Verso sees second day of sizable gains; RadioShack debt weakens; Momentive firm, Caesars mixed

By Stephanie N. Rotondo

Phoenix, Jan. 7 - There was a little more weakness than strength in the distressed debt market on Tuesday.

However, the day's biggest gainer - once again awarded to Verso Paper Corp. - posted large gains, thereby evening the scales a bit.

Verso's debt began to gain on Monday after the company announced a merger with NewPage Corp. and a subsequent exchange offer for its 8¾% notes due 2019 and 11 3/8% notes due 2016. Tuesday's session saw more follow-through on that news.

"Verso was up in the top activity-wise again," a trader said.

Meanwhile, RadioShack Corp. bonds were ending the day with a softer tone. On Monday, there was a bearish rush on put options in the company's stock, leaving the market to speculate as to what may be going on at the troubled retailer.

Elsewhere in the distressed space, Momentive Performance Materials Inc.'s 9% notes due 2021 were up nearly a point at 89 7/8, while the 11½% notes due 2016 earned almost that much as well, closing at 693/4.

There was no fresh news out on the specialty chemical manufacturer.

Caesars Entertainment Corp. was meantime mixed, also on no fresh news.

The 10% notes due 2018 rose over half a point, a trader said, to 501/2. He said about $33 million bonds changed hands.

The trader also saw the 12¾% notes due 2018 unchanged at 58¾ and the 10¾% notes due 2016 at 803/4, down almost a point.

Another market source pegged the 10% notes at 50½ bid, up half a point.

Verso continues to climb

Verso bonds continued to gain in the wake of Monday's news the Memphis-based papermaker is merging with NewPage.

One trader said the name "traded up a lot," seeing the 8¾% notes moving into the mid-50s, "which was up about 10 points," he said. The 11¾% notes due 2019 finished in the mid-90s, up 8 to 9 points.

Another trader saw the 8¾% notes at 551/4, up almost 11 points on the day with about $18 million bonds trading. The 11¾% notes were up about 7½ points, he said, at 94 1/8.

Verso said on Monday that it was acquiring Miamisburg, Ohio-based NewPage for $1.4 billion. NewPage shareholders will receive $250 million in cash, $650 million of new first-lien Verso debt to be issued at closing and a 20% equity stake in the company.

Verso has secured $750 million for the purchase. Those funds will be used for the cash portion of the sale and to refinance NewPage's $500 million term loan.

NewPage filed for bankruptcy in 2011 and exited in 2012. During that process, Verso made a bid for the company, but management maintained that it wanted to remain independent.

The value of the transaction was then valued at just over $1 billion.

Closing of the deal is expected in the second quarter.

In connection with the merger, Verso is exchanging the 8¾% notes, as well as the 11 3/8% notes due 2016 for new second-priority adjustable senior secured notes and new adjustable senior subordinated notes.

RadioShack declines

RadioShack's 6¾% notes due 2019 were weakening during Tuesday trading, just one day after a bearish rush in put options in the company's stock.

A trader said the paper was down about 1½ points at 60 3/8. Another trader placed the issue at 60.

As for the stock (NYSE: RSH), it closed down 16 cents, or 6.23%, at $2.41. Volume was over two times that of the average daily amount.

RadioShack has been struggling to regain its position within the retail space for some time now. However, equity investors on Monday seemed to indicate that they believed the stock was soon going to tank.

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