NII Holdings debt hits skids after liquidity warning; Verso merger in jeopardy as offer fails

By Stephanie N. Rotondo

Phoenix, Feb. 28 - NII Holdings Inc. was the name of the day Friday, as the bonds were "trading substantially lower," a trader said.

The company reported earnings on Friday and warned that its liquidity was such that it might not be able to fund its obligations come 2015 and beyond.

"[The bonds] were a major amount of the activity for the high-yield/distressed market," the trader said.

He saw the 10% notes due 2016 falling the most, losing 10½ points to end around 46. He said the issue opened the day at 50 bid, 52 offered, well down from Thursday's closing price around 57.

The 8 7/8% notes due 2019 meantime dropped over 4½ points to 443/4, he said, while the 7 5/8% notes due 2021 lost "4 and change" points, finishing around 371/2.

"They seemed to find a bid after awhile," the trader noted.

"Obviously the name du jour was NIHD," another trader said. He deemed the 7 5/8% notes due down 5 points to a 37 to 38 context. The 10% notes were down "probably 11 to 12 points" in a 46 to 47 ZIP code.

"There was a lot of volume and they got hammered," he said.

The bonds were down to a record low post-earnings, which showed the Reston, Va.-based provider of Nextel mobile phone service in Latin America losing 247,000 subscribers in the fourth quarter alone. Net loss was $745.8 million, or $4.33 per share.

The company ended the year with $5.8 billion of debt and $2.4 billion of cash and equivalents.

Though company management remained optimistic about the way forward, liquidity issues were raising concerns.

"These concerns regarding the company's liquidity, in combination with the potential impact if the company cannot satisfy certain financial covenants under its existing operating company debt obligations in 2014, raise questions about the company's ability to continue as a going concern," NII said in the earnings release.

Verso exchange offer fails

Away from NIHD, Verso Paper Corp. was a topical name, as the company canceled an exchange offer that was being done in conjunction with the company's planned merger with NewPage Corp.

The merger was contingent on the exchange getting done.

One trader said the 8 7/8% notes due 2019 - one of two series involved in the exchange - ended at 55, which was up from the day's low around 521/2.

"They finished virtually unchanged, but it was a bit of a rollercoaster," he said.

In order for the merger with NewPage to go through, 85% of the 8 7/8% notes, as well as 85% of the 11 3/8% notes due 2016, had to be validly tendered. Despite extending the offer twice, as of 5 p.m. ET on Thursday the company had not managed to meet the requirement.

Verso even entered into talks with the second-lien holders in an effort to find a way to sweeten the deal.

"Nonetheless, the [noteholders] demonstrated an unwillingness to engage in constructive dialogue, despite the fact that, based on market quotations, the [bonds] have already appreciated in value by approximately 80% since the announcement of the proposed merger with NewPage," Verso said in a statement.

"[The noteholders] repeatedly demanded terms for the exchange offers that, Verso believes, would not have enabled Verso to consummate the exchange offers in a manner that satisfies the conditions to its previously announced merger agreement."

For its part, NewPage had previously said it would not alter the terms of the agreement. Verso said it had notified NewPage of the offer's failure and that the company is "exploring all options."

Coal on the rise

The coal sector was moving higher as the week - and month - came to an end.

A trader said Arch Coal Inc.'s 7% notes due 2019 rose a deuce to 821/2, while the 7¼% notes due 2021 put on half a point, closing around 86.

Walter Energy Inc.'s 9 7/8% notes due 2020 were also stronger, gaining half a point to finish around 781/2.

In a related sector, oil producer Forest Oil Corp. saw its 7¼% notes due 2019 remain under pressure, losing "a couple points" to end around 861/4.

The bonds began dropping on Wednesday after the Denver-based company reported fourth-quarter earnings per share of 2 cents for the quarter, missing analysts' consensus forecast of 3 cents.

Revenues came in at $88.49 million, well below Wall Street expectations in the $96 million area.

Additionally, Forest reported a sharp decline in proved reserves at year's end from its year-earlier figures, largely due to asset divestitures, which were only partially offset by new discoveries.

Paul Deckelman contributed to this article

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