R.H. Donnelley files for bankruptcy, bonds gain; GM debt weaker; Rite Aid mixed on loan news

By Stephanie N. Rotondo

Portland, Ore., May 29 - The news of the day in distressed territory was a bankruptcy filing by R.H. Donnelley Corp.

Traders saw the company's debt moving higher on the news. The phonebook publisher has struggled against declining advertising revenues and a move to internet technology. Sector rival Idearc Inc. filed for Chapter 11 protections earlier this year.

Meanwhile, as General Motors Corp. prepares to file bankruptcy, its bonds have been moving more actively. But while the carmaker's debt moved up in the previous session on news of a new debt swap proposal, they were falling again come Friday.

Rite Aid Corp. said it had upsized a new term loan, part of its restructuring effort. The bonds had a mixed response to the news, according to traders.

R.H. Donnelley files, bonds gain

Phonebook publisher R.H. Donnelley filed for bankruptcy, the company announced Friday, which resulted in some pretty good activity in the company's debt.

A trader said $20 million of the 8½% notes due 2010 linked to subsidiary Dex Media West LLC traded around 76. That was 13 points higher than the previous day's close around 63.

"Why we don't know," the trader said of the gains. However, he said that if the bonds are trading flat, or without accrued interest, that could have accounted for the increase.

Another trader called the issue up 10 points to "75-ish." But he said the 8 7/8% notes due 2016 were unchanged to slightly lower at 7.5.

At another desk, the 8% notes due 2013 were seen falling 2 points to 15 bid, 16 offered.

The Cary, N.C.-based company said it had reached an agreement in principle with its key creditors regarding a restructuring plan that would reduce its debt by $6.4 billion and eliminate about $500 million in annual interest expenses. The company's bank maturities would also be extended until 2014.

"Our growth-through-acquisition strategy never anticipated the cataclysmic collapse of the U.S. economy and the local advertising market," said David C. Swanson, chairman and chief executive officer, in a statement. "As a result of these developments, earlier this year we began negotiating with our lenders to restructure our debt and provide the company with a more sustainable capital structure that reflects the current economic realities."

Donnelley also said that it was not looking for debtor-in-possession financing, as it had more than $300 million in cash on hand.

GM active, weaker

In the automotive realm, General Motors remained active following the company's new debt swap offer announced on Thursday.

A trader said the 8 3/8% notes due 2033 ended around 9.5, with about $28 million changing hands.

"Almost every GM issue traded with a 9 handle," he said. "And most were down a point."

Another trader said the bonds were "still active around 9 and change."

Yet another source quoted the notes generically at 6 bid, 8 offered, down a point.

On Thursday, the nearly bankrupt company announced a new debt-for-equity offer that held not only the approval of the U.S. Department of the Treasury, but also an ad hoc committee of bondholders. Under the new deal, bondholders would receive 10% equity in the new reorganized company, along with warrants for an additional 15%. That offer was deemed much better by the committee, as the original offer gave the group only 10% interest.

"The ad hoc committee of GM bondholders supports the revised offer from GM and believes that when contrasted with the alternative - uncertain and costly bankruptcy court litigation - that it represents the best alternative for bondholders in the current difficult and dire situation," the committee said in a statement Thursday. "Since the initial offer was made on April 27th, circumstances have materially changed that make today's offer more attractive.

"While the committee continues to remain troubled by preferential treatment that the UAW VEBA is receiving compared to the bondholder class - rejecting this offer in the expectation that the bondholders will do better in a litigated outcome was a risk the committee is unwilling to take," the committee added.

Meanwhile, Visteon Corp., which filed for Chapter 11 protections on Thursday, saw its bonds slipping some after moving higher in the previous session.

One trader said the notes were "not overly active," placing the 7% note due 2014 at 4 bid, 5 offered. Another pegged the paper at 5 bid, 6 offered, down half a point.

Ford Motor Co.'s benchmark 7.45% notes due 2031 fell 2 points to 55 bid, 57 offered.

Rite Aid debt mixed

Market sources gave mixed readings of Rite Aid's bonds after the Camp Hill, Pa.-based company priced an upsized term loan.

A trader called the 7½% notes due 2017 and the 10 3/8% notes due 2016 half a point higher at 78.75 and 90, respectively. However, he saw the 8 5/8% notes due 2015 unchanged at 68.

Another trader said the debt dropped 2 points on the day, with the 6 7/8% notes due 2013 at 59.5 bid, 60.5 offered.

The second trader noted that Moody's Investors Service had confirmed its negative outlook on the company.

Earlier in the week, market chatter was that Rite Aid would launch a $400 million term loan at Libor plus 650 basis points. Come Friday, the deal was seen increasing to $525 million, with price talk at 96.

The term loan is part of the company's "comprehensive plan" to refinance its debt. Proceeds from the financing are expected to be used to pay a term loan maturing in 2010.

Broad market improves

In the wider world of distressed, Harrah's Entertainment Inc.'s notes were "not overly active," a trader said. He saw the 10¾% notes due 2016 gaining 2½ points to 55, while the 7 7/8% notes due 2010 inched up to 91.75.

Another source called the 5¾% notes due 2015 a point lower at 42 bid.

Smurfit-Stone Container Corp.'s 8 3/8% notes due 2012 improved to 31 bid, 32 offered, a trader said, on no news. Another source called the 8¼% notes due 2012 firmer by 3 points at 31.5 bid.

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