Kodak climbs on restructuring news; Harrah's, Residential Capital up; Petroplus rebounds

By Paul Deckelman

New York, Jan. 10 - Eastman Kodak Co.'s bonds and shares firmed on Tuesday after the troubled photographic products company announced a corporate restructuring aimed at making it more competitive in the new digital-era market.

Distressed-market issues in general were seen higher, carrying over the overall strength seen in the junk bond market.

Among names seen higher on the day were such familiar credits as Ceasars Entertainment Corp. and Residential Capital LLC.

The latter company's bondholders, , meanwhile,, are uniting to protect their interest in the event that the mortgage lender's corporate parent does put it into bankruptcy for a restructuring.

Also seen a little higher - at least compared with recent trading levels - were the bonds of beleaguered European refiner Petroplus Holdings AG.

Kodak climbs

A trader said that Kodak's bonds were higher on the day after the struggling company - desperately trying to avoid being forced into bankruptcy - shuffled its corporate structure.

"We saw some bids for their paper, and it looked like everything moved up a little bit," he said.

"There was some volume there."

He saw Kodak's 7¼% notes due 2013 trade up into the lower 30s, in a range of 31 to 32, after having been below 30 bid on Monday.

However, he saw "a lot of odd-lot trading, smaller lots, a lot of retail trading and a few [larger] institutional trades."

Among the senior bonds, he saw Kodak's 9¾% notes due 2018 opening the day trading between 76 and 78, but moving up to a firm 78 bid by later in the day post-news. He said they "look to be up 1½ points."

Kodak's 10 5/8% notes due 2019, after trading at 77½ bid, 78 offered, moved up to 73¾ bid, 79 offered going out. However, he said it was difficult to really gauge the activity level in the latter bond since it's a 144A issue, whose details don't show up on Trace.

An active mover was Kodak's 7% convertible notes due 2017, which had previously been at 27 bid, but firmed up to around the 28-29 area, with busier round-lot trading than was seen in the other Kodak issues.

Kodak's New York Stock Exchange-traded shares jumped nearly 20 cents, to 60 cents a share, on volume of 67 million, nearly seven times the norm.

Kodak zoomed after the iconic Rochester, N.Y.-based photographic products and digital imaging technology company announced that starting from the first of the new year, it had restructured itself into just two divisions: the commercial segment and the consumer segment.

The company was previously organized into three divisions: the graphic communications group, the consumer digital imaging group and the film, photofinishing and entertainment group.

Beyond the streamlining, Kodak, which is trying to reinvent itself as a purveyor of digital technology and a manufacturer of digital printers following the virtual demise of its traditional camera and film business, did not announce any other changes to its operations.

The junk trader was skeptical, suggesting that he was "not sure what this accomplishes, by splitting the company into two parts."

Caesars seen higher

Away from Kodak, a trader said that he saw "a boatload" of Caesars' Entertainment's 10% notes due 2018 trading on Tuesday.

He said that the bonds, moving around in a narrow 70 ¾ to 71 range, were unchanged to perhaps a half-point higher.

"But there was good volume in the name."

Another market source agreed, seeing trading of over $17 million of those bonds, which were originally issued when the Las Vegas gaming giant operated under its more traditional name of Harrah's Entertainment. He saw the bonds going out at 71 bid, slightly higher on the day.

It was one of the most actively traded issues of the day in the junk market.

Harrah's 11¼% secured notes due 2017 firmed to 106½ bid, on volume of more than $13 million.

ResCap seen rallying

A trader saw "pretty good volume" in Residential Capital's issues, such as its 9 5/8% notes due 2015.

He quoted the Minneapolis-based mortgage lender's issue "up a couple of points" at 77 bid.

Another trader, who also saw them at 77, said they were up an even 2 points, although another said they were only up a point.

ResCap's bondholders , meanwhile, have banded together to protect their assets amid speculation that its parent company - Detroit-based Ally Financial Inc., the automotive and residential lender and banking firm formerly known as GMAC LLC - will try and force the unit into bankruptcy, according to the group's attorney, White & Case.

Those bondholders include institutional holders and secondary holders with more than $800 million of ResCap secured bonds.

The law firm's release said that the group is willing to work with ResCap and its Ally-hired advisors to ensure that the secured holders will receive the par recovery of their bonds.

Petroplus pops a little

Traders saw better levels on Tuesday for the bonds of Swiss refiner Petroplus, whose bonds collapsed last week after the company announced that its lenders had frozen its credit lines and that it would be forced to close some of its refineries because it could not buy crude oil for them.

"They were all up by 1 to 1½ points," a trader said, pegging the company's 6 ¾% notes due 2014 around a 421/2-43½ context. On Monday, those bonds, after dropping as low as 35 bid, 38 offered, came back later in that session to end at 39 bid, 42 offered.

He said it was the same for the other bonds. Its 7% notes due 2017 and 9 3/8% notes due 2019, which usually move in tandem, had fallen to about 33 bid, 36 offered on Monday, then finished Monday at 38 bid, 41 offered, before rising on Tuesday to 40½ bid, 42½ offered going home.

The 4% convertible notes due 2015, after bottoming at 33 bid, 36 offered on Monday, finished that session at 37 bid, 40 offered and then moved further up on Tuesday to around 38 bid, 41 offered.

A trader surmised that the bonds were just "snapping back" after having gotten so badly beaten up over the previous session.

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