NewPage gyrates as CEO quits; Blockbuster activity trails off; ATP Oil bonds seen firmer

By Paul Deckelman

New York, June 15 - NewPage Corp. bonds were moving around at lower levels Monday in the wake of the Miamisburg, Ohio-based coated paper manufacturer's unexpected announcement that its president and chief executive officer, E. Thomas Curley, had resigned, barely four months after assuming those positions. Traders said NewPage was arguably the busiest name in the junk bond sector.

Away from NewPage, traders saw a decidedly firm tone as junk bonds, taking their cue from the surge in the equity markets, extended with more conviction the modest gains seen in Monday's trading

Traders saw a falloff of activity in Blockbuster Inc. from the previously busy activity levels seen on Monday, when the company was lining up debtor-in-possession financing for possible use in the event it chooses - or is forced - to go into a Chapter 11 filing.

The recently volatile energy names seemed quieter on Tuesday, with ATP Oil & Gas Corp.'s bonds seen firming a little to around the 70 area, well up from their recent lows in the lower 60s.

.Sources in the bank-loan market meantime saw very little activity in distressed-company paper on Tuesday.

First he was in - and now he's out

Just four months after he arrived in Miamisburg, Ohio, to take the reins of NewPage Corp., North America's largest coated-paper producer, E. Thomas Curley abruptly resigned on Tuesday as president and chief executive officer of the company. The company offered little additional information about the move, and surprised junk market players took the company's bonds down by several points in heavy trading in response.

A market source said that NewPage's most busily traded issue, its 11 3/8% first-lien senior secured notes due 2014, "went on a wild ride," seeing the bonds having fallen nearly 2 points on the day to 91½ bid, completely obliterating some gains which had been seen in the credit on Monday, before the news of the executive shakeup, which saw two other senior executives, Mark A. Suwyn, the chairman, and Michael Edicola, NewPage's vice president, human resources, also heading out the door.

A trader at another shop quoted those '14s as having fallen as low as 90 bid before going home Tuesday at 92 bid, which he called a 1½ point loss. He saw the company's 10% second-lien senior secured notes due 2012 fall as low as 51 bid from prior levels around 54, before going out at 52 bid, 53 offered, also down about 1½ points.

"An awful lot traded," he said. "That was clearly the highlight."

"Obviously, by far, NewPage was the most active junk name," another trader said. "Over $100 million traded, almost all of that in the 11 3/8s, and all were down by several points."

One of the traders noted that Curley had only come aboard as CEO in mid-February of this year to replace another abruptly departing CEO, Richard D. Willet, Jr. - who somewhat mysteriously resigned Jan. 18. As was the case with Curley's departure, Willet's resignation also generated little or no explanation from the company, causing its bonds to slide on that occasion. The trader opined that it looked to him like "they shot the guy after just four months."

Besides announcing the resignations of Curley and the other two executives, NewPage said that Robert L. Nardelli would take over as non-executive chairman to lead the company during its search for a successor to Curley. Nardelli - formerly the CEO of Chrysler LLC and before that, Home Depot - is currently the CEO of Cerberus Operating and Advisory Co., an affiliate of NewPage's controlling stockholder, Cerberus Capital Management, LP.

Nardelli, on a morning conference call, indicated that there were no conflicts between Curley and the company's Cerberus-dominated board of directors, instead merely asserting that "there was mutual agreement, after a relatively short period of time, that a change would be appropriate."

Blockbuster tails off

A trader said that "interestingly," Tuesday was "the first day in a while that there's been very little trading" in Blockbuster's bonds, noting that on Monday, "$30 million or $40 million of the [9% senior subordinated 2012] bonds traded, and today, literally $3 million was the bulk of the day."

He said that those bonds went home right around the same 8-9 bid context at which the Dallas-based movie-rental company's paper had finished on Monday. He saw the last trade of the day at 8¾ bid, "and that's effectively where it's been.

He meantime saw the 11¾% secured notes due 2014 only trade "a very small amount" in the lower 60s to mid-50s, while on Monday, "yes, it was far busier."

He said that by this time, "so many people have made their bet" as to whether the company will slide into bankruptcy or not, "that it's a limited amount of paper and float that's out there."

He said that the company's managing to line up debtor-in-possession financing should it need it in the event of a Chapter 11 filing "got a few people to change positions, but now I suspect that it will tail off."

At another desk, a trader saw the 9s about the same at 81/2-91/2, while also seeing the 11¾ bonds up a point in a 63-64 range.

"The senior bonds were doing a little," he said.

ATP holds around 70 - a wrong price?

A trader saw ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 "definitely staying active" during Tuesday's session, estimating that between $390 million and $40 million of the bonds changed hands.

He quoted them as "going up and down around 70," with "about 90%" of the day's dealings in the Houston-based oil and gas exploration and production company's bonds taking place in a narrow 691/2-70½ context.

The bonds had fallen as low as the lower 60s last week, from prior levels in the low 70s, on investor angst about the likely impact that the government's restrictions on deepwater oil drilling in the Gulf of Mexico in the wake of the April 20 Deepwater Horizon oil rig disaster there will have on companies such as ATP, which have the bulk of their reserves there.

However, over the last several sessions, the bonds had moved back up to around the 70 level.

But the trader noted that "they came [to market] close to par six weeks ago," right around the time of the oil rig accident which started the incredible oil leak that has so fouled the Gulf. After that, "it's been brutalized" in tumbling down to current levels.

He said that "the biggest issue is, nobody is completely sure where it shakes out."

He proclaimed that in his opinion, "the only thing I know for sure is that 70 is the wrong price - there's not going to be an in-between here. It's either fine, in which case it will migrate right back up into the high 90s, or else, it's toast," and will fall down to around half of what it still is now.

"For sure, this is the wrong price, and I think that's why it's been so active. Fortunately this is one where there is no clear-cut consensus, so it's actually been tradable, which is nice."

A generally firm tone

A trader said that "if you take NewPage out of the scenario," Junkbondland had a pretty good day.

"The breadth and strength of the market were pretty nice to see," he said. "There's lots of stuff that's up well over a point. I would say certainly on average, the market's got to be up [at least] a half, and [the ratio of] winners to losers is probably 40, or 50 to 1. So it's definitely a legitimate, broad kind of a rally."

The trader said that such an advance "makes perfect sense," because "the fear of owning credit was probably a little overdone, and we're so far off the highs of April that this can probably last a couple of days longer, certainly; it can hold for a while."

He said that "as people started to catch on to that, all of a sudden, you didn't want to be short so much and it sort of becomes self-fulfilling.

He added that he's "optimistic, for another day or two."

Another trader said: "it's been sort of creeping better, in sympathy with the equity markets."

Equities were proving to be a strong prop under the junk market on Tuesday, with the bellwether Dow Jones Industrial Average climbing 213.88 points, or 2.10%, to end at 10,404.77. Other, broader stock index had even better gains, with the Standard & Poor's 500 index up by 2.35% on the day and the Nasdaq composite index up 2.76%.

The second trader said: "The calendar has been pretty light, so it hasn't really spurred a lot of trading away from large, big-cap names."

He estimated that "depending where you looked, you were up anywhere from a half point to a point today."

The first trader further said that there were "lots of different bonds trading, as opposed to huge amounts" in just a couple of names.

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