Tronox gains in busy trading on Kerr-McGee suit ruling; NII continues to struggle

By Paul Deckelman

New York, Dec. 13 - Tronox Ltd.'s bonds were very active on Thursday, at somewhat higher levels, as a federal judge ruled that its former corporate parent was potentially liable for billions of dollars of pollution clean-up costs that the chemical company otherwise could have been stuck with. Tronox had argued in its lawsuit that former parent Kerr-McGee, now a part of Anadarko Petroleum Corp., had unfairly saddled its former chemicals unit with all of its environmental liabilities before spinning the company off in 2006 as part of its own profitable sale to Anadarko later that same year. Tronox ultimately was forced into a bankruptcy restructuring.

Elsewhere, struggling NII Holdings Inc.'s bonds remained under pressure, just as they have been recently.

Arch Coal Inc.'s bonds, which had firmed solidly in busy trading on Thursday as the mining concern brought a new junk bond deal to market, were seen by traders to have backtracked on Friday, surrendering some of those gains.

Among underperforming retailing names, a trader saw RadioShack Corp.'s bonds trading busily around the same levels they have held this week but definitely off from where they had started the week.

Gymboree Corp.'s bonds, which fell on Thursday on disappointing earnings, trader at lower levels on Friday.

Tronox triumphs in court

A trader said that Tronox "was active again today, on the heels of that Anadarko/Kerr-McGee suit."

A second trader also saw activity in the Stamford, Conn.-based chemical company's 6 3/8% notes due 2002, driven by the legal developments.

He saw the notes moving as high as 102 bid, before settling in around 101 to 1011/2, "so they were up a little bit on the day, but they were certainly more active."

Over $25 million of the bonds changed hands.

Judge Allan Gropper of the federal bankruptcy court in Manhattan ruled that Kerr-McGee and ultimately, its eventual owner, Anadarko, are liable for anywhere between $5 billion and $14 billion of cleanup costs that predecessor company Tronox Inc. had gotten stuck with when it was spun off in the mid-2000s - costs that ultimately pushed the company into bankruptcy in 2009, from which it emerged two years later.

Tronox said in reaction to the judge's decision that it will receive no immediate or direct benefit from the Dec. 12 ruling. Instead, 88% of the judgment will go to trusts and other governmental entities to remediate polluted sites. The remaining 12% of any funds ultimately received will be distributed to a tort trust "to compensate individuals injured as a result of Kerr-McGee's environmental failures."

Anadarko said it would appeal the decision.

NII struggle continues

Elsewhere, a trader said that among the day's losers were NII Capital Corp.'s 7 5/8% notes due 2021. "It looks like those traded off a little bit - nothing notable."

A trader said that NII "has been pretty regular" in being among the most active issues.

He said that the 10% notes due 2016 were ending at 50 bid, 52 offered, which he said was down 1 point on the day.

He said the company's 8 7/8% notes due 2019 were trading in a 39 to 41 context, which he called 1 point lower.

He said there was "just a little trading" in the 10% notes due 2016, "not a whole lot."

He quoted its 7 7/8% notes due 2019 were ending up around 71 bid, 73 offered, which he called pretty much unchanged. He said it was "tough to see what the volume was" on that particular credit because it was sold as a Rule 144A deal.

Yet another trader declared that the bonds of the Reston, Va.-based provider of Nextel wireless service in Latin America "continue to be weak."

He said it 7 5/8% notes were trading around 37½ or 38 bid Friday, which he estimated was down 7 or 8 points from the mod-40s levels they held at the beginning of the week.

He said that the notes "had gone down below 40 before and had a good little rally back to the mid-40s" - only to fall again this week.

Arch gives up some gains

A trader saw Arch Coal's 7¼% notes due 2020 around a 77 to 79 context, with the day's final trades going off at 78, which he said was pretty much unchanged.

He said its 7¼% notes due 2021 were trading between 76½ and 78 bid, on volume of about $5 million.

The notes were at 76½ bid, 77½ offered "for most of the day," with the last sizable trade at 761/2. He said there had been trades "on both sides of that mark," and estimated that the bonds were down ½ to ¾ point from Thursday's levels.

However, another trader called them unchanged, observing that "they moved up yesterday [Thursday] and seemed to be holding at the higher levels."

At another shop, a market source said that the company's new deal traded a little bit," as he located those 8% senior secured second-lien notes due in January 2019 around 101, versus the par level at which the St. Louis-based coal producer had priced its quick-to-market $350 million offering on Thursday.

After hitting its peak level, he said, "they settled back in, so basically, they were trading around par, so it kind of struggled a little bit."

"But there wasn't nearly as much activity in those '20s and '21s" as there had been on Thursday, when turnover in each had been above the $20 million mark, he said. Those established bonds, which had all firmed about 1½ points to levels around 80 bid on Thursday ahead of the new deal, "were maybe a little weaker - they gave back a little of the gains.

"But they weren't all that active, to be quite honest."

Radio Shack, Gymboree weaken

Among the retailers, a market source said that Radio Shack's 6¾% notes due 2019 were trading at just under 66 bid, on volume of more than $5 million.

Another trader said that despite all of the Fort Worth, Texas-based consumer electronics retailer's talk of its turnaround strategy, "it hasn't turned around today." He pegged the bonds at 66-67 all day, with the last trades at 66, which he called "down a good bit" from recent levels, although he said that the bonds were around there for most of the week. He said that "it was not that much volume."

Also among the retailers, a trader said that Gymboree's 9 1/8% notes due 2018 were "somewhat active after disappointing earnings yesterday [Thursday]." He saw the notes trading around a 92 to 92½ context.

He called that "kind of unchanged" on the day, though below the 93ish levels the bonds held before the numbers.

The San Francisco-based children's apparel retailer reported a fiscal third-quarter loss of $24.4 million, which compared to a profit of $4.9 million the year before. Net sales dipped 0.5% to $309.9 million and same-store sales declined 4%.

A distressed-debt trader meantime said that Sears Holdings Corp. "is one to keep an eye on, even though it's in the low 90s."

He said that its 6 5/8% notes due 2018 were trading around 91-92, and were "pretty active," with news out about the company this week.

He said that there were "good volume trades today," the last around 911/4. Volume was more than $10 million.

He said that 90-92 "covered most of this week - but that's down a point or two from last week. A couple of weeks ago, it was in the mid-90s."

He suggested that there was selling in the underperforming Hoffman Estates, Ill.-based retailer's paper because the company's chairman Eddie Lampert "is maybe losing a little of his mojo," unable to stem the continued decline on the fortunes of the retailer's two principal operating units, Sears and Kmart, although he suggested that eventually, "he'll be back."

Quiet times in distressed

A trader in distressed bonds said that overall, "it was a very quiet day today."

He said that "distressed is disappearing," with many formerly clearly distressed names now trading like regular high yield bonds, with levels in the 90s or even beyond.

"High yield is the new world," he continued, adding that "a lot of our [distressed] paper has been called."

With a relative dearth of paper to trade, he said that at his shop, "we've been switching to preferreds, or closed-end funds that are trading at a discount.

"Bonds are just not doing much."

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