Sorenson paper gets a big boost; Catalyst hammered on skipped coupon; Exide bonds lose ground

By Stephanie N. Rotondo

Portland, Ore., Dec. 16 - Friday was an overall positive day for distressed debt, according to traders, but volume was on the light side.

"It was a stock day again," a trader said. "There were a lot of options expirations today."

Sorenson Communications Inc. was the day's big gainer. The company's bonds climbed up as much as 10 points on the day, though it was not clear what was driving the gains.

On the downside, Catalyst Paper Corp. was taking a beating. The company had said Thursday that is was deferring an interest payment on its convertible notes and investors reacted Friday by pushing the bonds significantly lower.

Exide Technologies' debt was also weaker. The softness was deemed "odd" by one trader, given that Moody's Investors Service had affirmed its ratings on the company and altered its outlook to positive.

Meanwhile, MF Global Holdings Ltd.'s bonds were ticking upward.

Sorenson sees big boost

Sorenson Communications' 10½% senior secured notes due 2015 were "up a bunch," a trader said, seeing the bonds gain about 10 points on the day.

He pegged the notes in the low-70s.

Another trader saw the bonds "quoted all day long" at 71 bid, 72 offered. He also called that up 10 points on "a lot of activity."

The first trader said he heard that the Federal Communications Commission was making some changes to its rates that were "obviously favorable" to Sorenson, a Salt Lake City-based provider of communications services and products for the deaf and hard-of-hearing.

"Maybe it wasn't specific to them, but maybe it had implications for them," he said.

However, a check of news outlets and the FCC website provided no further information on any rate changes.

The second trader said he had "no idea" what was driving the paper higher.

Catalyst gets beat down

Catalyst Paper's debt got whacked on Friday as investors reacted to news out Thursday regarding a skipped coupon payment.

One trader quoted the 7 3/8% notes due 2014 at 6 bid, 6½ offered, noting that the issue had dropped as low as 2.

"They haven't traded in a month," he said, adding that at that time, the securities were trading in the low-20s.

"That's way down from where those bad boys last traded," he said.

Another trader pegged the notes around 4.

On Thursday, the Vancouver, B.C.-based pulp and papermaker said it was deferring a $21 million interest payment on its 11% senior secured notes due 2016. The company said it was choosing to delay the interest payment due to ongoing talks with bondholders regarding a plan to deal with the company's debt structure. If Catalyst fails to come to an agreement or pay the coupon within the next 30 days, holders of the 11% notes can declare the bonds due and payable, with interest.

If the notes are accelerated and not paid within 30 days, that will then trigger an acceleration of the 7 3/8% notes, as well as on the company's ABL facility with JPMorgan Chase & Co.

Catalyst has hired financial adviser Perella Weinberg Partners to review alternatives to address Catalyst's capital structure.

Exide powers down

Exide Technologies' 8 5/8% notes due 2018 were weaker on Friday, even as Moody's affirmed the company's credit rating and placed a positive outlook on it.

"It's odd that they should trade down on that news," a trader said, seeing the issue falling 1½ points to 783/4.

Another trader also said the notes were "drifting lower," pegging them in the high-70s.

Moody's confirmed Exide's B3 corporate family rating and the B2 rating on the $675 million of notes maturing in 2018.

The rating agency said the positive outlook was based on the belief that despite challenges, Exide will continue to hold its market position.

Exide is a Milton, Ga.-based manufacturer and recycler of lead-acid batteries.

MF paper gains

MF Global's 6¼% notes due 2016 were on the rise, with one trader calling the issue up a point at 32.

Another trader said the debt was "probably a little better" at 32 bid, 33 offered.

Investigations into where $1.2 billion of missing customer funds are continuing, but some headway has been made, according to news reports out Friday. In at least one case, it has been discovered that the bankrupt futures broker used client funds to shore up its books.

The New York-based firm filed for bankruptcy on Oct. 31.

Broad market better

Among other distressed issues, Rite Aid Corp.'s 9½% notes due 2017 remained firm after the company reported a narrower third-quarter loss on Thursday.

A trader deemed the issue up nearly half a point at 90 5/8.

Another trader said Ahern Rentals Inc.'s 9¼% notes due 2013 were trading at 20 bid, 20½ offered. The issue doesn't trade often, he said, and assumed the renewed activity was due to news that United Rentals Inc. was buying Rent-A-Center.

Paul Deckelman contributed to this article

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