Kodak sale to Shutterfly deemed too low, bonds weaken; ATP debt gains ground on well results

By Stephanie N. Rotondo

Portland, Ore., March 2 - The distressed debt market was mixed Friday, but on the subdued side as the equity markets took a modest tumble.

Eastman Kodak Co. paper was weaker as investors reacted to news the company was selling its online photo services unit to Shutterfly for $23.8 million. A trader said the sale price was well below previous market expectations, thus the declines in the debt.

Meanwhile, a good production report from ATP Oil & Gas Corp. helped its notes gain 3 to 4 points on the day.

Circus and Eldorado Joint Venture missed its March 1 maturity on its 10 1/8% mortgage notes, bringing an end to "will-they-or-won't-they" speculation. There was little activity in the debt, however, even as ratings agencies took negative action on the company.

Kodak drops as sale digested

Eastman Kodak's debt was weaker in end of the week trading, as investors reacted negatively to news the company was selling its online photo services unit to Shutterfly for $23.8 million.

A trader said the price was "at the low end" of expectations, given that "people were thinking closer to $80 or $90 million."

He placed the 7¼% notes due 2013 at 271/2.

Another trader saw the 7¼% notes around 27 as well, and the 10 5/8% second-lien notes due 2019 around 90.

Late Thursday, Kodak said it had entered into a sale agreement with Shutterfly, an internet-based social media and personal publishing service. The agreement will serve as the stalking horse bid for the assets, which will be sold at auction under the U.S. Bankruptcy Code.

Since filing for bankruptcy, Kodak has sought to pare down its business in an attempt to return to profitability. In a statement announcing the deal, the company said that the accord was "consistent with our objective of focusing Kodak on a core set of businesses in which we can most profitably leverage our technology and brand strengths, and provides a well-proven mechanism for ensuring that Kodak receives maximum value from these assets."

Kodak will seek court approval on the sale and subsequent auction this month and hopes to complete the sale in the spring.

Kodak is based in Rochester, N.Y.

ATP up on well results

ATP Oil & Gas' 11 7/8% notes due 2015 were "bouncing around," and "definitely stronger," according to a trader.

The gains came as the company issued a positive production report from its Telemark Hub, at which it had struck oil in a fourth well earlier in the week.

The trader called the bonds "up a bunch" around 69.

Another market source called the issue 3 to 4 points better at 69 bid, 69½ offered.

Production from the fourth well - located within the Mississippi Canyon Block on the Morgus Field - was in excess of 7,000 barrels per day, 85% of which was oil, the company said in a statement.

ATP is a Houston-based oil exploration and development company.

Circus misses payment

Circus and Eldorado Joint Venture failed to pay off its 10 1/8% mortgage notes due March 1, the company said in a regulatory filing.

A total of $142.8 million principal amount and $7.23 million of accrued interest is now due and payable.

The news did little to stir up the debt, however.

"I saw scrappy pieces trading in the mid- to high-70s, but I don't think that's indicative of anything," a trader said.

The JV said it is continuing potential financing talks and that it had secured a forbearance from a substantial noteholder.

The news resulted in Moody's Investors Service lowering the company's probability of default rating to D from Ca. Standard & Poor's also lowered its rating to D from CCC-.

The JV is the owner of the Silver Legacy hotel and casino in Reno, Nev.

Broad market mixed

Among other distressed credits, a trader said Caesars Entertainment Corp.'s 10% notes due 2018 were "a little lower" at 76½ bid, 77 offered.

He also saw Edison International Inc.'s 7% notes due 2017 falling another point to 61 bid, 62 offered.

The paper had dropped as much as 5 points in the previous session on the back of disappointing earnings.

At another shop, a trader said Lehman Brothers Holdings Inc.'s debt was "up a little bit" at 28 bid, 28½ offered.

He also said AMR Corp.'s 6¼% notes due 2014 were "on the stronger side" at 32½ bid, 33 offered.

He deemed that a point better on the day.

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