AbitibiBowater paper weaker; Distressed autosphere mixed; Idearc loan softer, bonds firmer

By Stephanie N. Rotondo

Portland, Ore., April 3 - The distressed bond market was deemed firmer overall Thursday, despite its equity counterparts ending essentially flat.

"Everything was good," said one trader, who opined that the junk arena was up by 1 point on average.

"The market continued to rally," said another source.

One name busting that trend, however, was AbitibiBowater Inc. With its refinancing plan successfully completed, its new bonds ended unchanged to lower on the day. Longer-dated paper was also seen weaker, though traders noted activity in the name was "very light."

Meanwhile, distressed automotive names closed the session mixed. Delphi Corp.'s debt gained some ground as market players began to believe that the company could in fact exit bankruptcy by its end-of-the-week deadline. Cooper-Standard Automotive Inc. also continued to edge higher, boosted earlier in the week by its 10-K.

Dura Automotive Systems Inc., however, drifted lower, as the company's amended disclosure statement was approved.

A rating downgrade pushed Idearc Inc.'s bank debt down, but its corporate debt remained on the incline. Moody's Investors Service dropped its rating on the phonebook publisher, citing among other things, softer financial performance.

AbitibiBowater paper weaker

Trading in AbitibiBowater paper was "very light," a trader said, but the company's bonds still felt weaker overall.

The trader called the new 13¾% notes due 2011 unchanged at 100.5 bid, 101.5 offered. The new 15½% notes due 2010, given to noteholders in exchange for their 2008 and 2009 maturities, "opened wide" at 72 bid, 74 offered, closing at 73 bid, 74 offered. The trader said the bonds, which are trading in the when-issued "gray area," ended the previous session at 75 bid, 77 offered.

The trader said the 15½% notes had not yet been priced, but the trader believed the bonds would be placed somewhere in correlation with the 8.55% notes due 2010.

The trader also saw the 9% notes due 2009 linked to the Bowater moniker trade at 82.5 bid, 83.5 offered. He called that issue the "most active one" of the company's various notes.

"But that's a Bowater piece," he noted. "That's a much better piece of paper, a much different animal."

At another desk, a trader quoted the 13¾% notes at 100.75 bid, 101.5 offered and the 15½% notes at 73 bid, 73.5 offered.

On Tuesday, the newsprint producer announced it had successfully completed its refinancing plan. The plan included a private placement $350 million of 8% convertible notes - sold to Fairfax Financial Holdings Ltd. - as well as the issuance of the 13¾% notes. The proposal also included a $400 million 364-day senior secured term loan and the aforementioned exchange offer for the 2008 and 2009 issues linked to Abitibi-Consolidated.

With the plan in place, the company now has some breathing room. Abitibi was able to pay nearly $200 million on its April 1 maturity and thus avoid filing bankruptcy.

Still, the new debt acquired through the plan has a high price and a short shelf life. In 2010, the merged company will have about $1 billion in debt maturing and another $1.4 billion in 2011.

But Kim Noland, analyst with Gimme Credit LLC, believes there is time for the company to turn itself around - although she does not rule out another restructuring down the road.

"We think these securities are money good even in a restructuring and would buy them at current levels," she wrote in a morning report.

AbitibiBowater, the consolidated company of Abitibi-Consolidated Inc. and Bowater Inc., is a Montreal-based forest products company specializing in newsprint.

Distressed automotive names mixed

With its emergence deadline fast approaching, Delphi's bonds have gained a little momentum.

One trader quoted the debt generically at 37 bid, 38 offered, while another source deemed the notes nearly 4 points better at 37.

However, another trader pegged the 7 1/8% notes due 2029 at33 bid, 34 offered, "kind of where it has been."

On the bank debt side, the Troy, Mich.-based automotive parts supplier saw its first-lien term loan drop to 94 bid, 95 offered from 94¼ bid, 95¼ offered after spending every day this week on an upward path, a trader said.

In the previous session, a Delphi spokesperson told Prospect News that the company was on track to exit Chapter 11 protection by the end of the week. However, the spokesperson declined to comment on the company's progress in securing its $6.1 billion exit facility.

Meanwhile, Cooper-Standard Automotive's bonds continue to climb, its 8 3/8% notes due 2014 "ending up a little firmer," a trader said, at 78.25 bid, 79.25 offered and its 7% notes due 2012 at 87.25 bid, 88.5 offered.

The Novi, Mich.-based company's debt has steadily moved up since reporting its fourth-quarter and full-year results. Despite posting a 16% increase in sales for the year, the company also showed a wider loss.

Also in the autosphere, Dura Automotive's notes were seen sliding as the company's amended disclosure statement won approval from the court overseeing its case.

A trader said the 8 5/8% notes due 2012 "have been drifting lower" and closed Thursday's session around 7. The trader said he heard that under the new statement, recoveries were "tweaked lower."

"That's why [the bonds] went from the low-teens to 7," he said.

The company's subordinated debt, the 9% notes due 2009, are still trading at pennies on the dollar, as those debtholders are expected to receive no recovery.

