Nortel pops as company makes deal on interest payouts; Visant plans refinancing, bonds improve

By Stephanie N. Rotondo

Phoenix, July 25 – Nortel Networks Corp. was taking focus in the distressed debt space Friday, following news out late Thursday regarding interest allocations for U.S. bondholders.

Traders reported that the company’s Nortel Networks Inc. debt jumped 4 to 5 points in after-market dealings on Thursday. Come Friday, the name stayed active and the bonds inched up slightly more.

Meanwhile, Visant Corp. saw its bonds improving as the company announced a refinancing effort.

The maker of class rings and other memorabilia has been selling assets and forming strategic partnerships of late as it works to improve its bottom line.

Nortel notches up

A trader said Nortel Networks’ debt “popped yesterday” after the market closed as the company said it had reached a deal with bondholders regarding its interest payouts.

Though he noted that most of the gains were seen in those dealings, the paper remained “somewhat active” on Friday as well.

He saw the 10¾% notes due 2016 at 119½ bid, 120 offered, while the floating rate notes due 2011 were pegged at 111.

However, he deemed those levels unchanged from where the paper ended late Thursday.

“I saw a bunch of bids for all of them this morning,” another trader said. He deemed all of the issues – the straight bonds and the convertible debt – “up maybe half point across the board.”

In the straight bonds, the 10 1/8% notes that were to have matured last year were seen at 120 bid, 120¼ offered. The 10¾% notes were placed at 120¼ and the floaters were seen in a 110 to 111 context.

He pegged the 2.125% convertible notes that were to have matured in April at 103.5 bid, 104.5 offered. The 1.75% convertible notes that came due in 2012 were seen at 103 bid, 104 offered.

“The move happened last night, like 4:30 p.m. [ET],” another trader remarked. “They were able to get a deal done on interest allocations. The bonds were up 4 points on that news.”

The trader added that the debt was up another half-point in Friday trading and “pretty active as well.”

That trader said both the 10¾% notes and the 10 1/8% notes moved up to a 119 bid from a 115 bid previously.

Nortel said late Thursday that its U.S. unit, Nortel Networks Inc., had agreed to pay just over $1 billion in interest owed to bondholders owning about $3.9 billion of debt. If approved by the U.S. bankruptcy court overseeing the case, the deal could irk retirees in Canada and the United Kingdom, who claim that U.S. holders should get no more than $90 million in accrued interest, or none at all.

Under the terms of the deal, the bondholders will receive $876 million of accrued interest. That amount could increase to $1.01 billion if Nortel has not made the payout by June 30, 2015.

Visant paper surges

In an 8-K filed with the Securities and Exchange Commission on Friday, Visant said that it had entered into a strategic partnership and that funds gained from that deal would go to refinance its debt.

On the news, a trader said the company’s 10% notes due 2017 were “up a couple points.”

He said the issue started the day around 96 and moved up to 98 after the filing came out.

Another market source quoted the issue at 98 bid, 98¼ offered, up from 96 3/8 bid, 96½ offered.

Visant said that it had inked a deal with OCM Luxembourg Ileos Holdings S.a.r.l. and Tripolis Holdings S.a.r.l. in which all Visant would merge its Arcade Marketing subsidiary with the parties’ Bioplan unit. Ileos will receive a 75% controlling interest in the “strategic venture” and Visant stockholders will receive – directly or indirectly – a 25% minority interest.

Visant will also receive cash of $325 million, which it will use to refinance its senior secured bank facilities.

The company also noted that it will release its quarterly results on Monday and hold a conference call to discuss said results on Wednesday.

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