Weaker marketplace weighs on distressed paper; Eastman Kodak zooms upward on patent valuation

By Stephanie N. Rotondo

Portland, Ore., Aug. 18 - Distressed bonds were "quoted down," a trader said Thursday, but overall volume remained thin.

The weakness in the market came as European fears and growth concerns - both domestic and foreign - reigned, causing an a decline of more than 400 points in the Dow Jones Industrial Index.

NewPage Corp. continued to trade actively and held its ground for the most part, leaving one trader to speculate short covering. Rival Catalyst Paper Corp. was on the softer side, though was not actively traded.

Eastman Kodak Co., however, managed to post gains in an otherwise negative day. The increase came as market players began seeing good value in the company's patents.

Paper sector gets burned

The paper sector as a whole was taking a hit in Thursday trading, though there was no fresh news to cause it.

One trader said NewPage's 11 3/8% first-lien notes due 2014 "did dip into the high-70s" before coming back to close almost unchanged at 80 bid, 80½ offered.

Another trader said the issue "would not go through 80," and that the paper "really hung in there.

"There must have been a short covering bid," he speculated.

Meanwhile, rival Catalyst Paper saw its 7 3/8% notes due 2014 hit a low of 31, the second trader said. The senior notes - the 11% notes due 2016 - were "definitely quoted lower," the first trader said, though he added that the bonds "weren't very active."

He pegged the notes at 65 bid, 67 offered, down from a 67½ bid on Wednesday.

The second trader also saw quotes around "65-ish," he said.

Kodak aims higher

Eastman Kodak's 7¼% notes due 2013 gained strength, just one day after a research report came out claiming that the company's patent portfolio could be its saving grace.

A trader said he saw "odd pieces" trading as high as 90. Round-lot trades were around 881/4, while the 10 5/8% notes due 2019 and the 9¾% notes due 2018 were quoted at 85 bid, 86 offered.

Another market source pegged the 7¼% notes at 88 bid, up 3 points on the day.

A third source said the 7¼% notes were also higher around 88, while the other bonds were in the mid-80s.

In a new research report out Wednesday, MDB Capital Group Inc. said that the Rochester, N.Y.-based company's patents could be worth as much as $3 billion as various companies like Apple Inc. and Google Inc. aim to grab up patents.

Last month, the company said it was shopping its patents in an effort to increase its revenue stream.

Broad market dampened

Among other distressed issues, a trader said OPTI Canada Inc.'s 7 7/8% and 8¼% notes due 2014 were trading around 631/4. Another trader said the paper saw "a little bit of trading," also seeing a 63-handle.

Capmark Financial Group Inc.'s bonds - which tend to trade on top of one another - were deemed unchanged around 541/2, according to a trader.

A trader also saw Caesars Entertainment Corp.'s 10% notes due 2018 falling "a lot lower" to 79½ bid, 80 offered, from levels between 81 and 83.

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