Nortel notes get a boost; Dynegy bonds tumble; Chrysler gyrates with market; financials mixed

By Stephanie N. Rotondo

Portland, Ore., July 12 - The distressed debt market ended Tuesday's session about unchanged to slightly lower, but not before taking a bit of a ride.

"It seemed like things were getting quoted down and then things kind of came back up," a trader said.

"Most everything was lower and kind of came back towards the end of the day," said another trader.

Nortel Networks Corp. managed to gain ground in active trading, according to sources. The paper was trading actively as investors seemed optimistic about their recovery options.

Meanwhile, Dynegy Inc. took another hit following word Monday of the company's plan to issue $1.7 billion in new loans. The paper lost anywhere from a point to nearly 2 points on the day.

Chrysler Group LLC swung around with the market, a trader said. He said the automaker's debt opened lower, only to slowly climb back up to close about unchanged.

And, in the financial realm, credits were mixed as Ambac Financial Group Inc. slipped a bit and Capmark Financial Group Inc. headed higher.

Nortel heads up again

Nortel Networks was deemed "very active" yet again, as the bonds headed upward.

A trader pegged the 10¾% notes due 2016 and the 10 1/8% notes due 2013 at 1091/2.

Another trader said the paper was "probably up about a point" at 109½ bid, 109¾ offered.

A third trader said the debt opened around 108 bid, then hit a high of 110 before settling in around 109 bid, 110 offered.

That compared with 107½ bid, 108½ offered previously, the trader said.

At the joint hearing on Monday, U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, and Ontario Superior Court Judge Geoffrey Morawetz in Toronto gave the go-ahead on Nortel's patent auction sale to the Rockstar Bidco LP group.

Along with Apple Inc. and Microsoft Corp., the group includes Research In Motion Ltd., Sony Corp., Ericsson AB and EMC Corp. The group made the winning bid of $4.5 billion, five times that of Google Inc.'s "stalking horse" bid of $900 million.

Nortel, a Toronto-based manufacturer of wireless telecommunications technology, filed for Chapter 11 protections in January 2009. Since then, the company has sold off units to pare down and to pay off creditors. With the monstrous bid from the patent auction, creditors are expecting to receive 100% pre-petition recovery and there is some optimism about post-petition recovery as well.

Dynegy takes another hit

Dynegy debt "was getting hit again," according to a trader.

He said the 7¾% notes due 2019 were trading with a 68 handle for most of the day. That compared with levels around 70 on Monday.

Another market source saw the notes falling more than a point to end at 68¾ bid.

Yet another trader said the issue was "the most active in that capital structure," seeing the notes fall "another 1½ points or so" to 681/2.

On Monday, Dynegy said it was launching $1.7 billion in new loans to pay down existing debt as part of a plan to restructure the company's balance sheet. After rejecting two takeover attempts since September, the Houston-based energy company warned that it might have to file for bankruptcy in the second half of the year if it could not get its balance sheet in check. To that end, it hired financial advisors to help devise a restructuring plan.

The new loans are the first part of a proposed plan aimed at reducing overall debt. Of the loans, $1.3 billion will be held at the company's GasCo subsidiary and the remaining $400 million at the CoalCo unit.

On Tuesday, Moody's Investors Service downgraded the company's probability of default to Ca from Caa3.

Proceeds from the GasCo loan will be used to repay Dynegy Holdings Inc.'s existing senior secured credit facility, repay existing debt relating to Sithe Energies Inc., make a $400 million restricted payment to a parent holding company of GasCo and to fund cash collateralized letters of credit and cash collateral for existing collateral requirements.

The CoalCo loan will be used to fund cash collateralized letters of credit and cash collateral for existing collateral requirements, and for general working capital and general corporate purposes.

Closing is expected by the end of the month.

Chrysler starts slow, ends steady

Chrysler Group's 8% and 8¼% notes due 2019 opened lower, but came back to end in line with the previous close, a trader said.

He said the bonds - which "trade in lock-step" - opened offered at 951/2, with no bids. Then, he said, bids came in around 93 to 94 and by the end of the day, the paper closed at 96½ bid, 97½ offered, virtually unchanged form Monday's close.

Chrysler is an Auburn Hills, Mich.-based car manufacturer.

Financials mixed

In the financial-related realm, credits were mixed in Tuesday trading, according to traders.

Ambac Financial Group's bonds - the 9 3/8% and 9½% notes due 2012 and the 5.95% notes due 2035 - traded down "a scrap" to around 133/4, a trader said.

However, he said Capmark Financial Group's 5 7/8% notes due 2012 and the 6.30% notes due 2017 inched up to "59-ish" as the moves closer to exiting bankruptcy.

In financial preferreds, National Bank of Greece SA's 9% series A preferreds (NYSE; NBGPA) lost weight, falling 54 cents - or 6.79% - to $7.41.

Broad market softens

Elsewhere in the distressed market, Clear Channel Communications Inc.'s 11% notes due 2016 were "trading some," a trader said. He saw the paper slip about half a point to end around 87.

NewPage Corp. "has not been trading too much recently," the trader remarked. However, the 10% notes due 2012 did see some action Tuesday, slipping to the 25 mark.

And, OPTI Canada Inc.'s subordinated issues - the 8¼% and 7 7/8% notes due 2014 - finished at 42½ bid, 43½ offered.

"Maybe that's down a little bit," the trader said.

But another trader said the notes were "up a little bit" on stronger oil prices. He quoted the debt at 42¼ bid, 42½ offered.

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