Nokia's woes keep name, bonds topical; Kodak second-lien paper rises; broad market mixed

By Stephanie N. Rotondo

Phoenix, June 15 - The distressed debt market ended with a firmer tone Friday, despite an overall subdued trading day.

"Generally everything was a bit stronger," a trader said. Another trader noted that it was "a very slow Friday afternoon."

Trading in Nokia Corp. quieted down, though the name remained a topical one, traders reported. Paper had traded actively - and down 5 to 6 points - on Thursday after the company said it was cutting up to 10,000 jobs by the end of 2013 and that it expected its second-quarter loss to be higher than its first-quarter loss.

The news resulted in a downgrade from Moody's Investors Service on Friday, and other market watchers were speculating as to what was next for the Finnish telecommunications equipment manufacturer.

Elsewhere, Eastman Kodak Co.'s second-lien notes were getting a boost, according to traders. However, there was no fresh news out on the company, which is in process of auctioning off its patent portfolio.

Market speculating on Nokia

Nokia "was the big down one," a trader said Friday.

He saw the long bonds - the 6 5/8% notes due 2039 - dropping 3 points to end around 75, though he noted that there were "only a couple of trades."

The 5 3/8% notes due 2019 were meantime deemed unchanged around 771/4.

Another trader agreed that the 2019 maturity was holding steady, pegging the issue around 77.

On Thursday, the Epsoo, Finland-based smartphone manufacturer said it planned to axe 10,000 jobs, or 19% of its workforce, by the end of 2013 in an attempt to return to profitability.

The company also said that it was shuttering research centers and factories in Canada and Europe.

Nokia then revised its guidance for the second quarter, stating that its net loss would likely be larger than the $1.2 billion loss reported in the first quarter.

That loss was attributed to a 29% reduction in sales.

On Friday, Nokia's news resulted in a downgrade from Moody's Investors Service, and Fitch Ratings said that it might consider a downgrade if the company fails to stabilize itself.

Nokia's troubles have also resulted in a stock decline, though the equity (NYSE: NOK) managed to end 13 cents, or 5.53%, higher at $2.48 on Friday. Still, at that price - and given the company's situation - the market is now wondering if Nokia will become a takeover target.

The likeliest bidders are considered to be Samsung and Microsoft, but it remains unclear if either would be interested.

In a morning report, Gimme Credit LLC analyst Dave Novosel noted that the company also said it was "looking for a way to monetize its intellectual property portfolio more efficiently.

"We applaud the effort, but note that patent sales are often a sign of desperation, e.g. Kodak."

Kodak second-liens gain

Speaking of Kodak, the Rochester, N.Y.-based company's 9¾% second-lien notes due 2018 were gaining ground in end-of-the-week trading.

A trader quoted the issue at 64 bid, 65 offered. Another placed the notes at 64½ bid, 65 offered.

There was no fresh news out, but Kodak is in fact attempting to launch an auction for its patent portfolio. The company has remarked time and again that a sale of the patents is crucial to its turnaround.

Kodak filed for bankruptcy on Jan. 19, after failing to find a respectable price for the portfolio.

Buyer seeks Fannie, Freddie

A preferred stock trader speculated that a buyer was picking up Fannie Mae and Freddie Mac paper Friday, as the entities' preferreds were rising 20 to 40 cents on the day.

"Every now and then, they have an unusual amount of activity," the trader said, noting that there was no fresh news on the government-backed mortgage guarantors.

"Obviously there is [a buyer around]," another source commented. "The point is, why is there a buyer around? And that I don't know."

Freddie's 5.7% noncumulative perpetual preferreds (OTCBB: FMCKP), for instance, were up 42 cents, or 20.49%, at $2.47. The 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) earned 11 cents, or 6.15%, to end at $1.90.

Fannie's 7.625% series R noncumulative preferreds (OTCBB: FNMAJ) were up 20 cents, or 16.67%, at $1.40.

Broad market mixed

Among other distressed issues, a trader said Patriot Coal Corp.'s 8¼% notes due 2018 "got slammed," placing the debt around the 37 mark.

However, the trader also saw Dynegy Holdings LLC and NewPage Corp. climbing upward.

Dynegy's 8 3/8% notes due 2016 were pegged at 641/2, while NewPage's 11 3/8% first-lien notes due 2014 were seen at 61.

At another shop, a trader said Petroleos de Venezuela SA's 9% notes due 2021 dipped nearly a point, thereby erasing most of the gains from the previous session.

He saw the paper trading around 751/2.

Springleaf Financial's 6.9% notes due 2017 meantime held in at 79 1/8, as did Residential Capital LLC's 6½% notes due 2013 at 22.

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