ATP Oil & Gas declines as Israeli licenses seized; RadioShack sees sizeable trading; AMR firms

By Stephanie N. Rotondo

Phoenix, Sept. 4 - Distressed bond players were "getting their head back into it," a trader said on Tuesday.

That meant another day of slow goings for the market, though there was news out to push some issues around.

ATP Oil & Gas Corp. continued its reign as the most actively traded distressed name, with over $40 million of the company's bonds changing hands. The bonds were down over 2 points on the day, as it was reported that ATP's Israeli drilling licenses were seized.

Meanwhile, RadioShack Corp. paper was "more active than they have been," according to a trader. However, the bonds were virtually unchanged, even on news the company had launched its no-contract wireless service.

And, AMR Corp. debt headed into higher territory, though trading in the name was thin, a trader said. He said the day's gains were based on word that AMR and U.S. Airways had inked a non-disclosure agreement, pointing to a potential merger agreement.

ATP under pressure

A trader said he saw "a lot" of ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 trading in a 233/4-to-24 context today, although earlier he did see the bonds get as low as a 23 3/8-to-23¾ range, which he called "the lowest ever."

He said "I don't know how much more [down] it can go, but maybe it's reached its [stabilization] point here."

A second trader saw the bonds last down 2¾ points on the day, trading at 23¾ bid.

Over $40 million of the bonds had traded by mid-afternoon, tops among high-yield issues.

Yet another trader said the issue was "down a bunch," trading in a "231/2-ish zip code."

At another desk, a trader pegged the bonds in a 24-24½ context.

"The reality is, nobody knows anything," he said, noting that rumors had been swirling in the name, which he guessed had caused the downturn. For many investors, ATP is a name in which "you sell now and ask questions later," he said.

The rumors were in regards to the company's offshore drilling licenses in Israel. The chatter was that the permits had been seized. This proved to be true - with a caveat.

As it turns out, the licenses for the Shimshon and Daniel exploration areas were held by a subsidiary, ATP East Med Number BV. That unit was not included on the list of assets when the Houston-based company filed for bankruptcy protections.

The parent ATP only owns 5% of the stake, with the subsidiary owning 35% and Isramco Ltd. Holding the remaining 60%.

Still, with the licenses pulled and possibly delayed for another two years, ATP will realize very little value. The company had planned to sell some of its Israeli rights, while keeping a portion of them.

RadioShack action increases

RadioShack's 6¾% notes due 2019 traded more actively than usual Tuesday, with at least $13 million changing hands, a trader reported.

He deemed the debt unchanged, however, at 67 5/8.

Another trader said the bonds were "about unchanged to probably a little bit lower" at 67½ bid, 68 offered.

The Fort Worth, Tex.-based electronics retailer announced on Tuesday that it had launched its own no-contract wireless service called RadioShack No-Contract Wireless. The company will use Leap Wireless International Inc.'s network.

The new service is part of the company's plan to rebuild itself amid declining profits.

AMR gets a rise

AMR and potential merger partner U.S. Airways have taken the next step in deciding whether or not a combination of the companies will work, inking a non-disclosure agreement.

Under the agreement, the two airlines will exchange certain confidential information in order to ascertain the value of a merger.

The news gave AMR's 6¼% benchmark convertible notes due 2014 a boost, a trader said, seeing the notes move up to around 64.

Tempe, Ariz.-based U.S. Airways has repeatedly expressed an interest in merging with bankrupt Fort Worth, Texas-based AMR. AMR had previously said it would maintain its independence, but later relented, saying it would look at all proposed options.

In a joint press release, the two airlines said they would likely not provide any updates on the talks until a decision had been made either way.

Paul Deckelman contributed to this article

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