Nortel Networks weak for second day on allocation plan; JCPenney quiet ahead of earnings

By Stephanie N. Rotondo

Phoenix, May 13 – Distressed debt investors were again eyeing Nortel Networks Inc.’s bonds during Wednesday trading.

Bankruptcy judges from the United States and Canada announced on Tuesday a liquidation formula for Nortel Networks’ remaining $7.3 billion in assets.

Under the formula, divisions in Canada, the United States and Europe would receive cash to pay to creditors. Creditors will receive a percentage of their claims as they relate to the overall business.

A trader noted that the news was not taken well on Tuesday and “the bonds really took it on the chin,” falling about 15 points in that session.

The weakness continued into midweek trading, he noted, seeing the floating-rate notes that matured in 2011 ending at 86 and the 10¾% notes due 2016 at 89.

The former, he said, hit a low of 85 before rebounding. The latter dipped as low as 85.

Nortel filed for bankruptcy in 2009 and ultimately wound down operations. Since then, investors and creditors have been duking it out in court, fighting for the biggest piece of the remaining assets.

J.C. Penney Co. Inc. released its first quarter results on Wednesday as well, but a trader said there was little action in the bonds ahead of the numbers.

The results were posted after the market closed.

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