Lehman Brothers receives plan approval, bonds, preferreds gain; AMR remains busy, holds steady

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Dec. 6 - Distressed debt was "kind of sideways," a trader said Tuesday.

"Some things were up, some things were down," he said. The market just didn't move a lot today."

Lehman Brothers Holdings Inc.'s debt - as well as its preferreds - were trading heavily and better during the session. The defunct investment bank's third amended plan of reorganization was approved Tuesday, bringing an end to the largest bankruptcy in the history of America.

Meanwhile, AMR Corp. continued to be "real active," according to a trader. The senior issues were busier than the subordinated notes, but both were about unchanged.

Lehman busy, better

Lehman Brothers received court approval on its reorganization plan Tuesday, closing the case that has gone on since Sept. 15, 2008.

One trader said the debt - such as the 6 7/8% notes due 2018 - was up half a point to "27-ish."

In the preferred stock realm, a market source said it was a Lehman issue that dominated trading. The 7.95% series J noncumulative preferreds (OTOTC: LEHJQ) were trading busily and traded up fractionally, ending at 1.2 cents.

Now that Lehman's plan has been approved, it can begin paying out what it owes to creditors, which is estimated at $65 billion.

Payouts are expected to being early in 2012.

Lehman may now also begin shutting down its remaining operations.

The firm has requested its bankruptcy exit occur after Jan. 31.

AMR holds altitude

Investors continued to push AMR paper around on Tuesday, but in terms of price, the securities were holding steady.

A trader said the 10½% senior notes due 2012 were "real active" around 92, which he deemed "kind of unchanged."

Another trader said the subordinated issues - like the 9% notes due 2016 - were trading around 21, but on light volume.

The Fort Worth, Texas-based parent of American Airlines filed for bankruptcy last week, making it the final of the U.S. carriers to go through a court restructuring. On Tuesday, the company said it was making a series of management changes.

Kodak heads higher

A trader said that Eastman Kodak Co.'s 7¼% notes due 2013 "traded up a little," in line with a gain in the troubled Rochester, N.Y.-based photographic products and digital imaging technology company's shares, likely on news reports that Kodak is shuffling around its team of restructuring advisors.

He saw the issue trading as high as 49 bid, calling that "the first round-lot trade in a while" in Kodak.

He said that about $250,000 traded on Monday in a "46 and change-47 and change" context. Smaller pieces traded above 47 on Tuesday, "and then a larger block traded at 49."

Kodak's New York Stock Exchange-traded shares rose by 6 cents, or 5.71%, to end the day at $1.11. Volume of 12.2 million shares was more than 1½ times the average daily turnover.

The trader cited reports of the change in advisors - which he "didn't think was much" in explaining movements in the bonds or the shares, particularly since "the company said they didn't.

But somebody believed the story and bought some bonds," he added.

The Wall Street Journal reported in Tuesday's editions that Kodak - which some weeks ago had hired the Jones Day law firm to advise it on restructuring - has now hired another well-known law firm, Sullivan & Cromwell, seeking advice from the latter's restructuring practice on reworking its finances.

The Journal story cited unidentified sources as saying that Kodak is no longer being advised by Jones Day's restructuring unit, although it retains the company for other uses.

The paper said the shift in advisers "is seen as subtle but meaningful in the restructuring community," pointing out that while both law firms have sometimes helped clients with bankruptcy proceedings and both have sometimes sought other alternatives for some clients, Jones Day's restructuring practice "specializes in guiding troubled firms through bankruptcy proceedings," while Sullivan & Cromwell "often serves as corporate counsel advising public companies on a wide range of transactions that don't involve a trip through bankruptcy court."

Kodak has repeatedly insisted it has no plans for a bankruptcy filing.

Kodak said in a statement that it has employed Sullivan & Cromwell for decades and still retains Jones Day - "but we don't itemize the work any of our advisers do for us."

Clearwire rises

A trader said that Clearwire Corp.'s 12% first-priority senior secured notes due 2015 were 91½ bid, while its 12% second-priority senior secured notes due 2017 were 79½ bid.

"It looks like it was a little better," he said - or in the case of the 2017 notes, a lot better; he said that the latter bonds had traded as low as 73½ bid, 74 offered on Friday, so they were up quite a bit.

"They moved up a fair amount. Yesterday [Monday], there wasn't much going on with the "17s at all."

The Bellevue, Wash.-based broadband provider, 49% owned by Sprint Nextel Corp., announced plans on Tuesday to raise $595 million in two stock offerings - one a $300 million offering of class A shares, the other a private $295 million purchase of class B shares by Sprint, under the financing agreement between the two companies announced last week, which calls on Sprint to buy up to $347 million Clearwire shares on a pro-rata basis, should Clearwire seek to raise up to $700 million via equity offerings.

Although news of the stock sale initially dropped Clearwire's existing Nasdaq-traded shares, by the day's end, the stock had moved back up to close at up 25 cents, or 11.11%, at $2.50. Volume of 27.6 million was over three times the norm.

The junk trader meantime saw Sprint's 6 7/8% notes due 2028 as "the biggest trader today," finishing at 72 5/8 bid, 73 offered, which he said was down a little from Monday, when the bonds had gotten as good as 731/2. He called it off a quarter, "which is strange, given that the other ones are up."

Broad market mixed

Elsewhere in the land of distressed debt, ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were active but 1½ points weaker at 671/2, a trader said.

Sears Holdings Corp.'s 6 5/8% notes due 2018 were meantime unchanged around 81, the trader said. The company was downgraded by Moody's Investors Service on Monday.

On the upside were Momentive Performance Materials Inc.'s 11½% notes due 2016. A trader saw the notes climbing up a point to end at 733/4.

And, Leap Wireless International Inc.'s 7¾% notes due 2020 inched up over a point to 803/4.

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