NewPage paper dives on earnings; First Data debt mixed again; ATP Oil notes continue to climb

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Aug. 5 - It was "another huge day in the market," a distressed debt trader said Thursday.

And even though new issues continued to take the spotlight, there was ample room for trading in NewPage Corp. debt, which one trader estimated at $150 million to $200 million in total turnover.

The heavy trading came after the company released its quarterly results. The bonds subsequently ended the day 4- to 8-points lighter than they had closed the day before.

Meanwhile, some of First Data Corp.'s debt was seen gaining ground, though other pieces of paper languished at previous levels. The debt had ended the previous session largely mixed after news of a proposed credit agreement revision.

Action was once again on the heavier side in ATP Oil & Gas Corp. notes. A trader said the name continues to climb higher.

NewPage dives after results

NewPage, the Miamisburg, Ohio-based coated papermaker, announced its second quarter results on Thursday. Following the release, the company's bonds fell a good 4 to 8 points on the day, according to traders.

One trader said the 11 3/8% notes due 2014 declined by 4 points to close at 871/2. The 10% notes due 2012 meantime "took a nice 8-point hit," he said, seeing them end around 473/4.

"We were a seller around 54," he added of the latter issue. "These things are just getting hammered."

Another trader echoed those levels, noting that at least $200 million of the combined issues changed hands.

"Not doing so well is an understatement," he remarked. "[NewPage] was the main driver today for downside."

For the quarter, NewPage reported sales of $890 million, a 21% increase from 2009 comparables. Net loss, however, widened to $174 million from $6 million the year before.

"With improving underlying demand, we are working diligently to position the company to take full advantage of the market improvement," said George F. Martin, president and chief executive officer, in the earnings release.

Interest expense for the quarter increased to $92 million from $67 million, mainly due to higher interest rates. The company ended the quarter with $120 million in liquidity, which consisted of $7 million in cash and equivalents and $113 million available borrowings under a revolving credit facility.

Still, Martin expressed optimism going forward.

"We are optimistic about our results for the remainder of the year, with order volume continuing to improve each quarter and recently announced price increases starting to take effect in the third quarter of 2010," said Martin.

Despite Martin's positivity, not all market watchers saw a shiny silver lining.

An analyst who follows NewPage said that "the main takeaways from the call were that people were looking for a sequential improvement in the results," and they didn't get it, and now one of the asset sales is delayed, and that introduces uncertainty."

NewPage delays asset sale

NewPage is in the process of selling power generation assets in Port Hawkesbury, Nova Scotia for C$80 million, with closing expected in the fourth quarter, and has also agreed to sell some hydroelectric assets in Wisconsin for about $70 million.

While the company had previously predicted a fourth-quarter closing for the Wisconsin transaction as well, NewPage for the first time disclosed on its conference call Thursday and in its 10-Q filing with the Securities and Exchange Commission that the sale is now not expected to be completed this year.

The analyst said that the Port Hawkesbury sale is supposed to close in the second half of this year, "and which is consistent, that's fine, what we expected - but we expected both of them would happen by the end of the second half. Now $70 million of that is being pushed out, to a date that's unknown, because of a regulatory process that we don't know about."

He said that the "sometime next year" estimate given by company executives on the conference call could mean that the deal won't close until the end of 2011, and the company might run out liquidity. "And what does this 'regulatory process' mean? Does it mean that it may not go through? Or is it just paperwork? Or is there some issue that no one knows. There's uncertainty - uncertainty about the timing of the closing, and there's uncertainty regarding what this regulatory process means."

The analyst was not terribly impressed by assertions on the conference call by the company's recently appointed president and CEO - Martin - and its chief financial officer, David J. Prystash, that recently announced price increases would aid NewPage's finances.

"All of this price increase stuff - we [the analyst community] have heard it," by reading paper industry trade publications. "They said it when they lost their management [replacing then CEO E. Thomas Curley back in June] - they said these are the price increases, so we've heard it all."

