NOVA Chemical knocked lower as Alberta nixes aid; Sirius gains on reported debt buy; Spectrum loan pushes up

By Paul Deckelman and Sara Rosenberg

New York, Feb. 5 - The up-and-down saga of NOVA Chemicals Corp.'s bonds - especially the issue maturing on April 1 - took another turn Thursday, this time for the worse, as Canadian provincial officials shot down speculation that one or more government entities might come to the aid of the Calgary, Alta-based chemical company and help it raise $100 million needed to meet the covenant requirements of its credit facility.

A news report that EchoStar Corp. bought a chunk of Sirius XM Radio Inc.'s maturing debt stirred market speculation that the satellite TV technology company might be trying to maneuver for control of the debt-laden radio broadcaster - or even lay the grounds for acquiring it outright, possibly by forcing a bankruptcy filing - pushed Sirius' bonds sharply higher.

Spectrum Brands Inc.'s term loan continued firming in the wake of the consumer products company's Chapter 11 filing earlier in the week, although its bonds - which had risen after the filing - were seen having come back in.

Gaming issues like Wynn Las Vegas LLC and MGM Mirage, which crapped out on Wednesday, were seen bouncing back on Thursday. Also in that sector, there was little or no movement in Trump Entertainment Resorts Inc. bonds, even though the company won an extension to the forbearance agreements from its lenders.

NOVA not getting Alberta aid, bonds back off

NOVA Chemicals' 7.40% notes slated to come due on April 1 were seen having partially retreated from the strong gains they had posted on Wednesday on speculation that the company was close to an agreement to raise $100 million it needs to meet the requirements of its bankers.

The two potential sources for the additional money identified in media reports Wednesday, both arms of the Alberta provincial government, subsequently denied that any deal to provide NOVA funds was in the works.

A trader saw the 7.40s having retreated to 68.5 bid - a 322% yield to maturity - from Wednesday's closing level at 70, but he saw only $1 million of the bonds traded, in sharp contrast to Wednesday's action, when some $30 million of those bonds changed hands, making it one of the day's busiest issues, as they shot up to 70 from Tuesday's finish around 55-56.

A second trader, also seeing the notes in a 68-70 context, said the day's activity was "no big deal."

Another trader quoted the bonds at 65 bid, 67 offered, down from 70, but said that while "decent size had traded" on Wednesday, "today, I don't see much of anything" in them.

He also saw its 6½% notes due 2012 around 35-36, although he acknowledged that it was "really the short one that had run up."

A market source at another desk said the 7.40% bonds had actually traded up during the day on smallish odd-lot transactions, even reaching an early zenith of 80 before coming off that peak, and then finally finishing around a point or two higher on the session. However, on more substantial trades better representative of market action, the bonds lost several points.

Meanwhile, the 61/2s, another trader said, had closed at 36 bid, which he called up 1½ points, "so one is up and the other is down."

But a different market source said the 36 price represented a 2 point retreat from Wednesday's highs.

NOVA's New York Stock Exchange-traded shares, which on Wednesday had more than doubled at one point during the session before still ending up nearly 50% on 16 times their usual volume on the chance that NOVA had solved its near-term financing problem, came back down to earth on Thursday; they initially plunged nearly 21% from Wednesday's close, before bouncing off that low to eke out a gain of 5 cents, or 3.09%, to $1.67, on volume of 6.8 million shares, or nearly five times the norm.

Nova's bonds have recently been on a wild roller-coaster ride, with the 7.40s plunging from levels in the mid-80s just a week ago down to the mid-50s earlier this week, and the 61/2s swooning from around 40 bid down to 27, on investor anxiety over whether the $250 million principal amount of the April 1 bonds will be paid off when they mature, and more immediately, whether NOVA will be able to raise the $100 million it needs by the month's end to comply with its covenant and keep the bankers at bay. Major ratings-agency downgrades, citing the overall problems of the beleaguered chemical industry as well as NOVA's own weaknesses, did not help matters any.

However, it appeared on Wednesday as though NOVA's short-term problems, at least, would soon be over, as the Canadian newspaper The Globe and Mail reported that NOVA might be close to a deal on borrowing the needed $100 million, either from AIMCo - Alberta Investment Management Corp., a $75-billion pension plan owned by the Alberta provincial government, or ATB Financial, a lender, also owned by the provincial government, having $23.3 billion of assets.

The paper also reported speculation that the company's lending group would then be willing to waive or rework covenants on other loans that come due in coming months, while investment banks were already proposing stock-sale deals to NOVA, on the assumption that resolution of its near-term financial problem would push the shares up and make put it in a position to raise more cash via an equity sale.

However, on Thursday, hopes for a quick resolution to NOVA's funding problem were dashed, as Alberta provincial authorities turned thumbs down on the notion of bailing NOVA out. Officials of both AIMCo and ATB said late Wednesday after the financial markets had closed that speculation of their respective companies' involvement in a NOVA rescue was false, while Ed Stelmach, the provincial premier - roughly equivalent to a U.S. state governor - answered in the negative when asked on Thursday by reporters if his administration might help NOVA out with its funding. Alberta officials, echoing NOVA executives, have in the past expressed confidence in NOVA's ability to work with its lenders on modifying the loan terms to fit the company's current situation.

Under the terms of its credit facility, which the company and the lenders recently amended to relax its terms, NOVA must raise $100 million by Feb. 28 to remain in compliance with its covenants and keep access to its credit line, and then must come up with another $100 million by the end of June.

Satellite radio bonds gain altitude

Sirius Satellite Radio's bonds, and those of its former rival, XM Satellite Radio Holdings, now a part of Sirius, were seen higher as The Wall Street Journal reported that EchoStar Corp. had bought a stake in its maturing debt.

