Distressed market active, stronger; NewPage trends softer post-earnings; First Data debt gains

By Stephanie N. Rotondo

Portland, Ore., Nov. 4 - Thursday's secondary market saw "big volume," a trader said, causing most distressed credits to end at higher levels.

"A lot of stuff was much stronger today," said another trader.

But even the general positive tone of the market and improved quarterly figures could not help NewPage Corp.'s bonds gain traction. The debt was very active - deemed the most active by some sources - but still finished the session unchanged to weaker.

First Data Corp. meantime reported a larger net loss for the third quarter, and yet unlike NewPage, its debt traded higher.

Away from earnings news, Dynegy Inc.'s planned takeover by Blackstone Group LP drew another round of criticism from a San Francisco-based proxy research firm. But despite the firm's urging to reject the deal, the power company's bonds headed upward.

NewPage remains active, steady

NewPage debt was trading "pretty active," according to a trader, after the Miamisburg, Ohio-based papermaker released its third quarter results.

But despite a 19% increase in net sales, the bonds responded by slipping a tad. The trader called the 10% notes due 2012 modestly weaker at 63½ bid, 64 offered, while the 11 3/8% notes due 2014 closed around the 96 mark.

Another trader said "a couple hundred million" of the 10% notes changed hands, hitting a high of 68, a low of 63 and finishing up around 64.

At another desk, a source called the 10% notes the day's most active issue, seeing them falling half a point to levels around 64. The 11 3/8% notes were meantime "kind of unchanged" around 961/2.

For the third quarter, NewPage posted net sales of $943 million versus $791 million during the same quarter of 2009. Net loss narrowed to $67 million from $138 million due to improved sales volumes and lower interest expense.

"We expect our business for the remainder of the year to be generally consistent with trends at the end of the third quarter of 2010," said George F. Martin, president and chief executive officer, in the earnings release. "We also expect to see continued price realization in the fourth quarter from our previous price announcements."

On the liquidity front, NewPage ended the quarter with $125 million - $8 million in cash and equivalents and $117 million available under its revolving credit facility.

First Data gains post-numbers

In other earnings news, First Data released its quarterly results, which showed a wider loss attributable to new tax legislation.

But in contrast to NewPage, which reported better earnings but whose bonds dipped anyway, First Data paper was not only active, but also about a point better.

A trader said the 10.55% notes due 2015 were "pretty active" around 88.

Other traders echoed that level, with one seeing $70 million to $80 million of the bonds turn over.

Another market source deemed the 9 7/8% notes due 2015 up a deuce at 89 bid.

The Atlanta-based electronic payment processor saw its net loss increase to $431 million, due in part to a $178 million charge "associated with U.S. tax legislation signed in August that adversely affects the company's ability to use foreign tax credits to offset future U.S. taxes," the company said in the earnings release.

Still, consolidated revenue gained 8% to $2.6 billion. The increase was due to higher debit network fees.

At quarter-end, the company had $1.8 billion in unrestricted liquidity.

"The company is showing some progress on the top line...but margins have been disappointing," wrote Dave Novosel, an analyst with Gimme Credit LLC, in an afternoon comment. "Margins are being pressured by the usual price compression in the industry, a shift in product mix, and incentive compensation accruals."

Novosel noted that the company has not yet materially reduced its debt, "so the extremely high leverage remains."

Dynegy heads up

Dynegy's bonds inched up as yet another market player encouraged shareholders to reject Blackstone Group's $4.50-per-share takeover bid.

A trader called the debt "up a little bit," the 8 3/8% notes due 2016 around 77¾ and the 7¾% notes due 2019 around 71.

Another source saw the 7¾% notes closing a point firmer, also around 71.

Proxy research company Glass Lewis & Co. LLC called Blackstone's offer "insufficient" in an e-mailed recommendation sent to clients on Thursday. The e-mail went on to call the bid "below average to mediocre."

Shareholders will vote on the proposal on Nov. 17.

Dynegy is a Houston-based power producer.

Broad market gains ground

Elsewhere in the world of distressed debt, Harrah's Entertainment Inc.'s 10% notes due 2018 firmed a point to 89, a trader said.

The trader also saw Clear Channel Communications Inc.'s 11% notes due 2016 trading "pretty active" and slightly better around 76.

Another trader called General Motors Corp.'s 8 3/8% notes due 2033 stronger around 35.

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