Rite Aid mixed on numbers; GM slips on IPO news; Tribune about unchanged; Smurfit bonds weaker

By Stephanie N. Rotondo

Portland, Ore., June 23 - Distressed debt was largely mixed during Wednesday trading, though most bonds trended toward the softer side, traders reported.

Rite Aid Corp. saw its bonds performing in line with that trend as the company reported its first-quarter results. The quarterly figures were in line with - if not better - than what many analysts were expecting and the company affirmed its full-year guidance.

Meanwhile, General Motors Corp. is reportedly preparing its plan for an initial public offering. Market players saw the carmaker's debt dipping during the midweek session.

Tribune Co.'s debt was little fazed by word that its bankruptcy case examiner was requesting more time to investigate claims made by bondholders regarding the company's 2007 leveraged buyout and the subsequent bankruptcy filing in 2008. A trader said the bonds were down a bit to steady.

And, Smurfit-Stone Container Corp. remained an active name. However, the bonds continued to be weaker, likely due to profit taking.

Rite Aid mixed on numbers

Rite Aid debt was "way up there, activity-wise," a trader said, following the release of the company's first-quarter earnings.

But the trader said that, in terms of price movement, the bonds were "weird, some are up, some are down." He saw the 9½% notes due 2017 gaining nearly a point to close around 803/4, while the 7.70% notes due 2027 lost about a point to end around 58.

Another market source pegged the 8 5/8% notes due 2015 at 82¾ bid, about a point better on the day.

For the quarter ending May 29, the Camp Hill, Pa.-based drugstore chain reported a net loss of $73.7 million, or 9 cents per share, on revenues of $6.4 billion. Those figures compared with a net loss of $98.4 million, or 11 cents per share, on revenues of $6.5 billion the year before.

Analysts polled by Thomson Reuters were expecting the loss to come in at 14 cents per share on revenues of $6.4 billion.

Rite Aid said the 2.1% decrease in revenue was due to store closures, as well as a decline in same-store sales. Same-store sales dipped 1% total compared to year-ago levels.

Additionally, the company confirmed its fiscal 2011 guidance. Rite Aid expects to see between $25.2 billion and $25.6 billion in sales and is aiming for a net loss between $355 million and $570 million.

"During the quarter, we made excellent progress on our initiatives," said John Standley, president and chief operating officer, in the earnings release. "We expect these sales initiatives, along with the continued roll-out of our segmentation strategy, to have a significant positive impact on our business long term."

"Rite Aid's first fiscal quarter results were a bit better than we expected - at least on the EBITDA line," wrote Gimme Credit LLC analyst Kim Noland in an afternoon research note. Rite Aid reported adjusted EBITDA of $249.8 million, or 3.9% of revenues. "We view it as good news that [the company] affirmed full yea guidance of $875-$975 million EBITDA although this likely assumes improved operating results in the second half.

And, Noland said that with "reasonable liquidity" - about $1.25 billion - junior bondholders might be appeased given the "overleveraged (over 7x) capital structure."

GM slips post-IPO news

General Motors' notes fell in midweek trading, as news reports indicated the company was preparing its initial public offering.

A trader said the benchmark 8 3/8% notes due 2033 were "pretty active," seeing them fall about 1½ points to around 34. He also saw the 6 ¾% notes due 2028 around 30, though he deemed that "kind of unchanged."

Another trader said the 8 3/8% notes were down a point, also at that 34 level.

According to unnamed sources, GM is reportedly preparing to file its up to $20 billion IPO in July. The deal is expected to sell off some shares owned by the U.S. Treasury, reducing it to a minority stakeholder.

GM is also looking to JPMorgan Chase & Co. and Wells Fargo to provide auto loans for subprime and leasing customers. GM no longer has an internal financing unit, as it sold off GMAC LLC - now Ally Financial Inc. - about three years ago.

JPMorgan has also been retained - along with Morgan Stanley - to act as lead underwriter for GM's IPO.

General Motors is a Detroit-based automotive manufacturer.

Tribune unchanged to slightly weaker

Newspaper publisher Tribune saw its bonds shaking off news that the court-appointed examiner to its bankruptcy case has requested more time to investigate whether its 2007 leveraged buyout led by Sam Zell resulted in the company's 2008 bankruptcy filing.

A trader said there were "only a couple trades" in the credit. He quoted both the 4 7/8% notes due 2010 and the 5¼% notes due 2015 at 29 bid, 30 offered, deeming that down slightly to unchanged.

The examiner has requested another two weeks, extending the July 12 deadline to July 27.

Smurfit sees more pressure

Profit-takers continued to put pressure on Smurfit-Stone Container's debt, as the bonds fell another 1 to 2 points.

A trader saw the 8% notes due 2017 falling 1½ points to finish around 85 3/8. Another trader quoted the issue at 85½ bid, 86 offered, calling that "down a bit."

Yet another source said the 8¼% notes due 2012 dropped 2 points to end at 86 bid.

The bankruptcy court recently confirmed Smurfit's plan of reorganization. The Chicago-based paper packaging manufacturer expects to emerge from Chapter 11 protections by the end of the month.

Broad market softens

Also going on in the market, the not-quite-yet distressed Anadarko Petroleum Corp. bonds remained the "busiest" credit in high-yield land, according to a trader. He said the 6.45% notes due 2036 fell a point to 82, while the 5.95% notes due 2016 inched up a tad to 861/2.

First Data Corp.'s 9 7/8% notes due 2015 meantime remained on the weaker side, losing just over a point to end at 82 bid.

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