffs cuts debt

A debt reduction helped push up Cliffs Natural Resources’ bonds during Monday trading.

A trader said the 3.95% notes due 2018 were “up quite a bit,” rising over 3 points to 82. The 4 7/8% notes due 2021 improved almost 2 points to 69.

Another trader said the 2018 paper was “up a few points” to 82, while the 2021 issue was “only up a point” at 69.

The Cleveland-based iron ore producer said Monday that it had reduced its overall debt by $400 million, due in part to a $200 million repurchase of senior notes.

The notes were bought in the open market at an average discount of 34%.

The company used cash from operations and proceeds from the sale of its Cliffs Logan County Coal asset to fund the debt reduction.

In addition to the reduction, the company also said that it was cutting its common stock dividend.

“We see accelerated debt reduction as a more effective means of protecting our shareholders than continuing to pay a common share dividend,” said Lourenco Goncalves, chairman, president and chief executive officer, in a prepared statement. “The elimination of this dividend provides us with additional free cash of $92 million annually, which we intend to use for further debt reduction.”

NII eyes asset sale

Bankrupt NII Holdings saw its debt jump Monday after the Reston, Va.-based company announced it was selling its Nextel Mexico unit to AT&T.

Under the agreement, AT&T will pay $1,875,000,000 for the subsidiary.

A trader said he saw the company’s bonds “better by about 10 points” on the news.

He saw the 10% notes due 2016 quoted at 43 bid, 47 offered, up from previous trades around 33. The 11 3/8% notes due 2019 got “as good as 88¾,” which compared to 76 on Friday, he said.

Another trader pegged the 10% notes at 43 bid, 45 offered, a 10-point gain. The 8 7/8% notes due 2019 were also 10 points higher at 45 bid, 47 offered, he said.

The 7 5/8% notes due 2021 meantime put on 5 points, closing at 22½ bid, 23 offered.

A third trader placed the 11 3/8% notes around 89, up a dozen points on the day. He said the 7 5/8% notes earned 4 points to close in a 22 to 23 context.

Because NII Holdings is currently operating under bankruptcy protections, the deal with AT&T still needs court approval and there will also be a “competitive bidding process” for the unit.

Assuming all goes well, the sale should close in mid-2015, the company said in a press release.

NII Holdings is a provider of Nextel mobile services in Latin America and Mexico.

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