ResCap bonds gain big on sale rumors; OSG boosted by rate increases; Travelport paper stronger

By Stephanie N. Rotondo

Portland, Ore., March 16 - Trading was somewhat subdued in the distressed debt market on Friday, as March Madness, new high-yield issues and the typical Friday slowness set in, traders said.

"Volume was a little low," a trader said. "It's Friday, stock market didn't do much, Treasuries didn't do much."

However, news-driven moves abounded.

For instance, Residential Capital LLC continued to post gains Friday, jut one day after it was reported that Fortress Investment Group LLC was looking to pay $1 billion for assets of the money-losing mortgage lender.

Also busy were Overseas Shipholding Group Inc.'s debt. The bonds were up anywhere from 3 to 5 points on the day, a trader said, due to "a bunch of good stories out," including one that indicated shipping rates were on the rise.

Another higher credit was Travelport LLC. However, unlike ResCap and OSG, there was no fresh news out that acted as catalyst.

Bucking the day's overall firm trend was ATP Oil & Gas Corp. The notes were 1 to 2 points weaker on the day, following the company's late Thursday earnings release. Though the company had already given estimates of what its numbers would look like, a trader said the release contained "a couple things that were a little disappointing."

ResCap boosted by sale rumors

Residential Capital bonds were trading actively and better again as investors reacted to news that Fortress Investment Group was in talks to buy assets from the Ally Financial Inc. unit.

Word is that Fortress could pay over $1 billion for the assets. The purchase would be facilitated via a bankruptcy filing by ResCap.

One trader said the debt was "really active," seeing the 9 5/8% notes due 2015 moving up to 831/2.

Another trader echoed that level, calling the bonds "a couple points better."

A third trader quoted the notes at 83¼ bid, 84¼ offered.

The Fortress news was reported late Thursday. Reports indicated that ResCap, in preparation for a Chapter 11 filing, was already shopping for up to $2 billion in loans to fund operations.

A sale of the mortgage lender's assets would also be a boon to Ally as it seeks to repay over $17 billion in government bailout funds. Earlier in the week, Ally's capital plan was rejected by the Federal Reserve, making the Detroit-based bank one of four banks to fail the stress test.

ResCap is based in Minneapolis.

OSG sees improvement

OSG paper was on the rise Friday, a trader reported.

"The stock is flying, there's a bunch of good stories out," he said. "People might be short, I don't know."

He called the 7½% notes due 2024 up over 5 points at 651/2, versus levels around 59 on Thursday. The 8 1/8% notes due 2018 were deemed 3 points higher at 723/4.

Another trader said the company's debt "looked very active," pegging the 8 1/8% notes at 72 bid, 72½ offered.

In a research note put out Thursday, Wells Fargo Securities LLC said that tanker rates for very large crude carriers on single voyages had jumped 87% in a week. Smaller carriers saw prices gain 82%.

"According to our channels, the physical tanker market is still seeing upward pressure in the Atlantic Basin intraday, with relatively thin supply, which could continue putting some near-term upward pressure on day rates and potentially tanker stocks," New York-based analyst Michael Webber said in the note.

However, Webber noted that he was not sure the recent price moves were a signal to a longer-term recovery for the tanker shipping industry.

OSG is a New York-based bulk shipping company engaged mainly in the ocean transportation of crude oil and petroleum products.

Travelport gains unexpectedly

Travelport's two series of bonds were moving forward in Friday trading, though there was no news out to prompt the gains.

A trader called the 9 7/8% notes due 2014 up 2½ points at 661/2. The 9% notes due 2016 meantime gained a point, closing around 61.

Another trader placed the 9 7/8% notes around "66-ish" and the 9% notes around 62.

A third trader said the debt "continued to tick up," seeing the 9 7/8% notes trade with a 66 handle.

"That's up a few more points from the last print," he said.

Travelport is an Atlanta-based provider of computerized registration systems and other services to the travel industry.

ATP dips post-numbers

While most of the distressed market was posting gains, ATP Oil & Gas notes were not. Traders attributed the declines, however modest, to "disappointing" earnings.

One trader said the 11 7/8% notes due 2015 were the "second most active bond" of the day, falling half a point to 76.

Another trader quoted the securities at 75½ bid, 76 offered, up from the day's low of 741/2, but still down on the day.

The second trader commented that ATP had already been informing investors about what it expected its numbers to look like. However, "there were a couple of things that were disappointing," he said, production figures being one of them.

For the fiscal year, the Houston-based oil exploration company reported revenues from oil and gas production of $687.2 million, up from $438 million the year before. They attributed the rise in revenues to an increase in production, which was 9 million barrels of oil for the year.

For the fourth quarter, revenues were $177.7 million, compared to $141.7 million in 2010. Net loss was $28.5 million, or 56 cents per share. That was better than the fourth quarter of 2010, when net loss was $206.6 million, or $4.06 per share.

Rotech takes a breath

There was greatly diminished activity Friday in Rotech Healthcare Inc., whose bonds had fallen sharply on Thursday in heavy trading after the Orlando, Fla.-based medical products and services provider had reported worse-than-expected fourth-quarter numbers.

A trader said, "There's virtually nothing going on in that name today," seeing just one trade in the company's 10¾% notes due 2015, at 98 bid, 98¼ offered.

On Thursday, those bonds, which had previously traded above par, were seen down 5 or 6 points to 97 bid, 98 offered, while investors had absolutely hammered its 10½% notes due 2018 down by anywhere from 10 to 12 points, to around 63 bids, 64 offered. Those bonds were not seen on Friday.

Market closes week firm

Among other distressed debt market goings-on, Exide Technologies Inc.'s 8 5/8% notes due 2018 were seen up a deuce at 841/2.

Also, Verso Paper Corp.'s 11 3/8% notes due 2016 were up 1½ points at 611/2.

Another trader said Ambac Financial Inc.'s 5.95% notes due 2035 were up "2 points or so," trading around 161/2.

And, Nebraska Book Co. Inc.'s 10% notes that were to have matured last year moved up a point to 65.

Paul Deckleman contributed to this article

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