Rite Aid debt slips ahead of numbers; Chemtura long bonds better; Smurfit hit by profit-takers

By Stephanie N. Rotondo

Portland, Ore., June 22 - It was "kind of a tough day" for the distressed debt market, a trader said Tuesday.

The trader said that the market opened with a softer tone, ending its weeklong rally. Still, by the end of business, the market "cracked" and "accounts came back looking to see if the bids were still there."

"It was the first down day in the market in the last 7 to 8 days," another trader said. "That's not too bad."

Whether it was due to general market weakness or earnings anticipation, Rite Aid Corp.'s bonds gave up some ground. Traders saw the bonds dipping at least a point ahead of the company's earnings release on Wednesday.

Meanwhile, Chemtura Corp.'s long bonds continued to gain momentum, a trader said. The bonds popped last week following news that company had filed its plan of reorganization.

Smurfit-Stone Container Corp. debt was weaker in line with the overall marketplace. The bonds had been on an upward course and were further pushed up on Monday when the company said its reorganization plan had been approved.

And, Anadarko Petroleum Corp. remained in the headlines. Traders said the credit continued to dominate trading, as the bonds lost another point or so.

Rite Aid slips ahead of numbers

Rite Aid's debt fell about a point during Tuesday trading, just one day ahead of the company's expected first-quarter earnings release.

A trader called the 9½% notes due 2017 down "about a point" around 80. Another trader echoed that level, seeing about "$25-odd million" of the notes trade.

The second trader also saw the 8 5/8% notes due 2015 closing around 811/2, a loss of 1 to 1½ points on the day.

At another desk, the 8 5/8% notes were called down 1½ points around 82.

According to an analyst poll by Thomson Reuters, Camp Hill, Pa.-based Rite Aid is expected to post a loss of 14 cents per share on revenue of $6.4 billion.

Last year, the drugstore chain reported a $98.4 million loss, or 11 cents per share, on $6.53 billion in revenue.

Chemtura's long bonds improve

A trader said Chemtura's long-dated notes - the 6 7/8% notes due 2026 - "continue to rise," ending around 113.

That compared to Friday levels around "111-ish," he said.

However, the 6 7/8% notes due 2016 were "pretty much unchanged" around 1151/2.

The Middlebury, Conn.-based manufacturer and seller of specialty chemicals and polymer products filed its reorganization plan on Friday, more than a year after its March 18, 2009 bankruptcy filing. According to the plan terms, lenders would be paid in full in cash, while other creditors - including bondholders owed about $1.02 billion - would receive a combination of stock and cash.

The stock disbursement would account for about 95% of the company's new equity. The remaining 5% would be distributed to equityholders.

If stockholders vote to approve the current plan, they would also receive the right to buy up to $100 million in additional common shares via a rights offering.

But some shareholders are looking to add their own plan to the mix in an effort to gain more recovery.

"The equity committee is exploring the potential for alternative transactions that would result in the creation of additional value for all stakeholders, thereby increasing recoveries to equity holders well beyond what they otherwise would receive," the shareholder group said in court papers filed Friday.

Smurfit pressured by profit-takers

In other bankruptcy news, Smurfit-Stone Container saw profit-takers coming in and taking some of its recent gains, sending the company's bonds down at least a point.

A trader placed both the 8% notes due 2017 and the 8¼% notes due 2012 around 88, deeming that down "about a point."

Another trader pegged the 8% notes at 87¼ and the 8¼% notes at 88.

The second trader noted that general market weakness was likely to blame - "nothing sinister is going on," he said - as investors came to take "a little money off the table."

Yet another source saw the 8¼% notes falling nearly 2 points to end around the 88 mark.

On Monday, the Chicago-based manufacturer of paperboard and paper packaging products announced it had received court approval on its reorganization plan and related disclosure statement. The company expects to emerge from bankruptcy protections by the end of the month.

Anadarko down another point

Anadarko Petroleum "still continued to be a hot topic," a trader reported.

Another trader said that of the nearly $1.4 billion of notes that traded in the high-yield universe, about $300 million of that was made up of Anadarko paper.

Still, the bonds were only down about a point on the day, versus the 1 to 4 points lost in the previous session.

A trader placed the 5.95% notes due 2016 at 86 bid, 87 offered, the 6.45% notes due 2036 at 83½ bid, 84½ offered and the 6.95% notes due 2019 at 90 bid, 91 offered.

Another trader saw the 5.95% notes at 86 7/8, the 6.45% notes at 83¾ and the 6.20% notes due 2040 at 821/2.

On Monday, a trader speculated that activity in the credit was due to a Friday downgrade, which resulted in the company's rating falling to the 5B area. Some investors, he explained, were not allowed to own debt rated that low.

Potential liabilities

Anadarko has also pointed a finger at BP plc for its role in the Gulf of Mexico oil leak. Anadarko owns a 25% interest in the rig that sunk back in April and would therefore be liable for some of the costs related to the disaster - unless it can prove BP was negligent.

Though evidence thus far has shown BP to be negligent in its operating of the sunken rig, some market watchers believe Anadarko might still be on the hook - at least for a small portion.

"Although we think [Anadarko] has a strong case in its dispute with BP over the Macondo oil well disaster in the Gulf of Mexico, we suspect the resolution of the conflict will involve a material (finite) contribution by [the company] to clean-up and/or compensation efforts, as a matter of legal and political expedience," wrote Gimme Credit analyst Philip C. Adams in an research note.

According to news reports, it is also believed that Anadarko will choose to take the matter to arbitration rather than to battle it out in the court system.

In other oil spill-related news, a New Orleans federal judge issued a preliminary injunction on the six-month offshore drilling moratorium on Tuesday.

The Obama administration has said it will appeal the ruling.

Broad market rally ends

Also in the world of distressed debt, General Motors Corp.'s benchmark 8 3/8% notes due 2033 fell in line with the broader market, a trader said.

The trader called the bonds about half a point weaker at 34¾ bid, 35 offered.

First Data Corp.'s bonds were also "a smidge lower," the trader said. He quoted the 10.55% notes due 2015 at 79½ bid, 80 offered.

Another source said the company's 9 7/8% notes due 2015 dropped nearly 3 points, ending around 83¼ bid.

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