NewPage bonds climb on belief Verso will raise bid; Kodak gains amid bonus plan; Patriot firms

By Stephanie N. Rotondo

Phoenix, July 11 - It was a firm day for distressed debt, market sources reported Wednesday.

Continued "scuttlebutt" about NewPage Corp.'s future has helped the company's debt rise recently, a trader said. He saw paper trading "fairly active" during the session.

Meanwhile, Eastman Kodak Co. notes were rallying on news the company was seeking to tie management bonuses to its turnaround effort.

The day's "big gorilla" remained Patriot Coal Corp., according to a trader. The bonds have been inching higher ever since falling dramatically on news of a bankruptcy filing. The debt continued that trend in midweek trading.

Also stronger were AMR Corp.'s bonds. The gains came as the company's top executive said he was ready to review all potential options, including mergers, for the bankrupt airline's reorganization.

NewPage pushes up

NewPage's 11 3/8% first-lien notes due 2014 were "fairly active," a trader said, seeing the paper trade to new highs around 69.

The trader said the gains were based on "scuttlebutt" regarding Verso Paper Corp.'s bid for the bankrupt papermaker.

In a July 3 regulatory filing, Verso - which is controlled by Leon Black's Apollo Global Management LLC - said it had proposed a merger with NewPage, which would have given senior secured noteholders $1.08 billion of new Verso debt, $150 million of Verso stock and $200 million of cash.

NewPage said it rejected the offer, as it presented "significant downside risks" for shareholders.

However, chatter on the street is that Apollo could raise its bid, instead of allowing Miamisburg, Ohio-based NewPage to remain a competitor to Memphis-based Verso - especially given the decline in demand for coated paper.

Kodak moves forward

Kodak's debt was getting a boost Wednesday as the Rochester, N.Y.-based company sought approval to tie executive bonuses to the company's turnaround success.

"The bonds rallied," a trader said, pegging the 10 5/8% second-lien notes due 2019 around 70 and the 7¼% notes due 2013 around "181/2-ish."

Another market source called the 7¼% notes up a point at 18¼ bid.

A convertible bond trader meantime said the 7% convertible notes due 2017 were higher at 18 bid, 19 offered.

"They've been moving up steadily," he said.

Under Kodak's proposed compensation plan, 15 executives would receive as much as a total of $8.82 million in bonuses based on how effective they are at reorganizing the company and how much recovery creditors receive.

Kodak filed for Chapter 11 protections in January.

Patriot climbing higher

Recently bankrupt Patriot Coal continued to be notable during the midweek session.

"That was the big gorilla," a trader said, calling the name one of the most active among distressed issues.

He saw the 8¼% notes due 2018 rising to 39 bid, 39½ offered.

Another market source pegged the issue at 39¼ bid, up over 3 points on the day.

Patriot filed for bankruptcy late Monday following reports that the company had already lined up debtor-in-possession financing. The St. Louis-based coal producer received approval to access $677 million of the $802 million facility late Tuesday.

Citigroup Inc., Barclays plc and Bank of America Merrill Lynch facilitated the DIP.

The facility consists of a $375 million term loan, a $125 million revolving credit facility and $302 million in letters of credit from previous loans that were rolled over.

Patriot will use $377 million of the DIP to repay current debt, leaving the remained to fund operations while it goes through the bankruptcy process.

AMR gaining ground

AMR's chief executive, Tom Horton, has agreed to look at all available options for the Forth Worth-based bankrupt airline as it seeks to reorganize.

In a letter to employees sent out Tuesday, Horton said he had changed his mind after evaluating the company's prospects. He had previously vigorously maintained that AMR - the parent of American Airlines - remain independent.

The news gave the company's bonds a boost, a trader said.

He quoted the 6¼% benchmark convertible notes due 2014 at 63 bid, 63¼ offered.

AMR is reportedly planning to begin talks with other airlines within the next month. U.S. Airways has already been pushing for a merger with its company and, at the National Press Club's upcoming annual luncheon, CEO Doug Parker will talk about why the industry as a whole needs consolidation.

It is expected that parker will outline the reasons why U.S. Airways and AMR should combine.

However, news outlets reported that Parker has not yet received a call from AMR.

Tribune loan rises

Tribune Co.'s bank debt gained some ground in trading on Wednesday as news emerged that the judge on its bankruptcy case will have a final opinion on its reorganization plan by Friday, according to a trader.

The term loan B was quoted at 68¼ bid, 69¼ offered, up from 67 bid, 68 offered, the incremental loan and term loan X were quoted at 67¼ bid, 68¼ offered, up from 66 bid, 67 offered, and the revolver was quoted at 72½ bid, 74½ offered, up from 71 bid, 73 offered, the trader said.

Under the plan, the company would transfer its broadcast licenses to a new ownership group that includes senior creditors Oaktree Capital Management, Angelo, Gordon & Co. and JPMorgan Chase.

Tribune, a Chicago-based media company, believes it could emerge from Chapter 11 by the end of the year and that it will distribute around $7 billion to creditors.

Sara Rosenberg contributed to this article

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