Kodak holds on as judge declines to rule in patent battle; NewPage steady; Edison debt rising

By Stephanie N. Rotondo and Paul Deckelman

Phoenix, June 13 - There was a "heavier tone" in the high-yield bond market on Wednesday, but many distressed credits were managing to end the day unchanged, according to market sources.

A bankruptcy judge on Wednesday declined to rule in a patent fight between Eastman Kodak Co. and Apple Inc. Kodak had sought the court's ruling on whether or not it owned 10 patents that Apple is alleging ownership of.

Kodak wanted the ruling in order to include them in an upcoming auction of its patent portfolio.

Despite the news, Kodak's bonds were holding steady.

Also steady were NewPage Corp.'s bonds. Earlier in the week, a trader told Prospect News that the company was not planning on making a coupon payment at the end of the month. That initially put a little pressure on the debt, but the losses were contained.

Edison International Inc. meanwhile continued to trend on the upside. The Rosemead, Calif.-based power producer's debt has been steadily climbing all week, helped out by the fact that natural gas prices have been dropping.

Kodak unfazed by ruling

The judge overseeing Kodak's bankruptcy case declined to rule on a battle of ownership of 10 patents between the company and Apple.

However, the bonds were little affected by the news.

A trader said the bonds were actively quoted, but unchanged. He placed the 9¾% second-lien notes due 2018 at 61 bid, 62 offered and the 7¼% notes due 2013 at 12½ bid, 13½ offered.

Another trader agreed that the debt was "about the same," pegging the second-liens at 61½ bid, 62½ offered and the 7¼% notes at 12¾ bid, 13¾ offered.

Though judge Allan L. Gropper of the U.S. Bankruptcy Court in Manhattan declined to rule in the matter, he did provide a middle ground for the parties. As Kodak wants to include the patents in question in an upcoming patent portfolio auction, Gropper said Kodak could note on said patents that Apple might have a claim on them. Kodak could instead place a portion of the money earned in the auction into an escrow account, which will then be distributed to the winner of the actual patent battle.

Kodak is slated to file its auction procedures by the end of the month. However, as of yet, no stalking horse bid has been received.

Kodak is based in Rochester, N.Y.

NewPage holds still

Miamisburg, Ohio-based papermaker NewPage saw its bonds holding their ground in midweek trading.

A trader placed the 11 3/8% notes due 2014 around 58. Another trader quoted the issue at 56½ bid, 57½ offered, "kind of unchanged."

Earlier in the week, a trader told Prospect News that the bankrupt company was not planning on making its coupon payment at the end of June. That initially resulted in losses for the bonds, but they were quickly stemmed.

Edison powering up

Edison International paper continued to forge full steam ahead on Wednesday, a trader said.

He called the power producer's debt up half a point to a point on the day. The 7¾% notes due 2016 rose a point to 561/2, while the 7 5/8% notes due 2027 earned nearly a point to end around 543/4.

The 7% notes due 2017 were called half a point firmer at 561/2.

At another desk, a trader deemed the 7% notes "about unchanged," trading with a 56 handle.

Broad market mostly weaker

Among other distressed issues, a trader said Dex One Corp.'s 12% pay-in-kind notes due 2017 were "down a little bit," trading around 26.

Another trader said Bon-Ton Stores Inc.'s 10¼% notes due 2014 were a point higher at 771/2.

Patriot Coal Corp.'s 8¼% notes due 208 were seen getting hit," a third trader said. Though he didn't see many trades, he said the debt was "quoted wide" in the high-30s, "down a few points" from Tuesday levels.

Another market source placed the notes at 43 bid, down 3 points.

Alion sees big drop

A trader said that Alion Science & Technology Corp.'s 10¼% notes due 2015 traded on Tuesday night down around the 30 level, which called down around 10 points from prior levels.

The first trader saw no news out on the McLean, Va.-based employee-owned research and development and information technology government contractor that might explain the drop, and surmised that "they haven't traded in a while," causing the market to re-price the bonds.

"They hadn't traded well" even before the latest drop, he said, but the lack of recent quotes caused junk players to quote them lower in the wake of recent market woes.

A second trader said he "saw a couple of quotes" in the company's two issues of bonds, with its 12% senior secured notes due 2014 trading between 90 and 93 bid, though on "small" size.

He saw the unsecured 10¼ notes at 31 bid on Wednesday, but only on one small trade, for about $59,000.

On Tuesday, he said there had been a couple of $1 million trades at 29¾ to 30, "so they have gotten whacked."

But he said there had been very little, if any, trading in the credit in the days and weeks leading up to Tuesday - he said that "the last time I remember trading these things, they had a 50-handle," only half joking that "I don't remember how long ago it was."

He said that the bonds were around the 50-bid level and above back in April, but the last round-lot transaction before Tuesday was all the way back in late March. There was some sizable trading in the mid-40s in mid-May, around the time the company warned in a regulatory filing that it expects to have tap its $35 million revolving credit facility to "moderate the effects of interruptions to the collections cycle from contract funding delays," though not to any "significant extent" otherwise, except for letters of credit.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.