Idearc loan softer, notes gaining ground

Idearc saw the bid on its term loan soften as Moody's Investors Service downgraded the company and its debt, according to a trader.

The term loan was quoted at 79½ bid, 80½ offered, compared to previous levels of 79¾ bid, 80¼ offered, the trader said.

The company's corporate debt, however, was seen better once again, its 8% notes due 2016 up 1 to 2 points at 66 bid, 67 offered.

Moody's cut the company's corporate rating to B1 from Ba3 and its credit facility rating to Ba3 from Ba2. The outlook is negative.

Moody's said that the ratings downgrade was prompted by the concern that continuing softness in Idearc's financial performance has impeded the company from achieving a reduction of debt and leverage to levels expected when ratings were first assigned in October 2006.

The negative outlook reflects the view that Idearc's financial metrics could experience further deterioration as a result of softening spending by its customers on yellow pages print advertising, and the increasing competition and disintermediation facing the company.

Idearc is a Dallas-based provider of yellow and white page directories and related advertising products.

Retail bonds better, loans mixed

Distressed retailers "continue to creep up," a bond trader said, in line with the overall firmer market.

The trader quoted Bon-Ton Stores Inc.'s 10¼% notes due 2014 at around 69 and Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 near 80. He also said Linens n'Things Inc. floating-rate notes, which have slowly been climbing up, continued their upward trek, ending at 38.

At another desk, a trader called Burlington's bonds unchanged at 79.5 bid, 80.5 offered.

But the sector's bank debt was mixed on the day, traders reported.

Dollar General Corp., a Goodlettsville, Tenn.-based discount retailer, saw its term loan B-1 fall to 89¼ bid, 90¼ offered from 89¾ bid, 90¾ offered, the trader continued.

Meanwhile, Michaels Stores Inc., an Irving, Texas, specialty retailer for the hobbyist and do-it-yourself home decorator, was a little higher on Thursday as people view this debt as not yet undergoing as much of a pop as its peers. The term loan B was quoted at 84¾ bid, 85¾ offered, up from 84 3/8 bid, 85 3/8 offered, the trader added.

Hawaiian Telcom bank debt slips

Hawaiian Telcom Communications Inc.'s term loan lost some ground during the session as more sellers than buyers emerged, according to a trader.

The term loan was quoted at 74 bid, 76 offered, down from Wednesday's levels of 75 bid, 77 offered, the trader said.

"I think guys are starting to realize that the company is in a lot worse shape than they thought. Bonds continue to be under pressure, so valuations are changing," the trader remarked.

At the start of this week, the term loan fell to the 75 bid, 77 offered context from 79 bid, 80 offered after the company released disappointing fourth-quarter and full-year 2007 results.

For the quarter, net income was $109.9 million, primarily attributable to the sale of the company's directory publishing business, compared to a quarterly net loss of $29.9 million in the same period a year ago.

Operating revenue for the quarter was $116.4 million, $4 million below the prior quarter and 6.6% lower than that of the previous year's fourth quarter, and adjusted EBITDA was $29.6 million.

For full-year 2007, net income was $117.3 million compared to a net loss of $144.6 million in 2006.

Revenue for the full year totaled $483.7 million, a decline of $19.5 million or 3.9% from 2006, and adjusted EBITDA was $157.3 million, up 1% from 2006.

Hawaiian Telcom is a Honolulu-based telecommunications provider.

Broad market tidbits

A trader said Merisant Co.'s bonds were "doing better" as the company said its liquidity was stable, though its capital structure remained an obstacle.

The trader quoted the 9½% notes due 2013 at 72.5 bid, looking, and the 0% notes due 2014 in the low-30s.

Thornburg Mortgage Corp.'s 8% notes due 2013 ended its two-day rally, closing essentially unchanged at 71 bid, 73 offered.

A trader said there was "no reaction" in Vertis Inc.'s bonds after the company announced it would not make the upcoming interest payment on its 9¾% notes due 2009. Those bonds remained in the mid-80s, around 84, while the 10 7/8% notes due 2009 stayed in the mid-30s.

"It was a bit of a surprise," another source said of the news. "The numbers seemed to be good and they are still talking about merging with American Color Graphics."

The source added that if the company fails to make a payment on its upcoming coupon, "the bonds will go south." However, he added that in the event of a bankruptcy - assuming the proposed merger does not go through - "there could be par recovery."

United Rentals Inc.'s 6½% notes due 2012 were called "busy but unchanged" at 91 bid, 91.5 offered.

Tropicana Entertainment LLC's 9 5/8% notes due 2014 began trading flat, a trader said, closing around 56. The trader said the bonds had been at 52 bid, 53.5 offered, attributing the gains to the interest points. He therefore called the debt "equivalent to where they were - maybe half a point to three-quarters of a point lower."

"It's not over yet," he added, noting that the company has until April 20 to cure a potential default.

Harrah's Operating's new 10¾% notes due 2016 traded actively at 84.75 bid, 85 offered.

Sara Rosenberg contributed to this article.

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