Smurfit bonds steady despite income gain; NewPage debt up ahead of numbers; GMAC notes maintain

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Nov. 9 - It was a day of earnings - or pre-earnings - news in the distressed debt market.

Smurfit-Stone Container Corp. reported its third-quarter results, which showed an improvement in operating income. However, the bonds reacted little to the enhanced earnings and ended relatively unchanged.

Elsewhere in the paper and paper products sector, NewPage Corp.'s bonds moved higher ahead of the company's earnings release Tuesday.

Clear Channel Communications Inc. also put out numbers. Traders saw the company's bonds gaining, presumably on news that it had repurchased a fair bit of debt - at a hefty discount.

Away from papermakers, GMAC LLC's debt ended the session unchanged to slightly better. The movement came as it was announced the company was slated to receive a third round of government bailout funding.

Overall, market sources said the day was "in line with Mondays." That is, light volume and an essentially sideways market.

"The market is supposed to be better," said one trader. "But it just doesn't feel that way."

Smurfit steady despite income gain

Smurfit-Stone Container's bonds maintained during the first trading session of the week, even as the company reported improved operating income for the third quarter.

A trader said "most issues, except the seniors" were trading 77 bid, 78 offered. The senior paper, such as the 7¾% notes due 2014 "trade a little higher," he said.

For the quarter ending Sept. 30, Chicago-based Smurfit saw its operating income move up to $159 million, compared with $22 million the year before. Sales, however, fell to $1.42 billion from $1.88 billion.

Net income came to $68 million, versus $65 million for the same quarter of 2008.

In its regulatory filing, bankrupt Smurfit also said it was continuing to evaluate its restructuring options.

Smurfit-Stone Container is a manufacturer of paperboard and paper-based packaging.

NewPage up ahead of numbers

In other earnings news in the paper-related sector, NewPage was slated to release its earnings either late Monday or early Tuesday, according to a trader. He saw the company's bonds moving up ahead of the quarterly report.

"I think they were trading up in anticipation," he said.

The trader placed the 10% notes due 2012 around the 69 level, up from 67 on Friday.

Miamisburg, Ohio-based NewPage will hold a conference call to discuss its results on Tuesday at 11 a.m. ET.

Also, Johannesburg-based Sappi Ltd. posted its fourth-quarter results. A trader said the numbers were "pretty good."

"[The bonds] might be moving up in sympathy with the sector," he said. But despite any positive feelings generated by the company's earnings, in terms of price levels Sappi's bonds looked "unchanged," the 6¾% notes due 2012 at 95.5 offered.

A trader saw Catalyst Paper Corp.'s bonds continuing to move up, just as they had on Friday, with its 8 5/8% notes due 2011 at 61, up from the upper 50s on Friday.

"They moved up a couple [of points] again today, but there was low volume - they were not active."

Clear Channel busy, better

Among other earnings releasers, a trader said that Clear Channel Communications "seems to be a popular one again today," following the San Antonio-based radio and billboard company's third-quarter earnings results.

He cited the company's announcement that it had repurchased $528 million in debt for the bargain price of $180 million, adding, "people seemed to like that."

He saw the company's 11% notes due 2016 trading at 46 to 48, which he called "up a bit," perhaps 1.5 points, with "a lot trading."

Clear Channel's 6¼% notes due 2011 were "very active" within a 68 to 69 context, with the last trades seen around 68.5, "up a couple of points, and that had decent volume."

"So, you can say it was a case of positive news, positive reaction." He also said the bonds were active during the afternoon, "because the news didn't come out too long ago, so they're still a little active."

Another trader said, "A bunch of Clear Channels traded," quoting the 11% notes going out between 45 to 45.5, "up a little."

He said the bonds had traded between 42.5 and 44 on Friday, and were at 41 bid before that, "so they were up a few points."

For the third quarter, Clear Channel saw revenues of $660.6 million, down 19% from the previous year's $813.4 million. Net loss came to $24.4 million, or 10 cents per share, compared with net income of $9.1 million, or 3 cents per share, in the third quarter of 2008.

