ATP Oil bonds give back more ground; PDVSA mostly firm; Kodak debt declines on asset sale news

By Stephanie N. Rotondo and Sara Rosenberg

Phoenix, Aug. 24 - It was a typical summer Friday for the distressed debt market on Friday, traders reported. Volume was on the light side and prices were little changed.

Topical names, however, remained more active than not.

ATP Oil & Gas Corp.'s notes "keep sliding a bit," a trader said. The bonds of the bankrupt Houston-based offshore oil exploration company fell just under a point on the day.

Also weaker was Eastman Kodak Co. The decline came on the back of news out late Thursday regarding asset sales.

In the unchanged category were Navistar International Inc.'s bonds, even as its term loan drifted lower. The company was in the news this week after losing out on a new government contract.

ATP to be delisted

ATP Oil & Gas' 11 7/8% notes due 2015 hit an intraday low of 26, a trader said.

The paper eventually "bounced back," but was still lower day over day at 26 5/8.

The trader also noted that the bonds were the "top volume trader" of the day, with over $39 million trading.

Another trader also said the issue was the day's "most active," placing the notes in a 26-26½ context.

Another trader quoted the debt at 26½ bid, 27 offered. He called that unchanged.

After filing for bankruptcy late last week, ATP said Friday that its equity will be delisted from the Nasdaq Stock Market on Wednesday.

The stock (Nasdaq: ATPG) fell 6 cents, or 14.61%, to 35 cents.

The company said it does not intend to appeal the delisting, as it is quite common in bankruptcy cases.

PDVSA stronger

In other oil-related news, Petroleos de Venezuela SA's debt was mostly firmer on the day.

A trader saw the 8½% notes due 2017 rise half a point to 87¾ on around $13 million traded. The 9% notes due 2021 gained nearly a point to 831/2, on about $15 million traded.

The trader added that he also saw the rarely traded 9¾% notes due 2035 moving about. With about $20 million changing hands, the notes fell over 4 points to 751/2.

"I don't usually see these," he said, speculating that the dip was just due to the fact that "they didn't trade in a long time."

The decline could have also been spurred by news that the Venezuelan central bank had sold another $44 million of the notes via Sitme.

Kodak drifts lower

A trader said Eastman Kodak's 9¾% second-lien notes due 2018 fell to levels just below 70 on Friday.

He quoted the issue at 69 bid, 70 offered.

He said the lip was based on news out late Thursday, in which the Rochester, N.Y.-based company said it was selling off its camera film business, as well as other units.

Another trader pegged the 9¾% notes at 68 bid, 69 offered and the 7¼% notes due 2013 at 14 bid, 15 offered.

"The general take is that this Perez guy is just running this thing into the ground," the trader said.

"This Perez guy" is Antonio Perez, chief executive officer of the bankrupt company. In a conference call, Perez said the decision to sell the businesses was one of the "tough choices" the company has to make in order to "build our future."

In addition to the camera-film unit, Kodak also intends to sell its digital imaging kiosks and its heavy-duty commercial equipment businesses.

Camera-film is what put Kodak on the map in the first place.

In addition to the sale news, a trader said that there were also "still concerns about the patent sale."

The company's auction of its patent portfolio was slated to end last week. However, Kodak then announced it would extend to deadline, as it was continuing negotiations with bidders.

The talks have been called "secretive," and a trustee overseeing the bankruptcy case has been asked to look into proceedings.

The company has said that it could choose to keep the patents if talks fail to go its way.

Navistar bonds hold, loan slips

Navistar International's $1 billion five-year covenant-light term loan B (Ba2/B+/BB-) dropped to par 3/8 bid, par 5/8 offered, from par 7/8 bid, 101 1/8 offered, on reports of failure to win government contracts for joint light tactical vehicles, a trader said.

The trader explained that the company's equity and bonds have under pressures since the news first emerged a day or two ago, and now the loan is just following suit.

However, the bonds were holding their ground Friday.

One trader called the 8¼% notes due 2021 unchanged at 95 7/8. Another placed the paper at 951/2, also "pretty much" unchanged.

The U.S. Department of Defense was looking for companies to develop lightweight vehicles that offer greater protection, mobility and transportability to replace many of the U.S. military's older Humvees, and Oshkosh Corp., AM General LLC and Lockheed Martin Corp. were contracted for the job, while Navistar was not, according to news reports.

Under the contracts, Oshkosh will be delivering 22 designed and manufactured prototypes called L-ATV, AM General will produce and deliver 22 prototypes of its Blast Resistant Vehicle - Off road for government testing, and Lockheed Martin will deliver 22 of its JLTV-UTL and JLTV-GP vehicles.

Navistar's term loan, which closed on Aug. 17 and was used to repay ABL credit facility borrowings and for general corporate purposes, broke for trading on Aug. 16 at par ¾ bid, 101¼ offered.

Pricing on the loan is Libor plus 550 basis points with a 1.5% Libor floor, and it was sold at a discount of 99. There is hard call protection of 101 in year one, 102 in year two and 101 in year three.

During syndication, pricing was cut from talk of Libor plus 650 bps to 700 bps, the discount revised from 98, and the loan was changed to a fully funded tranche from $750 million funded and $250 million delayed-draw for 90 days.

J.P. Morgan Securities and Goldman Sachs Lending Partners LLC were the joint lead arrangers on the deal and bookrunners with Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC.

Navistar is a Lisle, Ill.-based manufacturer of commercial and military trucks, buses, RVs and diesel engines.

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