Sprint's iPhone success buoys debt; ResCap said to be filing soon, bonds gain; Bon-Ton gyrates

By Stephanie N. Rotondo

Portland, Ore., April 25 - The "general tone" in distressed bonds "was up," a trader said Wednesday.

"There was a really good tone to everything," he said.

That included names like Sprint Nextel Corp., which reported earnings during the session, and Residential Capital LLC, which could be facing a bankruptcy filing within the next few weeks, according to a report by the New York Post.

Even Bon-Ton Stores Inc. was higher on the day, after being on a slow decline throughout most of the week. Trading was "volatile" in the credit, a trader said, but paper still managed to close up from the day before.

Sprint gets iPhone boost

A trader said Sprint Nextel paper was up at least a point following the company's earnings release.

He saw about $15 million of the 6 7/8% notes due 2028 changing hands, rising over a point to 75 3/8. The 6% notes due 2016 gained 1¾ points, ending at 901/2.

Another market source pegged the 6% notes at 90½ bid as well, but deemed that up only half a point.

The Overland Park, Kan.-based wireless telecommunications provider posted its first-quarter earnings Wednesday, which showed an increase in subscribers, due in large part to its addition of the iPhone. Sprint added about 263,000 contract-based subscribers during the quarter, with about 1.5 million new iPhones being activated.

Given the iPhone's success, wireless revenues gained 7.4%.

Still, once Sprint's Nextel network is added in, the contract-based gain turns to a loss of 192,000 customers. That network is scheduled to be shuttered next year.

Nextel's poor performance also caused a wider quarterly loss for the company. Net loss was $863 million, or 29 cents per share, compared to a net loss of $439 million, or 15 cents per share the year before.

Revenues increased 5% to $8.73 billion.

ResCap filing imminent

Residential Capital's 9 5/8% notes due 2015 got a modest boost Wednesday as the New York Post reported that the company could be facing a bankruptcy within a matter of weeks.

One market source quoted the notes at 92 bid, 93 offered, up from 92 bid, 92½ offered. Another trader said the paper was "a little bit active" at 92 bid, 93 offered.

Citing unidentified sources, the Post said that ResCap's parent company, Ally Financial Inc., was finally coming to the conclusion that there was no other option for its money-losing mortgage lending unit and that a filing could happen in the next three weeks.

The Minneapolis-based company also has a May 14 debt payment coming due and does not have the cash to pay it, the article noted. As such, the filing is believed to come before then.

A filing could also prove to benefit Fortress Investment Group, which, as previously reported, is said to be in talks to acquire all or parts of ResCap.

A Chapter 11 could be bad for taxpayers, however, which are owed $12 billion of bailout funds.

Bon-Ton gyrates

A trader said trading in Bon-Ton Stores' 10¼% notes due 2014 was "volatile" during the midweek session.

Late Tuesday, he said, there was an 81 bid for paper and the notes "caught a floor there." Come Wednesday morning, the notes were 82 bid, then 83 bid, trading as high as 831/2.

However, he added that paper was again bid for in the 811/2-82½ range later in the day. Still, he deemed the notes up 3 points day over day.

Before Wednesday's gains, the York, Pa.-based retailer's bonds had been drifting lower, though on no fresh news. There was also no news out Wednesday to push the price around.

Kodak quiet on Gallery sale

There were little goings-on in Eastman Kodak Co.'s debt following news that an auction of its Kodak Gallery had been canceled and Shutterfly Inc. was named the winner.

The 9¾% notes due 2018 were quoted at 87 bid, 87½ offered, according to one trader. Another trader pegged the 7¼% notes due 2013 at 30½ bid, 31 offered.

Shutterfly made the "stalking horse bid" on the unit in early March. Late Tuesday, it was revealed that the company was going to get the online photo-sharing segment for $23.8 million.

No other bidders came forward, thus the cancellation of the auction.

The Rochester, N.Y.-based company filed for bankruptcy in January.

Distressed bonds firm

Distressed bonds were trending higher in midweek trading, according to market sources.

AMR Corp.'s 6¼% convertible notes due 2014 were "the real name of the day," a trader said, seeing paper jump to around 51.

Ahern Rentals Inc.'s 9¼% notes due 2013 were likewise stronger, trading around 64.

There were also "some buyers" of Dynegy Holdings LLC's 8 3/8% notes due 2016, which traded up to 67.

Dex One Corp.'s 12% PIK notes due 2017 traded at 29, according to a trader.

In distressed financials, Ambac Financial Group Inc.'s bonds moved up to around 18, compared to levels around 17 previously. MF Global Holdings Ltd.'s 6¼%/7¼% notes due 2016 inched up to 411/2.

And, Hawker Beechcraft Acquisition Co. LLC's 2015 maturities climbed up to 15.

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