Dynegy, Nortel, Kodak head into higher territory; AMR boosted, unions said to support takeover

By Stephanie N. Rotondo

Portland, Ore., April 19 - Distressed debt was taking a back seat to high-yield credits Thursday, specifically Chesapeake Energy Corp.

"I didn't necessarily see a lot in Distressed Land," a trader said.

Dynegy Holdings LLC's bonds were moving up "across the board," according to one trader. However, there was no fresh news out to act as catalyst.

Another gainer was Nortel Networks Inc. paper. And, Eastman Kodak Co. was firmer on the day, though without any specific news to cause the increase.

In the news, AMR Corp. was making headlines during the day's session, reporting a $1.66 billion loss for the first quarter. But the bankrupt airline's bonds were rising anyway, leaving one trader to speculate the gains were due to news reports indicating the company's union would support a takeover offer from U.S. Airways.

Dynegy gets a boost

A trader said Dynegy Holdings' debt was "up a point, kind of across the board."

He saw the 7½% notes due 2015 and the 7¾% notes due 2019 up 1¼ points at 65½ and 653/4, respectively. The 8 3/8% notes due 2016 were up nearly a point to 66 3/8, he said.

Another trader also said paper was trading higher, seeing the 8 3/8% notes between 66 and 661/2.

A third source called the 7¾% notes up only slightly at 65¾ bid.

There was no news out on the Houston-based subsidiary of Dynegy Inc.

Nortel inches up

Nortel Networks' notes were deemed "better" by a trader, seeing the 10¾% notes due 2016 at 114½ bid, 115 offered.

That compared to 114 bid, 114 1/8 offered previously.

A second trader called both the 10¾% notes and 10 1/8% notes due 2013 stronger, pegging both issues at 114 bid, 114½ offered.

Nortel, a Mississauga, Ont.-based manufacturer of telecommunications products, filed for bankruptcy in 2009 and has been liquidating ever since.

Kodak debt rises

Eastman Kodak's 9¾% notes due 2018 were "up a bit," according to a trader.

He quoted the issue at 87 bid, 88 offered.

Another market source saw the 7¼% notes due 2013 moving up a touch to 30¼ bid.

Kodak is based in Rochester, N.Y.

AMR gains on union news

AMR's debt was "stronger" on the day as news outlets reported that the bankrupt airline's unions intended to support a potential takeover offer from U.S. Airways.

A trader quoted the benchmark 6¼% notes due 2014 at 47½ bid, 48 offered.

Bloomberg reported Thursday that AMR's three largest unions agreed to support a possible offer from U.S. Airways, which has reportedly been kicking around a takeover attempt. The unions' decision was based on the fact that they think they can negotiate a better deal with U.S. Airways than they could with AMR.

The news came ahead of the Fort Worth-based company's April 23 hearing in which it intends to seek a cancellation of existing union contracts in an attempt to cut 13,000 union jobs.

AMR was also making headlines as the company reported first-quarter earnings. The company posted a loss of $1.66 billion, which was well above a $405 million loss the year before.

However, the loss narrowed to $248 million once you took out 41.4 billion of charges related to its bankruptcy filing.

Revenues gained 9.1% to $6 billion.

Market seeks strength

Elsewhere in the distressed arena, a trader saw James River Coal Corp.'s 7 7/8% notes due 2019 slipping to levels around 64, compared to 65 bid, 66 offered previously.

Another trader said Reddy Ice Corp.'s 11¼% senior notes due 2015 were stronger, trading around 94.

Also, Ahern Rentals Inc.'s 9¼% notes due 2013 "continued to be active," the trader said, seeing the bonds inch up to 611/4. He speculated that the gains were "on the heels of [news] from RSC Holdings and United Rentals Inc.

"The two of them had earnings that looked pretty good," he said.

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