NewPage first-liens remain strong on DIP search news; Sino-Forest gets hammered as execs exit

By Stephanie N. Rotondo

Portland, Ore., Aug. 26 - Storm watching put on a damper on the distressed debt market Friday, at least in terms of volume.

As for price moves, a trader said the arena "started weaker then seemed to come roaring back with the see-sawing equity markets.

"Everything is finishing up stronger at the end of the day," he said.

NewPage Corp.'s first liens were one of the more actively quoted issues, just one day after news outlets reported that the papermaker was in search of a debtor-in-possession loan. The bonds traded up about a point on the day.

Elsewhere in the forest products sector, Sino-Forest Corp. bonds were quoted significantly lower, though trading was thin. The lower markets came as the company's common stock was halted for trading and members of its executive team were ordered to resign by regulators.

Away from that space, both Sprint Nextel Corp. and Clearwire Corp. paper was subdued despite news out the day before that Clearwire - a major partner of Sprint's - was considering a debt restructuring.

NewPage rising as DIP sought

A trader said NewPage's 11 3/8% first-lien notes due 2012 were up "about a point or so" around 841/2. He said the issue saw "the most volume of the day of any single issue."

However, he said there were no trades in the 10% notes due 2012.

Another trader also deemed the senior notes up about a point at 84 bid, 84½ offered.

Another trader said NewPage was "a touch better," also around that 84 level.

According to a Wall Street Journal report out Thursday, Miamisburg, Ohio-based NewPage is in talks with JPMorgan Chase & Co. and Wells Fargo & Co. for a DIP loan of about $600 million.

Citing people familiar with the matter, NewPage is said to have already developed a preliminary prepackaged bankruptcy filing, though nothing is set in stone, the sources said.

NewPage warned of a potential Chapter 11 filing earlier this month as it failed to refinance its second-lien notes in July. Because of that failure, certain debts were accelerated. If the company fails to refinance or repurchase the debt by the end of the year, more debt could mature earlier than planned.

NewPage hired investment bank Lazard Ltd. and law firm Dewey & LeBoeuf earlier this year to advise on a potential restructuring plan.

Sino-Forest beat down again

News that Sino-Forest Corp.'s stock was halted and that regulators had ordered five top executives of the Chinese-based, Canadian-listed company to resign resulted in the bonds being quoted much lower.

However, traders said trading in the name was light.

"They went down pretty big," said one trader. "Sino was down a lot to the mid-20s."

"They were quoted down 25 points across the board," said another trader. "Not sure how much of it traded."

Another source saw the 10¼% notes due 2014 trading with a 35 handle. That was down about 50% from the last round-lot trade of 70 early last week.

The 6¼% notes due 2017 were meantime trading around 34, down from 55½ last week.

The Ontario Securities Commission called for the resignation of five executives, including Allen Chan, chief executive officer. The commission is investigating claims that the company has misrepresented its revenues and exaggerated its land holdings.

Those claims first came to light in June when known short seller Carson Block - also the founder of research firm Muddy Waters LLC - issued a research report alleging that Sino-Forest had overstated its land holdings. Though the company has denied the allegations, both the bonds and stock have suffered.

The regulators also called for the halting of the stock.

The stock (Toronto: TRE) closed at C$4.81 on Thursday. In the last year, the shares have traded as high as C$25.85 and as low as C$1.29.

Clearwire, Sprint go silent

Both Sprint Nextel and Clearwire were muted Friday, despite news out late Thursday that indicated Sprint's 4G partner was considering a debt restructuring.

A trader said Sprint's 8¾% notes due 2032 fell to 97 bid, 98 offered from levels around 99 previously. He also saw the 7 3/8% notes due 2015 trading around 97.

Another source saw Sprint's 6% notes due 2016 rising almost a point to 94 bid.

A third source saw Clearwire's 12% notes due 2017 in the mid-70s.

On Thursday, Bloomberg reported that Kirkland, Wash.-based Clearwire was in talks with Blackstone Group LP on a possible restructuring.

For its part, Sprint is reportedly in talks with cable companies looking for an investment into Clearwire. Talk has it that Sprint wants the investment so that it can buy the remaining 46% equity stake that it doesn't already own.

Sprint is based in Overland Park, Kan.

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