GMAC notes maintain

GMAC's debt held its ground Monday as the Federal Reserve said the struggling lender would receive more bailout funding - marking the third such time the company has been granted government funding.

A trader said the 6 5/8% notes due 2012 traded into a 94.5 bid, though he called that "relatively unchanged." He also pegged the 6¾% notes due 2014 at 90.75 bid, 91 offered, which was unchanged to "maybe up a quarter point."

At another desk, the 6 7/8% notes due 2012 were marginally better at 95 bid, as the benchmark 8% notes due 2031 held in at 85.5 bid.

According to several news reports, the Fed announced Monday that GMAC was the only bank - out of 19 tested - to fail a so-called "stress test," and that it therefore needed $11.5 billion in additional capital to pass the aforementioned test. The Fed told GMAC it would need to raise that much back in May, but the company has been unable to do so.

As such, GMAC is in talks with government officials regarding how much more of the $700 billion bailout funds it would receive. GMAC has already taken $12.5 billion of the funds.

Last week, GMAC posted yet another quarterly loss tied to defaulted loans. Some market players have criticized both the company and the government for what they deem "throwing good money at bad."

Lear exits bankruptcy

A trader said that Lear's bonds moved up solidly against a backdrop of the company's emergence from Chapter 11.

He saw the Lear 8½% notes due 2013 last trading at 78 bid, which he called a 9-point gain on the day, while its 8¾% notes due 2016, which last traded at 780, were up 11 points.

He said there had been "decent-sized trading in the 60s and 70s. They were up all day, but at the end of the day, they seemed to jump a lot."

Another trader exclaimed, "Wow!" when he saw the gain in the bonds, pegging the 8½% notes at 78 going out, after having been "all over the place" earlier. That contrasts with 73 at the opening and 68 to 69 last Friday, and "67ish before Halloween. So it's moved up nicely."

He saw the 8¾% notes having opened in the morning at 69.5, then having moved around - "70, 76, 75, 71.5. Then there was nothing for about four hours - but they were trading up late in the day at 80."

Six dips on new plan

A trader said Six Flags Inc.'s bonds were mostly trading around an 18 to 20 context, while its 12¼% notes due 2016, which were in the 90s, around a 93 to 95 context. However, he added that he didn't know what kind of action, if any, the latter bonds were seeing. "That seems like where they [the company's bonds already] were."

He said the 9 5/8% notes due 2014 were down 3 points on the day at 19 to 19.5, adding, "that one was active."

He also saw its 4 % notes due 2015 ending right around 19.5 to 20, "down a couple of points" on the day, although the bonds were off their day's low around 16 to 17.

"So I would say that Six Flags had an active day, and its paper is lower."

That activity came amid news that the bankrupt New York-based amusement park operator has submitted a new reorganization plan to the bankruptcy court - one which gives certain bondholders a much bigger share of the company's equity when it is reorganized than the original plan did. Critics of the original plan said that reorganization proposal gave almost all of the stock to the senior lenders like JPMorgan Chase & Co., in return for cutting Six Flags' debt.

After consultations with other creditors - notably hedge fund Avenue Capital Management - Six Flags reached the amended terms - although these still face opposition from other creditors and stakeholders.

The new plan, which was filed with the court on Saturday, includes selling $450 million in new stock to increase the money available for creditors.

Broad market mixed

Elsewhere in distressed territory, Charter Communications Inc.'s paper was "not very active" or much changed in the wake of the company's earnings release.

A trader quoted the 11% note due 2015 at 20 bid, 20.5 offered.

Also, Park-Ohio Holdings Corp.'s 8 3/8% notes due 2014 were seen moving to lower ground.

A trader said the bonds had been 78 bid, 79 offered, but speculated that the offered side was now somewhere between 76 and 78.

"It looks like there was a seller around recently," he said, adding that the bonds tend to trade only in small pieces.

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