Kodak bonds gain after top names said to bid for patents; Supervalu debt boosted by CEO ouster

By Stephanie N. Rotondo

Phoenix, July 30 - While it was a generally firm day for distressed bonds, there was "light volume, though a bit more than I thought," a trader said Monday.

Another trader attributed the lackluster volume to it being "just a summer Monday," though he added that the looming month-end could also be affecting volume.

Eastman Kodak Co. was "probably the most notable" name of the day, according to a trader. The company's debt were up 8 to 10 points following news out regarding the various consortiums that are said to be bidding for a patent portfolio.

Initial bids were due by Monday night.

Meanwhile, Supervalu Inc. was on the rise on word that the company had fired its top executive and replaced him with its chairman.

Though most of the distressed market was stronger during the day's session, RadioShack Corp. was a touch weaker as Standard & Poor's downgraded the struggling electronics retailer.

Bidders clamor for Kodak patents

The initial bids for Eastman Kodak's patent portfolio were due Monday night and some big names were said to be bidding for the intellectual property.

Investors reacted favorably to the news, pushing paper up 8 to 10 points.

One trader pegged the 9¾% second-lien notes due 2018 in the high-70s, up about 8 points. The 7¼% notes due 2013 were up similarly, closing around "22-ish."

Another trader quoted the second-lien notes at 79 bid, 80 offered and the unsecured notes at 22½ bid, 23½ offered.

A third market source deemed the 7¼% notes up 10 points at 27½ bid.

Interested bidders for the portfolio - said to be worth between $2.4 billion and $4.5 billion - include Google and a consortium of Microsoft, Intellectual Ventures and Apple.

The Rochester, N.Y.-based company is counting on the sale to pay off the creditors that have held up the company as it is in bankruptcy. If the portfolio fetches a good price, creditors could get more than 30 cents on the dollar in recovery.

If more than one qualified bid is received, an auction will begin on Aug. 8, with a winner being announced Aug. 13.

Supervalu ousts CEO

Supervalu announced Monday that it had fired its chief executive officer Craig Herkert on Sunday.

The struggling Minneapolis-based grocery store operator has tapped its chairman, Wayne Sales, to lead the company as it attempts to turn itself around.

The news gave the company's bonds a boost, according to traders.

One trader called the 8% notes due 2016 up over a point at 851/4. Another said the debt was "better" at 84½ bid, 85 offered.

Yet another trader saw the bonds rising 1½ points to 851/2.

In recent weeks, Supervalu, which operates stores such as Albertson's and Jewel-Osco, reported weak quarterly results and said that it was considering putting itself up for sale. Sales said in a letter to employees that he would move quickly to cut prices in order to compete with its sector peers and that he was willing to make "tough decisions" in regard to cost cutting.

"I am well aware of what our critics have said about us," Sales wrote in the letter. "You are all familiar with our continued decline in sales, profitability and share value."

Jonathan Feeney, an analyst with Janney Montgomery Scott, said the ousting of Herkert could be a positive move forward.

"While this move alone doesn't inspire confidence, it removes a key perceived hurdle in the company's review of strategic options," he wrote in a note to investors.

RadioShack falls post-downgrade

Following its disappointing second quarter results last week, RadioShack received yet another downgrade, this time from S&P.

A trader saw the 6¾% notes due 2019 slipping to 64½ bid, 65 offered. Another trader echoed that market, though he said the paper was essentially unchanged.

S&P said Monday that it had cut RadioShack to B- from B+.

The outlook is negative.

"In our view, U.S. consumer electronic goods and services retailer RadioShack's poor operating and financial performance trends will continue for the remainder of fiscal 2012 and into fiscal 2013 due to fierce competition and lower margin mobility products," S&P said in a statement.

"We believe that it will be very difficult for the company to improve its gross margin in the next year, given the changing industry dynamics and mobility accounting for more than 50% of sales."

Springleaf value grows

A trader said he has "some more of those Springleaf [Finance Corp.] moving around."

On Monday, he saw the 6.9% notes due 2017 up a point at 81, as the 5.4% notes due 2015 gained over 2 points to 86.

Another trader said the movement could have been due to news that the company - formerly the American General Finance unit of American International Group Inc. - was looking to sell $858 million of residential mortgage-backed securities.

Energy bonds rise

In the energy sector, Petróleos de Venezuela SA's 9% notes due 2021 moved up 1¼ points to 743/4.

Arch Coal Inc. meantime remained on an upward climb, a trader said. He saw the 7¼% notes due 2021 up 3 points at 861/4.

Sector peer Alpha Natural Resources Inc. was also better, with the 6¼% notes due 2021 firming over a point to 86½ bid.

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