Edison Mission debt creeps higher; Overseas Shipholding stays active, firms; Penney trends up

By Stephanie N. Rotondo

Phoenix, Nov. 19 - The distressed debt market was benefiting Monday from a positive tone in the broader markets.

"The market was strong; there was nobody of real note moving toward the downside," a trader said.

"Everything in general probably had a better tone to it," said another trader.

However, overall volume was on the light side, likely due to the fact that it is a shortened holiday week.

Recently topical names like Edison Mission Energy, Overseas Shipholding Group Inc. and J.C. Penney Co. Inc. were all moving higher in tandem with the markets.

Also moving higher - or holding its ground, depending upon whom you asked - was Nokia Corp. The cellular telephone manufacturer's debt and equity were on the rise during the session, as some markets were reporting that the new Lumia phones were selling out rapidly.

Edison up despite downgrade

After missing a Nov. 15 coupon payment on its unsecured bonds maturing in 2017, 2019 and 2027, Edison Mission's debt has been "slowly creeping upwards," a trader said Monday.

He noted that the 7%, 7.2% and 7 5/8% notes were all trading flat, or without accrued interest.

Still, the paper was up about 2 points at 47½ bid, 48 offered, according to the trader.

Another trader quoted the issue at 46½ bid, 47½ offered, adding that trades were occurring closer to the offered side.

On Monday, Standard & poor's cut its rating on the company and the bonds in question to D, indicating a default. However, a default technically will not occur unless the Rosemead, Calif.-based power producer fails to make the coupon payments within a 30-day grace period.

That being said, Edison has said it is unlikely it will be able to cure the problem, which will result in the debt becoming due and payable immediately. If that happens, a bankruptcy filing is almost certain.

OSG stays busy

New York-based oil tanker company Overseas Shipholding Group "remained volatile," a trader said Monday.

The company filed for bankruptcy last week. Given such, the bonds are trading flat.

But the credit continued to be active, the trader said, with the 8 1/8% notes due 2018 moving up nearly a point to 38.

Another trader also pegged the issue with a 38 handle, while a third trader quoted the notes at 37½ bid, 38½ offered.

J.C. Penney stages comeback

A trader said J.C. Penney's 5.65% notes due 2020 were up 1½ points on the day, trading around 841/2.

Another trader saw the securities around 85, up from an 83-84 context.

The Plano, Texas-based retailer's debt struggled in the previous week, after the company had reported dismal earnings and an over 26% decline in same-store sales. Market sources said Monday's firmness was more a matter of the general positive tone of the market than anything else.

Nokia steps out of range

Nokia's 5 3/8% notes due 2019 were no longer range-bound, a trader reported.

The bonds had been holding in an 82½ to 84½ context for some time, the trader said. But Monday saw the bonds rising up to 86, according to the trader.

Another trader, however, said that the issue was "pretty active, but unchanged" in an 85 to 86 context.

Meanwhile, the Finnish company's stock (NYSE: NOK) gained 17 cents, or 6.14%, to close at $2.94.

According to media reports, Nokia's German Facebook page indicted that stores were quickly selling out of the newly released Lumia phones. Nokia is hoping that the new line will help it retake market share and improve its bottom line.

Broad market posts gains

Elsewhere in the distressed space, a trader said Alpha Natural Resources Inc.'s bonds were up 1¼ points, the 6¼% notes due 2021 at 86½ and the 9¾% notes due 2018 at 1011/2.

Another trader said Clear Channel Communications Inc.'s debt was up 1½ to 2 points, seeing the 10¾% notes due 2016 finishing around 70.

At another desk, a trader called ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 steady at 13½ bid, 14 offered.

And, Eastman Kodak Co.'s 9¾% second-lien notes due 2018 were "up quite a bit," a trader said, trading around 76.

That was up "another 3 to 4 points" from last week, he said.

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