NewPage slides despite no fresh news; Sino-Forest steady as shares up; Nebraska Book off

By Paul Deckelman

New York, June 13 - NewPage Corp.'s several series of notes were down by multiple points on heavy volume, although there was no fresh news seen out on the Miamisburg, Ohio-based coated-paper manufacturer that might explain the drop.

Traders meantime saw some lower levels in the bonds of NewPage sector peer Catalyst Paper Corp., though on considerably less activity.

Away from the paper sector, Sino-Forest Corp.'s bonds, which have been on a wild ride since the beginning of the month, thanks to a harshly critical research report on the timber company put out by a short-seller, seemed to have steadied a little on Monday, while its equally volatile shares bounced back a little after posting another sizable loss on Friday.

Nebraska Book Co.'s bonds were seen down by several points, although there was a lack of news out about the company.

In the new deal arena, Chrysler Group LLC's recent two-part megadeal, which priced nearly a month ago, has been hammered down by investors in the interim and is now struggling along at several points below the bonds' original par issue price, with no relief in sight.

NewPage is knocked down

A trader said that clearly "NewPage seems like the name of the day," with the coated-paper manufacturer's 10% second-lien senior secured notes due 2012 and its 11 3/8% senior secured first-lien paper due 2014 both down anywhere from 2 to 4 points on the day, depending on whom you were talking to, on "huge" volume.

"There was a lot of activity. It was down and it was ugly," he said.

He saw the 10% notes going home at 33 bid, 34 offered, calling them down anywhere from 3 to 4 points, while the 11 3/8s ended at 92, which he said was off between 2½ to 3 points.

A market source at another desk saw the 10s ending at 33½ bid, down more than 4 points on the day, though on a strictly round-lot basis. Throwing out the smaller trades as unrepresentative, they closed closer to 34 bid, down 3¾ points.

Volume was heavy with over $41 million changing hands, making it easily the busiest purely junk issue of the day.

He also saw the 11 3/8s closing down 1½ points on the day at just over 92 bid on volume of $36 million.

Traders were puzzled as to the cause of the harp slide in the bonds, since there was no fresh news out on NewPage either in terms of company news releases or regulatory filings.

An analyst also noted that there was no fresh paper-industry data out that might spur such selling.

He suggested that "people are shorting high-beta names" and the 10s are especially vulnerable because "even though they're supposed to be second-lien, in reality, there's no asset coverage there."

People, he said, "are making speculative calls," feeding off market rumors, but with no concrete negative news to go on.

Another trader said that investors may be looking to lighten up on "paper that's got trouble ahead, or CCC or weak single-B paper. Particularly in certain sectors, guys have been trying to get rid of it. Maybe they've given up the ghost" on NewPage, he suggested.

He had not been active in the name, but theorized that "there might be some dialog out there about restructuring that's leading to lower valuations."

Catalyst follows NewPage down

A trader said that Catalyst Paper's bonds "got a little easier" in apparent sympathy with the drop that sector peer NewPage's bonds took in active dealings, though on no news.

"Maybe the bonds were in, but not as low" as NewPage, he said

He saw the Richmond, B.C.-based paper manufacturer's 7 3/8% notes due 2014 around 60 bid, 61 offered, "quoted there, but not a lot of volume. I'd call those almost unchanged."

"Meanwhile, its 11% senior secured paper due 2016 was at 88 bid, 90 offered, down 1 point."

Sino-Forest steadies

A trader said that Sino-Forest's bonds, which had gyrated around wildly last week as the Canadian-Chinese timber company defended itself against scathing allegations of corporate wrongdoing contained in a controversial research report on the company, seemed to have calmed down a little on Monday.

"I did not see a lot of activity in that name," he said, quoting the company's busted 4¼% notes due 2016 "pretty much unchanged" in a 52-54 context.

He said that the 5% converts due 2013 "may be quoted up a point," around 61 bid, "but I don't think there was much volume."

He also saw its 9 1/8% notes that are slated to come due in mid-August at 91-92, which he said was around where they went out of Friday, while the 10¼% notes due 2014 were in a 65-67 range.

