Tribune steady despite no new plan; Skilled Healthcare loan loses; Nortel holding its ground

By Stephanie N. Rotondo

Portland, Ore., Aug. 30 - Distressed debt traders enjoyed what one trader called the "lowest volume day of the year" on Monday.

Just minutes before the closing bell rang, secondary market volume was somewhere between $550 million to $570 million. That's about half of normal daily volumes.

"There's probably the most amount of people out than has been out all year at one time," a trader said. With so many desks vacant and no high-yield calendar, he said the day was "impossibly quiet."

Another trader noted that with month-end just a day away, "there's not a lot of impetus to stir it up.

"This just could be a write-off week," he added.

Trading in Tribune Co. was even on the muted side, despite news out that the company was not planning on filing a new reorganization plan. Creditors had previously pulled their support for the plan and word has it that the company is once again in talks with lenders.

Meanwhile, a California court denied Skilled Healthcare Group Inc. a mistrial in its 2006 class action case. As a result, the company's term loan headed south, but its bonds did not even trade.

As with the rest of the market, Nortel Networks Corp.'s debt held in there. The bonds have moved very little since Friday's asset sale announcement.

Tribune steady despite no new plan

Tribune's management said over the weekend that it did not intend to file a new reorganization plan "at the present time" as it was in talks with creditors.

According to a Bloomberg report, the Chicago-based newspaper publisher's employees learned of the new development in an e-mail sent Saturday.

The company had previously been ordered back to the drawing board after the plan fell apart. The collapse came after some senior lenders chose to withdraw their support of the plan due to the potential of litigation from junior noteholders in regard to the 2007 leveraged buyout the led the company into bankruptcy.

But the market being what it is this week, traders saw little movement in Tribune paper.

A trader quoted the 7¼% notes due 2013 at 45 bid, 45¼ offered. He said he also saw the 4 7/8% note due 2010 offered at 46, but without a bid.

Another market source also placed the 7¼% notes in that 45 context, noting that the bonds had been in the 70s in July.

On Friday, Tribune released financials from the first seven months of the year, which showed a 44% increase in consolidated cash flow and an 18% increase in consolidated operating cash flow margin.

"We are making solid financial progress," said Randy Michaels, chief executive officer, in the press release. "Despite the noise surrounding our Chapter 11 process and a tough economic environment, we have not only stabilized our business, but in 2010 we have grown operating cash flow - and we're really just getting started."

As of July, Tribune had about $1.6 billion cash on hand.

Skilled Healthcare loan loses

Skilled Healthcare Group's term loan dropped in trading following the announcement that the Court of the State of California denied a previously filed motion for mistrial or new trial on grounds of juror misconduct, according to traders.

The term loan was quoted by one trader at 91½ bid, 93½ offered, down from 94½ bid, 95½ offered, and by a second trader at 92½ bid, 94 offered, down from 94 bid, 95 offered.

However, traders saw no action in the 11% notes due 2014, though one remarked that the issue had been offered in the low-90s last week.

"Not a dearth of trading in that one," he quipped.

The ruling involves a case that was filed back in 2006 under which the plaintiffs alleged that certain of the company's California-based facilities were understaffed and misrepresented the quality of care provided in their facilities.

In July of this year, a jury ruled that the company should pay $613 million in statutory damages and $58 million in restitution to the plaintiffs, and before the punitive damages phase of the trial went on, the parties reached an agreement to enter into mediation to settle the lawsuit.

However, the company then claimed that it found juror misconduct and wanted a mistrial or new trial.

Skilled Healthcare said in an 8-K filed with the Securities and Exchange Commission on Monday that settlement discussions in the case are ongoing.

Also, the company is appealing an injunction that the court granted when the mistrial motion was denied.

Under the injunction, the company's skilled nursing facilities are required to provide specified nurse staffing levels, comply with specified state and federal laws governing staffing levels and posting requirements, and provide reports and information to a monitor.

No final judgment has been rendered in the case, and further proceedings with the court are scheduled to begin on Tuesday.

Skilled Healthcare is a Foothill Ranch, Calif.-based health care services company.

Nortel paper holding its ground

Nortel Networks' notes remained steady, even as investors took the weekend to think over news the company was planning another asset sale.

A trader called both the 10 1/8% notes due 2013 and the 10¾% notes due 2016 unchanged at 78 bid, 78¾ offered and 79, respectively.

Sources at other desks echoed those levels.

On Friday, the Toronto-based wireless telecommunications equipment manufacturer said it had entered into a stalking horse bid with PSP Holding LLC, an entity fully funded by Marlin Equity Partners and Samnite Technologies Inc. for its Multi Service Switch business.

The current price of the bid is $39 million, in cash.

Broad market subdued

Elsewhere in the distressed debt arena, Blockbuster Inc.'s 9% notes due 2012 remained around the 5 mark, according to a trader.

The trader also said he saw the 11¾% notes due 2014 bid for at 48. That compares to 50 bid, 52 offered last week. He opined that the offer "should be right around 50, give or take."

NewPage Corp.'s 11 3/8% notes due 2014 meantime remained "somewhat active," a trader said, with about $10 million of the bonds changing hands. Still, he said they were "exactly where they have been" at 81 bid, 81¾ offered.

Sara Rosenberg contributed to this article

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