Tribune bonds firm, plan doomed; Rite Aid steady on earnings; Nuveen notes pop on acquisition

By Stephanie N. Rotondo

Portland, Ore., July 29 - The distressed debt market was "mushy," a trader said Thursday, adding that it was "better in spots and not-so-better in other spots."

Still, another trader said that in terms of volume, it was "another reasonable day."

Tribune Co. debt got a boost on news regarding a recent report about the company's 2007 leveraged buyout that bondholders allege resulted in Chapter 11. The report claims that the company committed fraud in terms of the sale. The report could be a boon for bondholders and other creditors who are set to receive no recovery in the bankruptcy case.

Meanwhile, Rite Aid Corp.'s bonds held their ground, even as the company posted yet another decline in monthly sales. But traders noted that the debt was not quite as active as it had been on Wednesday.

Nuveen Investments Inc. announced an acquisition Thursday, which gave its bonds some legs. Sources saw the notes climbing 5 to 6 points on the news.

Tribune firms, plan doomed

Newspaper publisher Tribune saw its bonds gain as much as 4 points on the day, as bondholders called the company's reorganization plan dead in the water.

A trader said the 4 7/8% notes due 2010 was the most active of the Tribune issues, seeing the bonds close around 33 bid, 33½ offered. The 5¼% notes due 2015 and the 6.61% notes due 2027 also closed around that level, he said, which was a 2- to 4-point gain, depending on the issue.

The 7¼% notes due 2013 meantime closed around 34, up 2¼ points.

Another trader placed the 4 7/8% notes around that 33½ mark, adding that all the issues "basically trade in the same dollar price." He called the bonds up "a couple points" on the day.

"I think there's an expectation that they'll finally sort themselves out," the trader remarked. "But I'll believe it when I see it."

Bondholders and other creditors are claiming that a recent report regarding the company's 2007 leveraged buyout negates Tribune plan of reorganization. The report - conducted by examiner Kenneth Klee - found the $3.6 billion transaction fraudulent. Since the current reorganization plan is based on a settlement of potential legal claims resulting from the LBO, the creditors are saying that the deal is dead and that creditors will vote it down - if it even gets that far.

The current plan gives control of the company over to lenders such as JPMorgan Chase & Co. and Angelo Gordon & Co. Bondholders are expected to receive no recovery.

The Klee report, as it is being touted, is not yet available to the public. A hearing on the report is scheduled for Aug. 4.

Rite Aid steady on sales report

Rite Aid bonds - which were trading on the active side on Wednesday - calmed down come Thursday, as the Camp Hill, Pa.-based company released its July sales report.

One trader said it was a "pretty quiet day for Rite Aid," calling the 9½% notes due 2017 unchanged around 82.

Another trader also deemed the debt steady, at 813/4.

For the four weeks ending July 24, the drugstore chain saw same-store sales fall 1.1% from year-ago levels. Total sales dipped 2.2% to $1.89 billion from $1.93 billion the year before.

For the year to date, same-store sales were down 1.3%, with sales slipping 2.4% to $10.16 billion.

Nuveen pops on acquisition

Nuveen Investments' 10½% notes due 2015 "popped," a trader said, on news the company was purchasing FAF Advisors from U.S. Bancorp.

The trader said the bonds ended around 981/2, which compared to 92½ previously. He said the move was possibly the day's most "exciting" event, "especially for this bond, as it doesn't trade that actively."

Another trader said a "huge hunk" of the notes changed hands during Thursday's session, placing them at 983/4. He called that up 5 to 6 points.

At another desk, a trader said the bonds were up "about 3 points" at 341/2, generically speaking.

Nuveen will pay $80 million in cash to U.S. Bancorp and will also give them a 9½% equity stake.

In return, Nuveen will receive about $25 billion in investments.

Upon hearing the news, Standard & Poor's affirmed Nuveen's long-term corporate credit rating at B-, though Moody's Investors Service upped the outlook to positive.

A&P gains ground

A trader said that Great Atlantic & Pacific Tea Co. Inc.'s bonds "improved - they did move a little bit today," building on the gains in the iconic Montvale, N.J.-based supermarket operator's bonds notched on Tuesday and Wednesday, as they bounced back from the drubbing they took last Friday.

He said that the 11 3/8% senior secured notes due 2015 were finishing around 70 bid, 72 offered, versus 67 bid, 68½ offered on Wednesday and levels in the low 60s earlier in the week.

He also saw the company's 6¾% convertible notes due 2012 having moved up to around 55 bid by the day's end - well up from 51 bid, 52 offered earlier in the day and from 52 bid, 53 offered on Wednesday.

Those bonds had initially fallen all the way down into the 40s last Friday, pushed down by poor numbers, the abrupt exit of the company's CEO after just six months on the job, and indications that the company does not yet by any means have the funding to pay off a bond series maturing next year in place.

"There was a lot of volume, too," the trader said, "really active in the name.

"The bonds were up a couple [of points], with the 6¾% [notes] up a little more" than the 11 3/8% notes, since they are convertible notes, in line with a jump of 67 cents, or 24.81%, in A&P's New York Stock Exchange-traded shares, which ended the day at $3.37 - actually above the levels they held last Friday - despite the lack of actual fresh news about the company.

Another bonds trader noted "buyers across the board," with the A&P bonds up 3 points on the session.

Paul Deckelman contributed to this article

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