"We're not seeing many markets in these," he said of the company's bonds, which had traded quite actively last week, frequently in brisk dealings, as market participants weighed the claims of Muddy Waters LLC - an investment firm founded by short-seller Carson Block, who has taken a short position in the company's shares - that Sino-Forest had way overstated the value of its timber holdings and had engaged in other questionable accounting practices and other business tactics.

Management of the company vehemently denied the allegations and noted that Block and his company stand to make substantial amounts of money by driving the company's share price down. Sino-Forest has called for authorities in Canada, where the company has headquarters in Mississauga, Ont. and where its shares trade on the Toronto Stock Exchange, to investigate Muddy Waters.

The bonds had mostly been trading at levels at or even above par on June 1, the day before the report surfaced, but initially fell as much as 30 to 50 points, depending upon the issue, right after that toxic report hit the market.

Meanwhile, the company's volatile shares, which have lost nearly three-quarters of their value from the C$18.21 level they stood at on June 1, were on the rebound on Monday, gaining 51 Canadian cents, or 11.41% on the day, to close at C$4.98 per share.

Volume of 7.97 million shares was about twice the norm. In contrast, the stock had plunged 13.2% on Friday on more than five times the usual volume.

Nebraska Book seen lower

Elsewhere, a trader said that Nebraska Book Co.'s 8 5/8% notes due 2012 were down at least 4 points on the day Monday, quoting the bonds at 79 bid, 80 offered.

He said that he had not seen any fresh news out on the Lincoln, Nebraska-based textbook publisher to explain the drop, although he noted that "it's a small deal, and there really wasn't much trading I saw one trade flash across" at that lower level.

He noted that while there had been some market talk of a possible bankruptcy filing back in March, when the company hired Rothschild and Kirkland & Ellis LLP to advise it on a on a restructuring, "that was months and months ago."

Sorenson at lower level

A trader said that Sorenson Communications Inc.'s 10½% notes due 2015 were trading "a bit lower," at 68 bid, 69 offered versus recent levels in the lower 70s.

He said that the Salt lake City, Utah-based provider of telephone technology and services to the hearing impaired had fallen a couple of points at the end of last week and then stayed down at those lower levels on Monday.

He saw no fresh news out on the company.

OPTI Canada unchanged

A trader said that OPTI Canada Inc.'s 8¼% notes due 2014 were steady around a 44-45 or 44-46 context.

He said that there was "not much activity" Monday in the Calgary, Alta.-based oil-sands energy producer's paper, "just a couple of trades."

Chrysler crunch continues

In mainstream Junkbondland precincts, a trader said that with a more cautious tone appearing in the overall market, some accounts "have been shorting more actively traded bonds, or larger issues," particularly those with lower ratings, such as Chrysler Group LLC's recently priced $3.2 billion of single-B rated senior secured eight-year and 10-year notes

He noted that "since Chrysler came to this market, it's traded from a premium down to 95 on both issues."

The Auburn Hills, Mich.-based No. 3 U.S. automaker priced its two-part deal on May 19. After first upsizing the offering to $3.5 billion from the originally planned $2.5 billion, Chrysler and its underwriters finally brought it in at $3.2 billion, consisting of $1.5 billion of 8% senior secured notes due 2019 and $1.7 billion of 8¼% senior secured notes due 2021.

After both pricing at par, the eight-years initially moved up to 100½ bid, 100¾ offered, while the 10-years firmed to 100¾ bid, 101 offered.

However, by the beginning of the next week, the bonds had begun their long skid and were trading under par, and they have continued to accelerate on a downside ride since then.

The trader contrasted Chrysler's bumpy ride with EchoStar Corp.'s upsized $2 billion offering, which priced on May 17, actually pre-dating Chrysler by several days. While the Englewood, Colo.-based communications satellite operator and set-top satellite broadcast receiver company's deal is also a big, liquid issue, the kind that players looking to raise cash or trim positions could easily sell, its EH Holding Corp. 6½% senior secured notes due 2019 and 7 5/8% senior notes due 2021 "are barely below 101."

He said that the $1.1 billion of eight years, which got up to 101 bid, 102 offered after pricing at par, and the $900 million of 10-years "are maybe off three-quarters of a point to 1 point from their high," noting that the [overall] market's "down a lot more than that."

He cited the better credit quality - Ba3/BB "straight across" - for the discrepancy between the EchoStar trading levels and the weaker-rated Chrysler's current status.

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