First Data drops on no news; Sprint Nextel debt up modestly; Rite Aid softens post-CVS numbers

By Stephanie N. Rotondo

Portland, Ore., July 28 - Distressed debt lost some of its luster during Wednesday trading, as recent gains turned sour.

First Data Corp. was on the busy side, as the bonds lost around 3 points on the day. There was no news out to explain the declines, however.

In earnings news, Sprint Nextel Corp. inched up slightly following the release of its second quarter results. Despite posting a wider loss, the company was excited about posting its first increase in net wireless subscribers in three years.

Rite Aid Corp.'s debt fell following earnings from sector peer CVS Caremark Corp. Rite Aid will release its July sales report on Thursday.

Meanwhile, NewPage Corp. bonds were modestly weaker on the day, according to market sources. The company is making strides in its fight against Chinese paper subsidies, according to a press release.

First Data debt drops

First Data's debt closed out the midweek session a few points lighter, according to traders.

One trader said the 9 7/8% notes due 2015 had slipped almost 3 points to 811/4, though he was not sure what caused the decline.

Another trader also said that he hadn't heard any news that would account for the losses, seeing the 10.55% notes due 2015 finishing around 77½ bid, 78½ offered.

That compared with previous levels around 80, he said.

The Atlanta-based electronic payment processor is scheduled to release earnings on Aug. 10.

Sprint up modestly

Sprint Nextel released its second quarter results, which showed the first total net wireless subscriber growth in three years.

A trader said the bonds were "pretty active" and about a point better, the 6.90% notes due 2019 ending around 953/4.

Another market source called the debt "up a little bit," seeing the 6% notes due 2016 at 94½ bid, 94¾ offered, versus 94 bid, 94¼ offered previously.

The source also saw the 6.90% notes at 95½ bid, 95¾ offered, which compared to levels around 94 on Tuesday.

For the quarter, the Overland Park, Kan.-based wireless telecommunications provider reported it had gained 111,000 net subscribers.

However, it also lost 55,000 brand subscribers and 228,000 contract subscribers.

Second-quarter earnings

The second-quarter loss also widened to $760 million, or 25 cents per share. Sprint lost $384 million, or 13 cents per share, in the same quarter of 2009.

Revenue meantime fell 1% to $8.03 billion.

"Our intense focus for the past 10 quarters on improving the customer experience, strengthening our brands and generating cash are paying off," said Dan Hesse, chief executive officer, in the earnings release.

"With strong cash flow, stable OIBDA and widespread third-party recognition for the improvements we're making in the customer experience, which in turn strengthens our brands, we feel we can confidently improve our subscriber forecasts for the second half of 2010 and deliver positive total net wireless subscriber additions for the remainder of the year."

Dave Novosel, an analyst with Gimme Credit LLC, seemed upbeat about the earnings and related subscriber additions. But he was still concerned about overall trends in the wireless arena.

"Slowing growth in the industry suggests Sprint may have trouble boosting revenue in the near term," he said in an afternoon note to clients. "Weakness on the top line is also constraining overall margins, while leading to operating losses in the wireless segment."

Novosel noted that Sprint's "bright spots" were "excellent free cash flow and healthy liquidity."

Rite Aid softens post-CVS numbers

Rite Aid bonds were down half a point to nearly 1½ points, traders reported, after rival CVS Caremark Corp. released its quarterly figures.

A trader called the 9½% notes due 2017 down the most, closing around 813/4. The 7½% notes due 2017 fell to around 92, he said.

At another desk, a trader said Rite Aid debt was "dragged down off of CVS numbers," seeing the 9½% notes around 82. While that issue was down about 1½ points, he said the other Rite Aid notes were off "maybe a smidge."

On Wednesday, CVS Caremark reported a dip in net income, which fell to $821 million from $866 million. Revenue was also weaker at $24.01 billion from $24.87 billion the year before.

Rite Aid is also expected to post its July sales results on Thursday.

NewPage paper dips

Miamisburg, Ohio-based coated papermaker NewPage saw its bonds slipping as a Congressional group asked the Obama administration to look into Chinese paper subsidies.

The bonds were down anywhere from one-eighth to one-half, depending on whom you asked. From the former, a trader placed the 11 3/8% notes due 2014 around 931/4. In regard to the latter, a trader saw the notes end around 93, which compared to 93½ the day before.

The first trader also said he saw a few bids in Sappi Fine Paper North America, though he didn't know if anything had traded. The 6¾% notes due 2012 were at 99 bid, while the 12% notes due 2014 were at 112 bid.

The trader added that the entire sector has "been kind of dragging."

According to a joint press release issued Wednesday, more than 100 congressional leaders wrote a letter to the President asking him to "carefully examine the practices employed by the Chinese government to provide its paper industry an artificial and unfair advantage in the U.S. market, and determine the extent to which these practices cause or threaten to cause harm to American producers."

Also, NewPage is expected to come out with second-quarter financials on Aug. 5.

Energy names most steady

A trader saw ATP Oil & Gas Corp.'s second-lien senior secured 11 7/8% bonds due 2015 ending around 74 bid, which he said was pretty much unchanged on "not a lot of activity." He said the bonds, which had recently been in the lower 70s, "are stable at the higher levels."

He saw BP plc's bonds remaining in the 90s, opining that "I sort of lost interest when they stopped going down." He pegged the British oil giant's 4¾% notes due 2019 unchanged on the day around 94½ bid, 95 offered.

He saw BP's 25% partner in the blown-out Gulf of Mexico well, Anadarko Petroleum Corp.'s 5.95% notes due 2016 right around 96 bid, which he called unchanged. "I didn't see a lot of activity in that name," he said, "for whatever reason. You can definitely see that activity slowed up in these."

Meanwhile, he said that Deepwater Horizon owner Transocean Inc.'s bonds "might have been a little lower," quoting its 6% notes due 2018 right around the 92 bid level, which he called down a point on the day.

Paul Deckelman contributed to this article

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