Analyst views on call

The only remotely new information, he said, was the failure to post sequential gains, and the disclosure that the Wisconsin asset sale isn't going to be completed any time this year.

He said that was why the company's bonds - which already started heading after NewPage's press release detailing its results hit the news wires early in the morning, before the financial markets opened - "are declining a little further today, after the call, when they dropped another two points."

That, he intoned "is what happens when you miss your numbers." He noted that he really wasn't expecting very much from NewPage - but added that he had not been entertaining much in the way of expectations for NewPage sector peer Catalyst Paper Corp., which also reported second quarter numbers several days ago, "but at least they improved sequentially" from the prior quarter. "I don't think anyone's model [for NewPage] had the second quarter down versus first quarter."

The analyst said that NewPage's lower liquidity at the end of the quarter - $120 million of combined cash and revolver availability, versus $247 million of liquidity at the end of the first quarter and $288 million in the second quarter of 2009 - is nothing abnormal, and is partly seasonal, since paper companies frequently expand their borrowing in the second quarter to build inventory and get ready for the third quarter, which is traditionally the strongest quarter of the year for them. "I think most people would describe it as more working capital."

He said that NewPage "has got enough liquidity to run through the third quarter, even if it sucks," and then presumably can expect to receive the proceeds from the Port Hawkesbury sale. However, he said after that the big question is whether the company would be able to "keep chugging along" until next year's third quarter, when it would get most of its revenues and do most of its cashflow generation, "when in reality, the capital structure won't support it?"

The analyst reiterated, "Keep in mind that this was not the make-or-break quarter - the third quarter is." He said that people "could brush off the second quarter results and say 'oh, it's the third-quarter that matters,' and they would be absolutely right."

However, he cautioned, "at the end of the day, they missed their numbers."

First Data mixed again

A trader said First Data debt was "not quite as active" as it had been in the previous session, but that the 11¼% notes due 2016 still managed to "bounce back" from Wednesday's slip.

The trader saw about $20 million of the paper turnover, ending around 70. He called the other issues flat, with the 10.55% notes due 2015 finishing around 781/2.

At another desk, a trader called the 11¼% notes up "about a point," also around the 70 mark. But the 10.55% notes were half a point softer, he said, around 78.

And, yet another market source deemed the 9 7/8% notes due 2015 down about 2 points at 793/4.

The Atlanta-based electronic payment processor's bonds were largely mixed during Wednesday trading, following news of a proposed amendment to the company's loan agreements.

Under the proposed amendment, First Data would gain permission to issue secured notes, as long as all of the proceeds are used to repay term loans at par, and the amendment would only become effective if the company sells at least $500 million of notes within 90 days of execution.

The amendment would also set the cap of allowable junior debt at $3.5 billion, and proceeds from this financing would be used to redeem or repay senior or senior subordinated notes or other debt.

Also, the amendment would allow for the extension of revolver or term loan commitments at a later date, with any extended debt able to have higher pricing or other modified terms compared to the non-extended debt, cut the accordion feature to $1 billion from $1.5 billion, and exclude certain junior debt from the calculation of consolidated senior secured debt.

First Data is scheduled to release quarterly results early next week.

ATP continues to climb

ATP Oil & Gas' notes "got busy again and continue to be better," a trader reported.

The trader quoted the 11 7/8% notes due 2015 at 81½ bid, 82½ offered, down from the intra-day high around 831/4, but still firmer day-over-day.

The trader noted that the debt had closed out around 77 on Wednesday.

Another trader echoed that market.

There was no credit specific news out on the company, though the oil industry has been firming since BP plc managed to get the gushing Gulf of Mexico well under control.

ATP will announce its second-quarter results late next week.

Elsewhere in the energy space, Edison International Inc.'s 7% notes due 2017 were "busy," according to a trader, and better around 71.

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