ATP Oil sees 'relief rally'; Kodak second-lien debt 'leaking'; energy names get investor focus

By Stephanie N. Rotondo

Phoenix, Aug. 29 - The distressed debt market continued its sideways crawl Wednesday, according to traders.

"There's very little on the newsworthy front," a trader said. "There's not enough volume to really skew it one way or another. Stocks were pretty much flat, so there's nothing to really drive [the distressed realm]."

As per usual, ATP Oil & Gas Corp. was the go-go name in the distressed space. One trader said the company's bonds were experiencing a "relief rally," given that Hurricane Isaac had passed through the Gulf of Mexico without incident.

Meanwhile, Eastman Kodak Co.'s second-lien notes declined further during the midweek session. A trader said the weakness could be stemming, at least in part, from news that sector per Lexmark International Inc. was looking to sell its printer business. Uncertainty about the company's patent auction was not helping.

ATP's 'relief rally'

ATP Oil & Gas' 11 7/8% notes due 2015 were heading higher on Wednesday, on "no particular news," according to one trader.

He placed the debt at 281/2.

Another trader said the bonds were experiencing a "relief rally" as Hurricane Isaac passed over the Gulf of Mexico, leaving the Houston-based offshore oil exploration company's rigs alone.

He said the issue got as high as 29 during the trading day.

A third trader called the notes up nearly 1½ points at 281/4.

Kodak decline continues

Eastman Kodak's 9¾% second-lien notes due 2018 were "definitely leaking," a trader remarked Wednesday.

He quoted the issue at 66 bid, 67 offered, a market that was echoed at another desk as well.

The first trader said the 7¼% notes due 2013 were "kind of hanging in there" at 14½ bid, 15 offered.

The trader speculated that the day's weakness could be due in part to news out Tuesday regarding sector peer Lexmark International. Lexmark is getting close to winding down its inkjet printing business, which it has been in process of doing since 2007.

The divesture is expected to save the company $85 million in 2013.

However, the trader said that perhaps the market was thinking that if Lexmark can't make its printing business work, "maybe Kodak will do even worse."

Last week, Kodak said it was selling off its imaging assets in order to focus on printing.

Additionally, there has been no update on Kodak's patent portfolio auction, which has created uncertainty.

Investors focus on energy

Patriot Coal Corp.'s bonds were on the rise, even as Alpha Natural Resources Inc.'s debt declined.

A trader called Patriot's 8 ¼% notes due 2018 up a point at 44 bid, 45 offered.

Another market source deemed the paper up modestly at 44¼ bid.

At another shop, a trader saw Alpha Natural's bonds dropping over a point, the 6¼% notes due 2021 at 90 and the 6% notes due 2019 at 903/4.

Elsewhere in the energy space, Edison International Inc.'s were either down or mixed, depending on whom you asked.

One trader said the 7½% notes due 2013 were a point lower at 55.

A second trader called the 7.2% notes due 2019 slightly weaker at 52 7/8. The 7% notes due 2017 were deemed up half a point at 533/4, as the 7 5/8% notes due 2027 were unchanged at 521/4.

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