Coal arena mostly soft on equity downgrades; Verso Paper debt drifting; Kodak quotes declining

By Stephanie N. Rotondo

Phoenix, Sept. 24 - Monday had a softer tone in the distressed debt market, traders reported, as equities also declined.

Most of the coal arena, for example, was weakening. On Monday, Bank of America analysts downgraded the stock of two major players in the industry, which also resulted in stock declines for the sector at large.

Meanwhile, Verso Paper Corp. debt was slipping, though on no fresh news.

There was also no news on Eastman Kodak Co., which a trader said was not helping the bonds' recent descent.

Coal sector limps down

The coal sector declined Monday, following equity downgrades in the sector from Bank of America.

Alpha Natural Resources Inc.'s 6% notes due 2018 were "down a couple," a trader said, ending around 87. The 6¼% notes due 2012 dropped 1 to 2 points to 871/2.

Another market source saw Alpha's 6¼% notes falling just slightly, to 88 bid.

At another desk, a trader said Arch Coal Inc.'s 7¼% notes due 2021 were off nearly 1½ points to 84 5/8.

Bucking the trend, however, were Patriot Coal Corp.'s 8¼% notes due 2018.

"It's odd because all of the rest of the coals are going the other way," a trader said.

He pegged the paper at 51, which he said was up a touch on the day.

On Monday, Bank of America analysts cut ratings on the stock of Peabody Energy Corp. and Walter Energy. Coal stocks have been rising of late, due to recent infrastructure development news from China and the Federal Reserve's announcement of a third round of quantitative easing. The downgrades, however, put a stop to that.

Alpha's stock (NYSE: ANR) fell 36 cents, or 4.99%, to $6.85. Arch Coal saw its equity (NYSE: ACI) decline 35 cents, or 5.04%, to $6.60.

Bankrupt Patriot Coal shares (Pink Sheets: PCXCQ) lost a penny, or 7.02%, to end at 13 cents.

Verso Paper bonds slip

A trader said Verso Paper's paper was down a good bit Monday, though on no particular news.

He pegged the 8¾% notes due 2019 at 481/2, down 3 points.

Another trader said the 11 3/8% notes due 2016 were "down a few" at 58 bid, 59 offered, though he thought the 8¾% notes were "where they have been" at 49½ bid, 50 offered.

Meanwhile, rival and one-time potential merger partner NewPage Corp. was holding in.

A trader said the 11 3/8% first-lien notes due 2014 were "still in that 641/2-ish ZIP code."

Kodak still quoted lower

There was not much activity in Eastman Kodak's bonds, a trader said Monday, but that wasn't stopping the issues from being quoted lower.

The trader saw the 9¾% second-lien notes due 2018 in a 64-65 context during the day's session.

Another trader said the debt "continues to be mildly weaker," especially as there has been no word on what Kodak plans to definitely do about its patent portfolio.

He also placed the second-lien paper in a 64-65 range and also saw the 7¼% notes due 2013 at 11 bid, 12 offered.

Kodak is based in Rochester, N.Y.

RadioShack gyrates

A trader reported "whacky activity" in RadioShack Corp.'s 6¾% notes due 2019.

"Some [bonds] traded all the way down, then they traded all the way back up," he said.

The debt hit a low of 65½ before coming back to end at 67 bid, 68 offered.

There was no new news out on the Fort Worth-based electronics retailer.

Clear Channel down, Edison up

In other distressed credits, a trader saw Clear Channel Communications Inc.'s 10¾% and 11% notes due 2016 giving up ground, ending at 71½ bid, 72 offered.

Another trader said Edison International Inc.'s Edison Mission Energy linked paper was "more active than usual," though little changed.

He saw the 7¾% notes due 2016 at 511/2, which he said was up "half a point or so."

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