NewPage bonds busy, better; Solo Cup continues to slide; GM bonds driven lower

By Paul Deckelman

New York, Mar. 2 - Amid reduced volume, traders in the bonds of distressed companies saw no overarching theme on Wednesday.

The most active name on the day was NewPage Corp., with several traders seeing the Miamisburg, Ohio-based coated-paper manufacturer's subordinated bonds up by as much as several points at various periods of the day, though on no firm news that could provide a rationale for the gains. Its secured bonds were likewise better.

Solo Cup Co.'s bonds continued to lose ground for yet another consecutive session, and, as has been the case recently, there was no actual fresh news seen out on the Lake Forest, Ill.-based maker of paper and plastic cups, plates and utensils that might explain the ongoing slide. However, a trader suggested that rising oil prices could be playing a role, since Solo is a major user of plastic, which is derived from petroleum.

General Motors Corp.'s legacy bonds were seen down several points, having apparently not gotten much of a boost from the robust February car-sales numbers the Detroit giant posted on Tuesday.

Elsewhere, there was continued activity in the bonds of the former TXU Corp. - but no clear resolution yet of the controversy over whether the big Texas utility company is in default on some of its bond indentures or loan covenants, as charged by one of its debtholders.

There was little or no activity seen in the bank debt of distressed companies.

NewPage is busy and better

Among specific names, NewPage Corp.'s 10% notes due 2012 "were really active," a trader said, calling them up about a point, at 68½ bid.

He mentioned that the Miamisburg, Ohio-based coated-paper manufacturer's bonds "are always active," but were a little more so on Wednesday.

He also saw NewPage's 11 3/8% senior secured notes due 2014 better by 1 point at 100½ bid.

"There was a lot of activity" In NewPage, a second trader concurred, seeing the 10s at 68½ bid, 69 offered, "a lot of volume."

He initially saw the bonds "up a couple of points," then estimated them up 1½ points, but said that by the day's end, their gain had been shaved to ¾ point to 1 point.

Yet another trader saw the 11 3/8s trading in a range between 98 7/8 and 1001/4, "all in that one area," on "a lot of bonds moving."

He knew of no fresh developments about the company which would explain Wednesday's activity, especially since NewPage had reported its quarterly numbers back on Feb. 17, "so there's nothing new there."

Solo suffering continues

A trader said that Solo Cup Co.'s 8½% notes due 2014 "have been getting beaten up," seeing the bonds going home at 83 3/8 bid, which he called down another 5/8 point on the session.

"Just 10 days ago, they were at 91," he said.

Solo was "pretty active," a second trader observed, seeing the 81/2s last at 83½ bid, 84 offered.

"It seemed like there was really good volume," he added.

He estimated that the bonds were "down around 2-ish points", but later modified that to a 1½ point decline.

He too was at a loss to explain the recent weakness in the Lake Forest, Ill.-based paper and plastic cup, plate and utensil maker's bonds .

Yet another trader suggested that the bonds were suffering the blowback coming out of the rising tide of world oil prices, which topped $102 in New York on Wednesday and show no signs of stopping.

He noted that the price for styrene - a key ingredient in Solo's line of plastic-based products - had gone for a low of about $13.30 per ton back in August, "and those prices have been going straight up since then," moving up to $15.70 per ton last week.

He suggested that investors "are concerned about the company's ability to pass these extra costs on to its customers in the form of higher prices for its products.

But while he saw the 8½% junior bonds "get beat up," he said that Solo's 10½% senior secured notes due 2013 "held in there," around 103 bid.

"There was not a lot" of the latter bonds moving around, he said, however "a couple of them were traded."

TXU default issue not settled

A trader saw the 6.55% bonds due 2034 of TXU - now known as Energy Future Holdings Corp. - down 1½ points at 32½ offered.

He also saw the 6½% notes due 2024 down 1 point at 43 bid, although he said the latter bonds "weren't very active."

A second trader said that the bonds "are still active," pegging the 101/4s at 55½ bid, 56 offered, "slightly lower than [Tuesday]."

"They have just so many issues, we saw a lot of quotes in the name," he said.

The Dallas-based utility and merchant power producer's bonds have been getting chopped up over the past few sessions amid allegations from one bondholder that it had defaulted on some of its debt - an allegation TXU denies.

As previously reported, Aurelius Capital Management LP, a lender under the credit facility, is alleging that Energy Future Holdings unit Texas Competitive Electric Holdings is in default as a result of certain intercompany loans that were made. The firm is claiming that the loans do not comply with the arm's-length basis requirement and that the non-compliance has resulted in a failure to make certain mandatory prepayments under the credit facility.

Aurelius has hired law firm Dechert to pursue the alleged default and is trying to put together an informal group of lenders to join in the complaint, a source remarked.

On a conference call Monday with Citigroup, the administrative agent on the credit facility, a source said that Citi claimed it was doing what was required under the credit agreement, but for now, everything is staying status quo.

Texas Competitive has said in filings with the Securities and Exchange Commission that the default allegations are without merit and that it will defend itself against the accusations

GM bonds going in reverse

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the former General Motors Corp., renamed after the latter's bankruptcy restructuring - "might be a little lower" at 32 bid, 32½ offered. He estimated they were down 1 point.

Another trader saw them down 1 point at 31½ bid, 32½ offered.

At another desk, a market source saw the "old GM" bonds down a full deuce at 31 bid.

Traders said that the bonds had not gotten any kind of a boost from Tuesday's release of February auto-sales figures by the major carmakers. GM's sales zoomed 49% from year-earlier levels - although the traders noted that the year-ago levels were so low that a large rise was to be expected and had already been "baked in" to the bonds' trading levels.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.