A trader saw Sirius' 9 5/8% notes due 2013 jump to 33.75 bid from 25.25 on Wednesday, on volume of some $17 million.

He said that if the Journal story - which was based on information from unidentified sources - turned out to be correct, "that's pretty significant news."

Another trader said that Sirius "was busy for a while," estimating that about $20 million of the bonds traded "as high as 34ish" in response to the EchoStar story, while XM's 13% notes due 2013 were up as much as 10 points on the day at 37 bid, 38 offered.

Another market source saw those XMs do even better, pushing as high as 38.5 bid, a gain of more than 12 points, while the Sirius '13s gained more than 9 points to close at 34.5.

The Journal reported that EchoStar had acquired a portion of a $300 million tranche of Sirius convertible debt slated to mature on Feb. 17. Sirius recently did a debt-for-equity exchange that brought the amount of the outstanding converts down to around $180 million. The Journal said it was not clear whether EchoStar had participated in that exchange offer.

As to the motive of president, chairman and chief executive officer Charles Ergen for buying the Sirius debt, the paper said that EchoStar might be pursuing a strategy to use the debt as a way to gain control of Sirius XM and its satellite assets - or at least exert considerable influence in possibly negotiating to buy them from Sirius - either outside of bankruptcy, or perhaps, if need be, by forcing the radio broadcaster into a filing. Neither Sirius nor EchoStar would comment on the story, or the speculation.

Sirius is facing a total of some $925 million of debt repayments this year, including $400 million of 10% converts due Dec. 1 which were issued by XM back when it was an independent satellite radio provider, before last year's merger with Sirius. Those bonds were seen having gained over 6 points on the day to the 44 level, and 14 points from levels they held earlier in the week.

Englewood, Colo.-based EchoStar - formerly the operator of what is now known as the DISH Network satellite TV broadcaster - is now a satellite TV technology company since its split last year from DISH, with EchoStar operating the satellites that DISH, the Number-Two U.S. satellite TV broadcaster after rival DirecTV, uses to beam its programming to its customers. EchoStar also makes and sells the set-top boxes and other hardware used in the reception of the DISH broadcasts. Although the two companies are now officially separate, their respective headquarters are near one another in Englewood, a Denver suburb - and Ergen is the chairman, CEO and president of both of them.

Spectrum loan lifted, bonds battered

In the bank debt market, Spectrum Brands' term loan once again moved higher in trading, with the momentum still being attributed to the company's recent Chapter 11 filing, according to traders.

The term loan was quoted by one trader at 69½ bid, 71½ offered, and by a second trader at 69 bid, 71 offered, up from previous levels of 68 bid, 68¾ offered. Earlier this week, prior to the bankruptcy filing, the debt was being quoted 61 bid, 63 offered.

The Atlanta-based consumer products company's bonds, meantime, retreated from the levels they'd held on Wednesday, with its 12½% senior subordinated PIK toggle notes due 2013 having fallen to a late level under 23 bid, down about 2 points on the session, although another market source said that on strictly a round-lot basis, the bonds went out around the 28 mark - although that was still a 2 point loss from the prior round-lot level, on Wednesday. Trading was fairly busy, though mostly in smaller trades.

Meanwhile, its 7 3/8% notes due 2015 dipped to about the 21 level, down from 25 on Wednesday, with very few bonds traded.

Both issues had moved up following the filing. The bonds are now trading flat, or without their accrued interest.

On Tuesday, the company announced that it had filed a pre-negotiated plan of reorganization with the U.S. Bankruptcy Court in San Antonio, Tex., and that the plan had already been agreed upon by the holders of roughly 70% of its outstanding public notes.

Under the plan, $1.05 billion principal amount of existing bonds would be cancelled and noteholders would be issued new bonds equal to 20% of the total unpaid principal and interest on the existing bonds together with shares.

The claims of existing secured and other general unsecured creditors would be reinstated or unimpaired.

Existing common stock will be extinguished under the plan and shareholders will receive nothing.

Gaming names on the rebound

A trader said that Wynn Gaming "rebounded after getting hit [Wednesday]," with the Las Vegas-based casino resort operator's 6 5/8% notes due 2014 pushing back up to the 73 bid level they'd held earlier in the week, versus 71.5 at the close on Wednesday, on volume of about $8 million.

He meantime saw rival Vegas-based gamer MGM Mirage's 6½% notes slated to come due on July 31 at 92 bid, or a 25% yield to maturity, improved from 89.5 on Wednesday, "a nice pop on the day," he said. Some $6 million of the bonds traded.

He said he had not seen any news out that might have pushed the bonds higher, particularly since the whole gaming sector has been in the dumps for months on the prospect of the recession cutting into discretionary consumer spending, like vacations at expensive resorts.

"I don't know why they're up," he added.

He also saw the company's 7½% notes due 2016 rise to 53.5 bid from 51.25 on Wednesday, also on $6 million traded, although MGM's 8 3/8% notes due 2011 ended 2 points easier at 50 bid, on turnover of $8 million.

In that same sector, a trader saw very little trading in Trump Entertainment Resorts' 8½% notes due 2015, which were apparently unmoved on the news that the Atlantic City, N.J.-based gaming company's lenders and bondholders had each agreed to a one-week extension, until Feb. 11, of their respective forbearance agreements with the company, entered into after it failed to make the scheduled Dec. 1 interest payment on its $1.5 billion of bonds.

He said that Trump had been "active when they were around 70, and when they were in the 40s," but that interest had fallen off now that they're in the low teens.

A trader quoted the bonds on Trace as trading around 11 bid, though on very light trading. Another, however, saw them quoted over the counter in the 14-15 area.

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