Phoenix, Aug. 15 - The distressed bond market again lost the spotlight to new issues in the high-yield space, along with end-of-summer vacations, on Wednesday.
"It's still all new issue stuff," a trader said, adding that many people were out for one-week or even two-week vacations.
The market was also deemed to be on the flat side during the midweek trading session.
ATP Oil & Gas Corp. continued to be an active credit as the market awaits a pending bankruptcy filing. One trader speculated that the prolonged wait was due to the company attempting to find ways to avoid Chapter 11.
| Elsewhere, | Nokia Corp. | was unfazed by a downgrade from Standard & Poor's. | Caesars Entertainment Corp. | was meantime mixed following a set of rating changes from Fitch and S&P, as the company prepares an add-on offering to its 8½% notes due 2020.
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| ATP seeking private equity: trader
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| A trader saw ATP Oil & Gas' 11 | 7/8% notes due 2015 falling over half a point to 33¾ on Wednesday.
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| Another trader said the debt was steady at 33 bid, 34 offered.
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| A third trader said the bonds were "fairly active" at 33½ bid, 34 offered.
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| Since last week, the market has been waiting for the Houston-based offshore oil drilling company to file for bankruptcy, following a report that a debtor-in-possession facility had been secured via Credit Suisse Group AG. But the filing has not yet emerged.
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| "I am sure they are in talks with private equity groups and with their own creditors," a trader said, opining that the company is likely attempting to figure out a way to avoid bankruptcy. He noted that after the Deepwater Horizon explosion in April 2010, ATP had warned of a potential filing then, only to secure needed financing that allowed it to continue operating.
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| "The reason bankruptcies have been at all-time lows is for the most part, companies are able to work out private deals," the trader said, citing Knight Capital's recent $400 million infusion after a trading glitch resulted in losses of $440 million for the market maker. "Was it ideal? No," but it allowed the company to keep going.
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| Whether it files or finds financing, the company will probably have to weigh what it is willing to give up in terms of control of the company, money and possibly jobs, he remarked.
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| "It would be [in the company's] best interest not to file," he said. However, for bondholders, it's a different story.
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| On the one hand, not filing would mean that the interest on the bonds would be reinstated, as the debt is currently trading flat, or without accrued, he said. On the other, if investors bought the bonds at the current levels, a filing might be the best way for them to squeeze any value out of their investment.
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| "I would assume a good amount of the paper is held by guys that would like to own the company, from an equity perspective," he said.
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| Nokia notes nonplussed
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| Nokia's 5 | 3/8% notes due 2019 were "kind of unchanged," a trader said, despite a downgrade from S&P.
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| The trader quoted the issue at 80½ bid, 81½ offered, which was unchanged to "maybe off a half[-point] or so."
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| "There was no real trading," he said, assuming that the rating change would have sparked some activity.
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| S&P lowered Nokia's long-term corporate credit rating to BB- from BB+ and took similar action on the unsecured debt. The rating agency said the change was due to the Finnish company's recently revised estimates on revenues and profitability relating to its smartphones through 2013.
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| S&P said the outlook is negative.
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| Caesars shakes off downgrades
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| Caesars Entertainment was also faced with downgrades Wednesday, as the company announced a $250 million add-on to its 8½% notes due 2020.
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| However, the news did little to move the debt, a trader said.
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| The 10% and 12¾% notes due 2018 were unchanged at 64½ and 70, respectively. The 10¾% notes due 2016 gained a point to 731/2, according to the trader.
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| Both Fitch and S&P took action against the Las Vegas-based casino operator on Wednesday. However, Fitch said the company's new financing was credit positive, as the new debt would be used to take out 2015 maturities.
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| S&P meantime affirmed its ratings, but changed the outlook to negative, citing disappointing earnings.
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| No life for LifeCare
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| A trader was surprised that there was "not a single trade" in | LifeCare Holdings Inc.'s 9¼% notes due 2013, given that the company said Tuesday that it was skipping its Aug. 15 coupon payment.
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| "It's a small deal, but I still thought some of it would have traded," he said.
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| The Plano, Texas-based company said Tuesday that it was electing to forgo the payment as it continues to look at its restructuring options.
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| The company has 30 days to make the payment before a default has officially occurred. However, if the company does not make the $5.5 million payment by the end of the grace period, it would constitute a default under its senior secured credit facility.
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| Also, by not making the payment, LifeCare cannot draw on its revolving credit facility.
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| With the notes maturing in just a year, the company now has to figure out how to refinance or buy back the debt by May 15, 2013. If the company has not done so by then, a senior secured term loan and revolving credit facility will accelerate and become due on that same date.
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| LifeCare has hired Rothschild to advise on its financial situation, but the company warned that a bankruptcy filing might be possible if it cannot find a better solution to its fiscal woes.
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| Market tidbits
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| In the rest of the distressed arena, a trader said | Petroleos de Venezuela SA's 9% notes due 2021 were holding in at 811/4.
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| Another trader said | Edison International Inc.'s Edison Mission Energy-linked 7% notes due 2017 were active at 53½ bid, 54 offered.
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| NewPage Corp.'s 11 | 3/8% first-lien notes due 2014 were seen trading at 66½ bid, 67 offered late in the day.
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