Sprint Nextel paper shrugs off downgrade, heads higher; Kodak paper up on Imax licensing news

By Stephanie N. Rotondo

Portland, Ore., Oct. 18 - There was a "nice rebound" in distressed bonds on Tuesday, according to a trader.

Sprint Nextel Corp. debt, which had fallen in the previous session, was again trading higher come Tuesday. The bonds were up despite a downgrade from Fitch Ratings.

Meanwhile, Eastman Kodak Co. paper was "a touch better," after the company announced it had licensed its laser-projection patents to Imax Corp. The agreement will provide cash to the struggling 131-year-old company.

There were some credits, however, that were experiencing weakness.

Momentive Specialty Chemicals Inc. - formerly known as Hexion Specialty Chemicals, Inc. - reported preliminary third-quarter results early in the session. The somewhat negative report pushed the company's bonds lower.

Sprint up despite downgrade

Sprint Nextel bonds "were maybe a touch better," a trader said, seeing the 8 3/8% notes due 2017 trading around 93.

He also saw the 6.9% notes due 2019 around 86.

Another trader said the debt "rebounded," pegging the 6.9% notes at 861/4, the 6% notes due 2016 at 86½ and the 8¾% notes due 2032 at 84.

The gains came despite a rating downgrade from Fitch Ratings, which follows a rating change from Moody's Investors Service last week.

For its part, Fitch gave Sprint an issuer default rating of B+, down from BB-. The agency said the cut was due to increased credit risk resulting from the addition of the iPhone and the acceleration of its own network plans.

Sprint is an Overland Park, Kan.-based wireless services provider.

Kodak up on Imax news

Eastman Kodak got a modest boost on news it had licensed its laser-projection patents to Ontario-based Imax.

One trader called the 7¼% notes due 2013 "a touch better" around 40, while the 9¾% notes due 2018 were "still around 73."

Another trader deemed the 7¼% notes unchanged at 401/2, though another called the paper up 2½ points at 40½ bid.

The Rochester, N.Y.-based company has been attempting to increase its royalty revenues in an effort to avoid bankruptcy. Under the terms of the 10-year deal with Imax, Kodak will receive an upfront payment, a milestone payment and ongoing royalties.

The company will use proceeds for general corporate purposes.

Momentive notes slip

Momentive Specialty Chemicals released preliminary third quarter results on Tuesday and investors responded by pushing the company's debt lower.

A trader saw the 7 7/8% notes due 2018 "off a couple points" around 881/2.

"There was heavy volume for that name," he said.

Another trader said the bonds were "active after numbers," also calling them down a couple points around the 88 mark.

The Columbus, Ohio-based company said it expects to post sales of $1.2 billion for the quarter ended Sept. 30, which is line with the previous year's levels. Operating income is estimated at $93 million.

Momentive also said that it expects to be in compliance with all of its debt agreements.

Still, the company's top executive was hesitantly optimistic.

"Due to the recent economic uncertainty, we have seen some caution among our customers negatively impacting our third quarter 2011 results," Craig O. Morrison, chairman, president and chief executive officer, said in the press release.

"However, certain product lines, such as our oilfield proppants and North American formaldehyde businesses continued to perform well versus the prior year, which was offset by headwinds in our specialty epoxy business from tightness in Chinese credit markets and the reduction of Chinese government subsidies. We believe the quarter was impacted by both a softening economy as well as a draw down of inventories across a number of key segments."

Morrison said the company was "reviewing our plans to aggressively accelerate savings from the shared services agreement with Momentive Performance Materials Inc. in order to capture these cost savings as quickly as possible, while also launching additional cost reviews across all aspects of the business. We believe our business is well-positioned over the long-term."

The company will release its full quarterly report in early November.

Also in earnings news, a trader said DirectBuy Holdings Inc.'s 12% notes due 2017 were "lower after poor monthly numbers," seeing the bonds "drifting into the high-20s."

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