Rite Aid bonds firm on new issue; First Data holds its ground; Skilled Healthcare notes steady

By Stephanie N. Rotondo

Portland, Ore., Aug. 9 - It was a "surprisingly busy Monday" in the distressed bond market, according to a trader.

The activity was largely due to "two or three of these new issues making the afternoon a little crazy," he added.

One of those new issues was from Rite Aid Corp. The new debt traded up upon hitting the market, though modestly so. Still, the gain also helped to bolster the company's old notes.

With earnings expected out on Tuesday, First Data Corp.'s bonds were seen holding their ground. The debt was, as per usual, one of the more active credits.

Last week's news of a mistrial motion has done little to help - or conversely, to hurt - Skilled Healthcare Group Inc.'s bonds, which ended Monday's session unchanged. However, news of the motion did improve the bank debt's levels.

In the chemical arena, Chemtura Corp. is scheduled to launch a new term loan on Tuesday. The financing will be used to help the bankrupt company exit Chapter 11 protections.

Rite Aid bonds firm

Rite Aid bonds saw heavy action following the launch of a new issue, traders reported.

The 9½% notes due 2017 "traded a lot," a trader said, deeming the paper up a point around 83.

Another trader said that a total of about $50 million to $75 million of the outstanding bonds changed hands, with the 9½% notes being the most active around 82 7/8. He also called that up by about a point.

Meanwhile, the new issue - $650 million in 10-year 8% secured notes, priced at par - "seems to be doing OK," the second trader said, quoting the notes at par 1/8 bid, par ¼ offered.

Proceeds from the new issue "will be used, together with available cash, to repay and retire Rite Aid's $648 million tranche 4 term loan due 2015 under its senior secured credit facility, and to fund related fees and expenses," the company said in a press release.

The Camp Hill, Pa.-based drugstore chain said it was also looking to amend or replace its existing $1.175 billion revolving credit facility due 2012 with a new facility that will mature in 2015.

The new issue and the proposed refinancing will push out maturities, which "gives more money for the shorter maturities," a market source said. "If they pay off the bank debt, there is less stuff ahead of you."

The source opined that the potential structure change was the reason for gains in the old debt, although he also noted that some felt that the company might not be doing so bad if they were able to issue more debt.

Moody's Investors Service gave the new debt a B3 rating, while affirming all other ratings. The agency said its grade took into account "Rite Aid's highly leveraged capital structure and heavy interest burden, which we believe limits the company's ability to invest in capital expenditures and working capital to the same extent as its competitors," according to a press release.

"The rating also reflects Rite Aid's mid-tier market position against two larger and better capitalized competitors," Moody's said.

"Positive ratings consideration is given to the company's lack of near dated debt maturities, its adequate liquidity, large revenue base and the solid fundamentals of the prescription drug industry."

Standard & Poor's meantime rated the new issue at B+. Both S&P and Moody's said the outlook was stable.

First Data holding its ground

First Data's debt was active, but unchanged, ahead of the company's Tuesday earnings release.

A trader said about $25 million to $30 million of the 10.55% notes due 2015 turned over around 79 5/8. The 9 7/8% notes due 2015 meanwhile were "spot-on where it was [Friday]," at 801/2. Trading volume was about "$20-odd million," he said.

At another desk, a trader placed the 9 7/8% notes at 801/2, also calling them unchanged.

Late last week, the Atlanta-based electronic payment processor announced it was seeking revisions to its bank agreements, allowing it to - among other things - issue new debt to pay off existing debt.

Skilled Healthcare notes steady

Skilled Healthcare's bonds remained unchanged in the wake of Friday's announcement the company had filed a mistrial motion related to its 2006 class action lawsuit.

Market sources pegged the 11% notes due 2014 at 901/4.

The bank debt, however, moved up in trading. On the back of this development, the company's term loan was quoted by one trader at 94½ bid, 95¼ offered, up from 91½ bid, 93½ offered, and by a second trader at 93½ bid, 95½ offered, up from 91½ bid, 93½ offered.

On July 7, the Foothill Ranch, Calif.-based nursing home operator was slapped with a $677 million jury verdict for its alleged inadequacy at its assisted-living properties. The parties involved in the case eventually agreed to mediation, but talks are reportedly still ongoing.

On Friday, the company said it had filed for a mistrial due to juror misconduct.

"Although we maintain that this matter should have been rejected by the court at the outset, the loss of our right to a fair and impartial jury cannot be ignored," said Boyd Hendrickson, chairman and chief executive officer, in a press release. "I was astonished by the evidence we learned about this juror's concealed bias and apparent pernicious conduct that ultimately resulted in an egregious verdict.

"We take patient care very seriously and firmly believe that these skilled nursing companies are adequately and appropriately staffed," he concluded.

Chemtura to launch exit facility

Chemtura has scheduled a bank meeting for Tuesday to launch its proposed $300 million six-year term loan B that will be used for exit financing, according to a market source.

Bank of America, Barclays and Citigroup are the lead banks on the deal, with Bank of America the left lead.

Other funds for the company's exit are expected to come from a $275 million five-year senior secured asset-based revolver and notes.

Previously, the company said that it would get $750 million of term loan and/or notes, with the sizes to be decided based on, among other things, market conditions.

The plan is to pre-fund the notes and term loan, but proceeds would not be available until after the company's plan of reorganization takes effect.

Chemtura previously disclosed that pricing on its asset-based revolver is expected to range from Libor plus 275 basis points to 325 bps based on availability.

If availability is less than $100 million, pricing will be Libor plus 325 bps; if it is $100 million to $200 million, pricing will be Libor plus 300 bps; and if it is greater than $200 million, pricing will be Libor plus 275 bps.

Bank of America is the administrative agent the revolver.

Chemtura is a Middlebury, Conn.-based manufacturer and seller of specialty chemicals and polymer products.

Boston Generating loan up on sale

Boston Generating LLC's first-lien term loan was noticeably stronger in the secondary market after Constellation Energy disclosed that it has signed an asset purchase agreement to acquire the company's 2,950-megawatt fleet, according to traders.

The first-lien term loan was quoted by traders at 94½ bid, 96 offered, up from 88 bid, 89 offered.

Constellation Energy is looking to acquire Boston Generating's five power plants located in the Boston area for approximately $1.1 billion, with financing coming from cash on hand and debt.

The proposed transaction is expected to be consummated through a court-approved bankruptcy proceeding to be initiated by Boston Generating. If approved, Constellation Energy's bid would then be considered the price to be beat in an asset auction to be held later this year.

Sara Rosenberg contributed to this article

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