ATP Oil bonds beaten down on reserve report; Supervalu gains continue; Navistar driving lower

By Stephanie N. Rotondo

Phoenix, Oct. 19 - A trader said ATP Oil & Gas Corp. was the "highlight" of Friday trading, as the bankrupt oil producer's debt dropped 2 to 3 points.

The company's debtor-in-possession facility also declined in early trading, but managed to rebound by the end of the day.

The trader said the decline was based on a reserve report that missed expectations.

Meanwhile, Supervalu Inc.'s debt continued to gain ground following the company's earnings release on Thursday. Though the earnings were only slightly better than what the market had been expecting, a trader speculated that it was talk that there were several interested buyers looking at parts of the company that has spurred the climb.

Navistar International Inc. was deemed "way off" in the final trading session of the week, though there was no fresh news out to explain the dip. The equity was also down significantly, in above average trading volume.

ATP gets slammed

ATP Oil & Gas' 11 7/8% notes due 2015 traded all the way down to 17 on Friday, before inching back up to an 18-19 context, a trader said.

Still, that was down a couple points on the day, he said.

"There was some [reserve] report that came out," he said. The report "didn't meet the numbers [the market] was expecting."

Another trader pegged the paper in a 17-18 context, down from 211/2-221/2.

The Houston-based company's DIP also dropped in early trading, but managed to end the day higher than Thursday levels, according to a trader.

The DIP was seen at 92½ bid, 94½ offered early in the day, but fell all the way down to 90 bid, 92 offered before climbing back up to 93 bid, 95 offered.

ATP filed for bankruptcy in August as it struggled to get production up to targets.

Supervalu sees more upside

Supervalu's bonds continued to trend higher Friday, just one day after the company reported its second-quarter earnings.

"There was a lot of activity, everybody was scrambling for Supervalu," a trader said, noting that the paper was "very strong."

He pegged the 8% notes due 2016 at 901/2, up a deuce, "maybe even 2½ points" on the day. The 7½% notes due 2014 put on 3 points to end around 981/2, as the 8.7% notes due 2030 rose over 2 points to 601/4.

On Thursday, the Minneapolis-based grocery store operator reported a net loss of $111 million, or 52 cents per share, on net sales of $8.04 billion.

That compared to a profit of $60 million, or 26 cents per share, on sales of $8.4 billion, the year before.

Excluding certain one-time charges, Supervalu would have posted flat earnings.

Analysts polled by Thomson Reuters had been expecting a profit of 13 cents per share, on sales of $8.01 billion.

In terms of its debt, the company said it was expecting to reduce its overall leverage by $400 million to $450 million by the end of the fiscal year.

However, a trader pointed out that gross margins were at 21.4% of sales and that SG&A expenses were at 21%, leaving the total at basically zero.

The company also said that it was continuing talks with potential buyers, but gave few details beyond that.

It was this piece of the puzzle that a trader said was the cause of the recent uptick.

"It seems like there is a lot of interest in them," he said. Investors "think that there will be some people that will pick up the pieces."

Navistar debt, equity weakens

A trader said Navistar International's 8¼% notes due 2021 were "way off" in Friday trading, though on no fresh news.

The trader saw the notes fall over 2½ points to 92 1/8.

Another trader said the debt "traded off a good bit," calling the paper "93-ish," which was down a couple of points.

The Lisle, Ill.-based truck maker's stock (NYSE: NAV) was also down a fair bit, falling $1.49, or 7.23%, to $19.06.

AMD takes a fall

Advanced Micro Devices Inc. could be the next name to hit the distressed realm, following a disappointing quarterly release on Thursday.

A trader said the 7¾% notes due 2020 were "down a good bit" at 90. That was an 8-point loss for the day, he said.

Another trader also saw the issue finishing around 90.

The company's equity (NYSE: AMD) meantime declined by 44 cents, or 16.79%, to $2.18. It should be noted that the chip-maker's stock has lost over 50% of its value since the beginning of 2012.

On Thursday, AMD reported a net loss of $157 million on revenues of $1.27 billion. That compared to a profit of $97 million on revenues of $1.69 billion the year before.

The swing to a loss was due in large part to declining PC sales, as consumers switch to tablets and smartphones.

On the loss, the Sunnyvale, Calif.-based company also said it was cutting about 15% of its workforce or about 1,800 jobs.

AMD also was not so optimistic on its fourth quarter.

Come Friday, Moody's Investors Service responded to the dismal earnings by downgrading the company's rating to B1 from Ba3. The ratings remain on review for a potential further downgrade.

OSG rises, Sorenson active

Among other distressed issues, a trader said Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 jumped nearly 8 points to 513/4. He said the surge was a result of a recent downward move that was "a little overdone."

Another trader said Sorenson Communications Inc.'s 10½% notes due 2015 "remained active," trading in an 82-83 range.

Sara Rosenberg contributed to this article

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