Spheris boosted by asset sale plans; Smurfit-Stone bonds higher; Rotech up on refinancing buzz

By Stephanie N. Rotondo

Portland, Ore., April 15 - Distressed debt remained firm during the Tax Day trading session, helped out in part by big gains in Spheris Inc.

The company's bonds jumped as much as 20 points on the day, traders reported. The movement came as the bankruptcy court overseeing the company's case approved the sale of nearly all of its assets.

Meanwhile, fresh on news that it had received "overwhelming" creditor support, Smurfit-Stone Container Corp.'s notes also headed for higher ground. The bonds were up anywhere from 2 to 4 points, depending on whom you asked.

Market sources speculated that Rotech Healthcare Inc. might soon be undertaking a refinancing. They credited that notion for the recent gains seen in the rarely traded paper.

A Spansion Inc. creditor group has reportedly raised funding for a reorganization plan to rival the flash memory maker's current plan. A source saw bid for the company's debt inching higher in response.

And, Clear Channel Communications Inc. and Sprint Nextel Corp. also posted gains on the day.

Spheris boosted by sale plans

Spheris, the bankrupt Franklin, Tenn.-based medical transcription company, saw its bonds jumping up about 20 points on the day in the wake of receiving court approval to sell nearly all of its assets.

A trader said the 11% notes due 2012 ended the day around 32, which compared with markets of 12 bid, 14 offered before the news hit.

Another source placed the paper at 321/2, a good 20 points better than levels seen Wednesday.

"People did some quick math and it put them at like 30 recovery," the first trader said.

Spheris will receive $116.3 million for the assets it will sell to CBaySystems Holdings Ltd. and MedQuist Inc. The final price was a 49% increase from the beginning of the auction, which was launched by Transcend Service Inc.

Transcend's opening bid was $78.3 million.

"The price has certainly been tested at auction and I am pleased to approve the sale," said U.S. Bankruptcy Judge Kevin Gross at a hearing to confirm the sale.

The proceeds received from the asset sale will comprise $98 million in cash, $17.5 million in notes and the assumption of outstanding debt.

Smurfit gains as plan supported

Smurfit-Stone Container's bonds headed up in trading following news out late Wednesday regarding its plan of reorganization.

A trader said the Chicago-based paperboard manufacturer's 8% notes due 2017 and 8¼% notes due 2012 "keep cranking higher," seeing the paper close around 93. He deemed that about 2 points stronger versus Wednesday markets.

"Smurfit was up a bunch," another trader said, also placing the notes around that 93 level.

At another desk, the 8¼% notes were seen at 93½ bid, a gain of more than 4 points day over day.

Late Wednesday, Smurfit announced that it had received "overwhelming support" for its reorganization plan. A confirmation hearing on said plan began Thursday.

Elsewhere in the paper sector, a trader said that "the space continues to be well-bid." He said that Appleton Papers Inc.'s 10½% senior secured notes due 2015 - which priced at 98.035 on Jan. 29 to yield 11%, only to plummet down to levels around 90 bid in the aftermarket in the days that followed, and then to begin gradually creeping back up from those low - was up 2 points on Thursday.

"That bond is [trading at] a premium now," he declared.

He also saw Verso Paper Corp.'s bonds up another point, on top of the gains notched earlier in the week on an equity upgrade for the Memphis-based paper company by Credit Suisse.

"The space has been on fire, it really has," he said.

Another trader said that NewPage Corp.'s 10% notes due 2012 remained fairly active in the mid-70s.

Rotech up on possible refinancing

A trader said that Rotech Healthcare's 9½% notes due 2012 trading up at 891/2, up about 4 points on the day and well up from their levels in the 70s at the beginning of the week.

"People have started to talk about a possible refinancing on that one," he said, apparently lifting the Orlando, Fla.-based medicinal oxygen provider's bonds.

He said that Rotech had starting posting gains "from out of nowhere," rising into the 80s on Wednesday. "It's not a name that trades often," he said, "but most people would have quoted them in the low-60s around the beginning of the month." He said that not all of the gain has come at once, but "in the last week to two weeks, we've seen people definitely want to bid that paper up, and you still can't find the right side."

He also noted that Rotech's shares, which were trading at 64 cents on April 5, have about tripled since then, closing Thursday at $1.78.

Another trader said that Rotech was "another hurry up and wait" kind of a situation, explaining that the bonds "haven't traded in months," and now all of a sudden, are trading sharply higher, pegging them at 89 bid, 90½ offered on Thursday, up from about 85 on Wednesday and the 70s in the days before that. He said that Thursday's gains came on a couple of large, round-lot trades.

Spansion inches up

Spansion's debt finished the day slightly better as an ad hoc committee of convertible noteholders said it had raised more than $400 million in order to fund a rival reorganization plan.

A trader saw the 11½% notes due 2016 at 120 bid and the 2¼% convertible notes due 2016 at 14½ bid.

"That's quite a disparity," he said. He added that the bonds could be even higher but "I didn't see a right side."

The committee is supporting a plan that would pay off senior noteholders in full in exchange for common shares in the new reorganized company.

Spansion is a Sunnyvale, Calif.-based manufacturer of flash memory devices.

Clear Channel, Sprint stronger

The telecommunications and cable arenas had a firm day in the bond market, according to traders.

A trader said that Clear Channel Communications' 10¾% notes and 11% notes due 2016 finished the session "about a point better," with the former around 81 5/8 and the latter around 74.

Another trader, however, said Clear Channel notes "seemed unchanged as far as I saw."

The first trader also saw Sprint Nextel's debt improving, with the shorter paper up a point and the longer issues up a deuce.

The trader saw Sprint's 8 3/8% notes due 2012 at 105 and the 8¾% notes due 2032 at 961/2.

Another market source called Sprint's benchmark 6% notes due 2016 a point stronger at 92½ bid.

Broad market mixed

Elsewhere in distressed territory, Lehman Brothers Holdings Inc.' debt was "maybe down a quarter to a half" point, a trader said. He placed the benchmark issues around 231/2.

The trader also called Blockbuster Inc.'s 9% notes due 2012 unchanged, "still trading with a 23 handle."

Another trader said the movie rental chain's debt had dipped about a point, also seeing them around 23.

Paul Deckelman contributed to this article

© 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.