NewPage, Verso recover some losses; ATP higher as buyers seek Israeli licenses; Caesars firms

By Stephanie N. Rotondo

Phoenix, Sept. 6 - As positive news out of Europe helped push up the equity markets, the distressed debt arena followed suit on Thursday.

"I think the word of the day is like 'buy everything,'" a trader said. "The market was really strong; there were buyers of just about everything."

However, another trader said the "bulk" of the activity continued to be in new high-yield issues.

After losing ground in the previous session on news merger talks had disbanded, both NewPage Corp. and Verso Paper Corp. bonds rebounded during the trading day.

ATP Oil & Gas Corp. was also seen recouping losses. Earlier in the week, the market learned that the company's Israeli licenses had been seized at the behest of creditors. On Thursday, it was reported that companies interested in acquiring the licenses have asked the seizure be reversed.

Meanwhile, Caesars Entertainment Corp. debt ended stronger, despite a recent outlook change from Fitch Ratings. Fitch altered its outlook to negative on Wednesday, stating that the company's high leverage makes it prime for some sort of restructuring.

NewPage, Verso recoup losses

NewPage and Verso bonds were trending higher again, after losing ground in the previous session on back of news that merger talks had been halted.

A trader said Verso's 11¾% notes due 2019 were trading up about 2 points to levels around 80. NewPage's 11 3/8% first-lien notes due 2014 were better around 65.

Another trader also pegged NewPage's notes around the 65 level.

In July, Memphis-based Verso said it had approached Miamisburg, Ohio-based NewPage on a potential merger. If NewPage had gone along, stakeholders would have received $1.075 billion in new first-lien Verso notes, $150 million of Verso stock and $200 million in cash.

Verso had also said it would pay 100% of NewPage's debtor-in-possession facility.

The deal might have been doomed from the beginning, however, as management at NewPage was cool to the terms, saying that they presented "significant downside risks" to its stakeholders.

In a statement released Wednesday, Verso's CEO David Paterson said that it was "in the best interests of our company and its stakeholders to focus on the many other opportunities for Verso, including internal growth projects and other potential strategic alternatives."

Apollo Capital Management, run by Leon Black, holds stakes in both companies.

ATP rallies

ATP Oil & Gas' 11 7/8% notes due 2015 rebounded Thursday, according to traders.

One trader quoted the notes at 26 bid, 26½ offered, up about 2 points. Another trader placed the paper around 261/2.

Earlier this week, it was reported that the Israeli drilling licenses held by ATP's ATP East Med Number BV subsidiary had been seized by the Tel Aviv government at the request of two creditors who allege that they are owed $6 million by the unit. However, other oil and gas companies have asked the creditors to lift the seizure so that the licenses can be purchased.

The subsidiary was not protected under the Houston-based parent company's bankruptcy filing.

Caesars heads up

Caesars Entertainment's 10% notes due 2018 were rising during the session, despite a downward outlook revision from Fitch the day before.

A trader saw the bonds going out in a 65-65½ context, versus early morning levels around 64.

Another market source called the issue up over a point at 64¾ bid.

Fitch revised its outlook on the Las Vegas-based casino operator to negative on Wednesday, citing concerns about the company's ability to service its $19.9 billion in debt. While near-term liquidity is considered to be strong, Fitch's analysts wondered how long its investors would be willing to pump money into a company that is rapidly burning through cash.

Fitch opined that investors might instead look to restructure somehow, including possible spinoffs of certain units - specifically the interactive unit, which includes the famous World Series of Poker brand.

The rating agency also said that a debt exchange could be feasible.

Broad market sizzles

In the rest of the distressed space, a trader saw Clear Channel Communications Inc.'s debt gaining, the 9% notes due 2021 ending at 88 and the 10¾% notes due 2016 at 88.

Another trader said Patriot Coal Corp.'s 8¼% notes due 2018 were stronger again, though he was not sure what was causing the firmness.

He pegged the issue around 47.

Another market source called the issue up a deuce at 47¼ bid.

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