Clearwire gains as Sprint Nextel searches for investor; Sears, Hovnanian hold Thursday levels

By Stephanie N. Rotondo

Portland, Ore., Aug. 19 - While the equity markets continued to fade, distressed debt managed to stay relatively steady on Friday, traders reported.

"I wouldn't really say there was too much notable in the way of price action," a trader said. "Things were down a little but there's not a lot of volume."

"Everybody is watching the equities," remarked another trader.

Clearwire Corp. was one of few names that had any notable moves, as the bonds gained 5 to 6 points on the day. A trader said the gains came as partner Sprint Nextel Corp. was reportedly looking for investors for the telecommunications company.

Meanwhile, Sears Holdings Inc. and Hovnanian Enterprises Inc. held their ground for the most part in the final trading session of the week. Sears had fallen in the previous session on disappointing quarterly results, while Hovnanian had weakened for no apparent reason.

Investors are attempting to find a floor for Aquilex Holdings LLC's debt. While there wasn't much trading on Friday, offers were significantly lower than they were on Thursday.

Clearwire pops on buyout talk

A trader said Clearwire bonds were up 5 to 6 points on news that Sprint Nextel Corp. was in talks with cable companies to invest in its partner, which could possibly lead to a buyout.

The trader saw the 12% notes due 2015 moving up to 96 bid, 97 offered, up from 91 bid, 92 offered.

News reports citing people familiar with the matter indicate that Comcast Corp. is one of the potential investors, along with Cox Communications Inc. and Cablevision Systems Corp. Comcast already has a stake in Clearwire, but Sprint would use the new investment to possibly buy up the remaining equity in the company.

Sprint owns just under 50% of Clearwire's class B common shares. Comcast holds a 9.7% voting interest.

Sprint's 6% notes due 2016 fell 1½ points to 94 ½ bid, according to a market source.

Clearwire is based in Kirkland, Wash.

Sears hangs in post-earnings

Sears Holdings' debt held its ground after losing 5 to 6 points in the previous session on poor quarterly numbers.

A trader saw the 6 5/8% notes due 2018 around the 80 level, which he said was "about the same, maybe a smidge weaker" from Thursday's market of 80 bid, 81 offered.

For the second quarter, the retailer posted a net loss of $144 million, or $1.37 per share. That compared with a loss of $39 million, or 35 cents per share, the year before.

The loss came despite the company's attempts to lower costs by cutting jobs and shuttering stores. Sears said the wider loss was due to price markdowns to make way for new fall inventory.

"We are not satisfied with our results and are taking actions to turn around our performance in a challenging economic environment," said Lou D'Ambrosio, president and chief executive officer, in the earnings release Thursday. "While we improved our revenue trend, including growing our online business by over 30%, we had lower gross margins."

Sears is based in Hoffman Estates, Ill.

Hovnanian holds steady

Hovnanian Enterprises' bonds also hung in there, traders reported.

A trader pegged the 10 5/8% notes due 2016 at 87½ bid, 88 offered, versus 86 bid, 88 offered on Thursday.

Another trader said the paper was "quoted a lot, but not a lot of volume." He also placed the issue at 87½ bid, 88 offered.

On Thursday, the Red Bank, N.J.-based homebuilder saw its debt fall about 2 points on the day, though there was no news out to drive the paper lower. Still, with the Dow Jones Industrial Average losing more than 400 points in that session, many credits had weakened on no news.

Aquilex 'offered around'

A trader said, "A bunch of people are offering that around" of Aquilex Holdings' 11 1/8% notes due 2016.

Still, he added that he didn't see any trades.

Paper was offered around 70, he said.

"No one has really established a level on those, I guess," he said.

On Thursday, bonds traded in the 80s, though volume was thin. Just two weeks ago, the debt was in the high-90s.

The bonds have been quoted lower and lower since the company released its quarterly results on Monday. The Atlanta-based industrial repair company said it had drawn down the last availability under its revolver to meet it working capital needs and said it would ask its credit facility lenders for covenant-compliance waivers. Additionally, Aquilex issued a "going concern" warning should it not be able to tap new sources of liquidity.

Broad market softens

Elsewhere in the distressed arena, a trader said that Colt Defense LLC's 8¾% notes due 2017 had fallen 5 to 6 points on no news to 63¾ bid, 64 offered.

The trader also saw OPTI Canada Inc.'s subordinated issues - the 7 7/8% and 8¼% notes due 2014 - slipping to around 63, while Capmark Financial Group Inc.'s various bonds dipped to 523/4.

"People are just selling whatever there is bids for," he said.

Another trader saw Clear Channel Communications Inc.'s 10¾% notes due 2016 closing "a little bit lower" at 70½ bid, 71 offered. That compared with 72 bid, 73 offered on Thursday.

The 11% notes due 2016 were offered at 70, he said, versus markets of 70 bid, 71 offered previously.

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