NewPage notes gain value; Blockbuster hurt by DIP buzz; ATP better; Smurfit debt heads higher

By Stephanie N. Rotondo

Portland, Ore., June 14 - Though Monday was "a little anemic" for the distressed debt market, according to a trader, most credits ended the session on a positive note.

The trader noted that volume was on the light side - just over $1 billion - but that "everything was better," estimating that the ratio of firm names to soft at 20 to 1.

And, the trader said he "would not doubt that we'll see a continuation of the rally" come Tuesday.

Of Monday's goings-on, NewPage Corp.'s bonds were one of the day's more active issues. The bonds were also slightly better, and one trader opined that the gains were due to short covering. Another trader was not so sure about that opinion.

Meanwhile, news reports published over the weekend regarding an alleged search for debtor-in-possession financing hurt Blockbuster Inc.'s junior debt. However, a trader noted that the company's senior secured notes were being quoted better.

ATP Oil & Gas Corp. continued to be notable, as the oil driller's debt attempted to move back up into the 70s. Still, concerns about the oil leak in the Gulf of Mexico and the resulting implications remain.

NewPage notes gain value

Miamisburg, Ohio-based papermaker NewPage saw its bonds trading actively and better, though it was not clear what had spurred the action.

A trader called the 11 3/8% notes due 2014 up half a point to three-quarters of a point at 933/4.

Another trader also said that NewPage debt was active, "and has been for the last two to three days last week." The trader also placed the 11 3/8% notes around the 93¾ mark, deeming that up "a solid point." He added that about "$20-odd million" of the notes changed hands.

At another desk, a trader echoed the 93¾ level and also remarked that the 10% notes due 2012 were "pretty dead."

While the first trader thought short covering could be the cause of the increase in the bonds - The market felt like there was some short covering" going on, he said - the second trader was not so sure.

"There's not a lot of people shorting an 11 3/8% coupon on that much volume," he said. "My guess is someone else thinks something is up."

There was no fresh news out on the coated paper manufacturer.

Blockbuster hurt by DIP buzz

Blockbuster bonds resumed their high activity levels, according to trader, as the market digested reports that the company was seeking debtor-in-possession financing.

A trader said the 9% notes due 2012 initially traded up during Monday's session, "then right back down" to around 81/2.

"That probably leaves them down about a point," he said.

But another trader said that while the 9% notes were "still" around 8½ bid, 9 offered, the 11¾% senior secured notes due 2014 were higher at 62 bid.

Over the weekend, the Wall Street Journal published an article claiming that the Dallas-based movie rental chain was seeking up to $150 million in DIP financing, citing "people familiar with the matter."

Blockbuster has already admitted it was talking to bondholders holding about $630 million in debt in hopes of reaching some form of an agreement. It is expected that an update on those talks will be given at the company's annual shareholder meeting, scheduled for June 24.

Also, the article noted that the company could also be seeking a strategic equity partner. Once gain, the Journal cited "a person familiar with the matter" who claimed that if such a partnership was achieved, junior bondholders would possibly convert their holdings into stock.

Blockbuster has about $40 million in debt payments coming due July 1. As of April 4, it had just $110 million in cash and equivalents.

ATP bonds improve

ATP Oil & Gas' debt was higher after the first trading day of the week closed and the market continued to attempt to figure out what BP plc's obligations were regarding the Gulf of Mexico oil leak.

A trader said the 11 7/8% notes due 2015 were "up a solid point" at 68½ bid, 69½ offered. But another trader pegged the notes at 68½ bid, 70½ offered.

According to the second trader, BP's obligations due to the oil leak caused by the April 20 explosion at one of its oil rigs could be anywhere from $20 billion to $100 billion.

The former, he said, would likely leave BP in the clear, but the latter could possibly reduce it to ruins.

In a report published Monday, Moody's Investors Service said the spill and the resulting quagmire could have far-reaching consequences.

Referring to the recent moratorium on offshore drilling, the rating agency said uncertainties abound not only for domestic drillers, but those abroad as well.

And, it could be years before drillers make up the funds lost during the environmental crisis.

"We believe it could take up to two years before producers, rig operators, and service firms in the deepwater Gulf can resume activity to pre-spill levels," said Steven Wood, managing director, in a statement.

Additionally, as Congress seeks to increase or remove the liability caps imposed on drillers, some companies - particularly smaller producers - could decide to leave the Gulf area entirely, deeming it cost ineffective.

Smurfit heads higher

Also going on in distressed debt territory, Smurfit-Stone Container Corp.'s bonds were "all significantly better," according to a market source.

The source pegged the 8% notes due 2017 at 84 bid, 85 offered, the 8¼% notes due 2012 around 841/2, the 7½% notes due 2013 around 81 and the 7 3/8% notes due 2014 around 861/4.

Another trader said the bonds were "up a few points," the 8% notes closing around 84, up from 81 previously.

Smurfit bonds have been volatile of late, typically mirroring what is going on in the broader market. According to the second trader, "there could be some technicals" behind the price gyrations.

Smurfit-Stone is a Chicago-based manufacturer of paperboard and paper packaging products.

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