AMR bonds steady as company seeks extension; Navistar paper up on rumors; general market firms

By Stephanie N. Rotondo

Phoenix, June 29 - It was another strong day for distressed bonds Friday, though overall activity in the sector was painfully slow, according to market sources.

"There wasn't much news," one trader said. "But everything seemed like it was moving up a bit."

AMR Corp. was in the headlines, as Bloomberg reported that the company was planning to seek an exclusivity extension because union talks were not going as quickly as hoped. The news, however, did little to move the bonds.

Meanwhile, a trader said Navistar International Inc. paper was active and "all over the place," eventually ending higher.

The trader said the gain were probably due to rumors circulating about the company.

Other names, like Nokia Corp. and Clear Channel Communications Inc., were seen gaining ground in line with the market.

AMR steady

AMR's benchmark 6¼% notes due 2014 continued to hang around the 61 mark, a trader said.

There was not much trading in the Fort Worth, Texas-based bankrupt airline's debt, however, even as news came out regarding the company's plan to seek an exclusivity extension.

Citing "people familiar with the matter," Bloomberg reported that AMR wanted the extension because negotiations with its unions were not going as smoothly as hoped.

The company is reported to be filing for the extension next week. Its current exclusivity period ends Sept. 28. If the extension is approved, that would push the deadline to Dec. 27, which would likely hamper efforts to exit Chapter 11 protections while still in 2012.

Navistar gains on rumor

Navistar bonds were "up a good bit" by the day's close, even after trading "all over the place."

A trader pegged the 8¼% notes due 2021 in a 95 to 96 context, up from opening levels around 93.

Another market source saw paper opening at 94 bid, 94½ offered, hit a high of 95 bid, 96 offered and then come in to trade with a 93 handle late in the day.

The first trader noted that the company's stock (NYSE: NAV) was "up a bunch," gaining $2.81, or 10.99%, to $28.37.

The trader speculated that the gains in both the equity and the bonds were because of a rumor circulating about an addition to its engine offerings.

Navistar is said to be considering adding engines made by Cummins Inc. to sell alongside its MaxxForce engines. The trucks are expected to be available sometime in 2013.

The Lisle, Ill.-based company has been struggling to overcome issues with its 13-liter truck engine. The issues have presented an obstacle in getting the engines certified in the U.S. and have not been as easy to fix as previously believed.

Because of those problems, Navistar lowered its full-year profit forecast to a range of break-even to $2 a share, excluding some costs, earlier this month. That compared to a February forecast that put 2012 profit at as much as $5.75 a share.

Nokia, Clear Channel strengthen

The general strength in the market helped some names move higher, even without specific news to act as catalyst.

Nokia, for instance, was deemed "better" and "up with the general market" by one trader.

He placed the 5 3/8% notes due 2019 around 80.

Another source pegged the issue at 79½ bid, 80 ½ offered, up from 78¾ bid, 79 ½ offered previously.

Clear Channel Communications' 10¾% notes due 2016 were also "up a couple points," the first trader said. He quoted the notes at 63½ bid, 64 offered.

A second source saw the notes at 63 bid, 64 offered, up 1½ to 2 points on the day.

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