Clear Channel, Sprint decline; Rite Aid holds on ahead of earnings; Ambac debt unfazed by news

By Stephanie N. Rotondo

Portland, Ore., Sept. 21 - Distressed debt took a downward turn Wednesday, traders reported.

And, as the market responded to the Federal Reserve's latest stimulus plan - dubbed "Operation Twist" - distressed bonds traders said volume suffered.

"Stocks were obviously the big deal," one trader said. "It's a tough market these days."

Clear Channel Communications Inc.'s debt dropped anywhere from half a point to 2 points on the day, though on no fresh news to speak of. In a related arena, Sprint Nextel Corp. was also weaker.

Ahead of its earnings release on Thursday, Rite Aid Corp. was holding its ground, though trading was modest.

Meanwhile, Ambac Financial Group Inc. was decidedly quiet on news the company is considering filing a new reorganization plan - or possibly liquidating altogether.

Clear Channel knocked down

Clear Channel Communications' debt fell in midweek trading, but there was no news out to act as catalyst and traders were not sure what was pressuring the bonds.

A trader said the 5½% notes due 2014 were "quite busy" around 64, down about half a point. He also saw the 10¾% notes due 2017 losing a deuce to close at 643/4.

At another shop, a trader also placed the 5½% notes around the 64 mark and quoted the 10¾% notes at 64½ bid, 65 offered, down a couple points.

Clear Channel is a San Antonio-based multimedia company.

Sprint paper declines

The telecommunications sector in general was on the softer side Wednesday and Sprint Nextel was no different.

A trader called the 8 3/8% notes due 2017 off by 1½ points at 993/4, while the 6% notes due 2016 dropped a point to 911/2. The 5.95% notes due 2014 fell just half a point to 963/4, he said.

Another market source, however, saw the 6% notes dropping nearly 4 points to 91 bid.

Sprint has been on the defensive as of late. The Overland Park, Kan.-based company has not only been fighting a merger between AT&T Corp. and T-Mobile USA, but has also been scrambling to keep its partner Clearwire Corp. afloat. As previously reported, Sprint is currently looking for investors to help it buy up the rest of Clearwire's equity.

For its part, Clearwire was slated to speak at a Goldman Sachs conference in New York on Wednesday after the market closed.

Rite Aid unchanged pre-earnings

Rite Aid will release its second-quarter results on Thursday and ahead of the numbers, the bonds were moderately active, but steady.

One trader said the 8 5/8% notes due 2015 were "kind of unchanged" at 901/2. Another market source called the paper up slightly at 90¼ bid.

The summer has been good for the Camp Hill, Pa.-based drugstore chain. Same store sales increased throughout the season. However, analysts are expecting a loss of at least $0.18 per share.

A year ago, Rite Aid reported a net loss of $199.3 million, or $0.23 per share. In its first fiscal quarter, the company forecast a los of $370 million to $560 million for the year on revenues of $25.7 billion to $26.1 billion.

Ambac quiet, steady

A trader said Ambac Financial Group's debt was "very quiet," despite news that the company could file a new reorganization plan or that it could simply move to liquidate.

He said the bonds were quoted 14 bid, 16 offered.

The Office of the Commissioner of Insurance in Wisconsin was slated to meet Wednesday to decide whether it would approve the plan and its treatment of Ambac Assuarance Corp. Talks between the company and the regulator have reportedly been heated and if the plan is rejected, Ambac will have to go back to creditors to decide if it should press the issue or roll over and take it.

Dex debt falls

The trader also said that Dex One Corp.'s 12% PIK notes due 2017 were "continuing to weaken," seeing them slip to around the 32 level.

"That stock hits a 52-week low like very day," he said. People continued to wonder if the company would make its upcoming coupon payment.

"I don't think they've ever made a coupon in that name," he said.

Dex One is a Cary, N.C.-based phonebook publisher.

NewPage breaks

NewPage Corp.'s $250 million debtor-in-possession second-out term loan broke for trading, with levels quoted at 99¾ bid, par ½ offered, according to a trader.

The 11 3/8% first-lien notes due 2014 were "down a touch, but not really anything to speak of" at 851/4, according to another trader. He said the 10% second-lien notes due 2012 were up about half a point to 131/2.

Pricing on the term loan is Libor plus 650 bps, after flexing down earlier from Libor plus 700 bps. There is a 1.5% Libor floor and the debt was sold at an original issue discount of 99.

Talk that the deal was going well had been around since launch based on the fact that at the bank meeting, price talk came out lower than expected. Prior to launch, talk on the loan had been circulating at Libor plus 750 bps with a 1.5% Libor floor and a discount that was still to be determined.

The company's $600 million 18-month debtor-in-possession facility also includes a $350 million first-out ABL revolver that is priced in line with talk at Libor plus 325 bps with no Libor floor.

J.P. Morgan Securities LLC and Barclays Capital Inc. are the lead banks on the term loan and the revolver. Wells Fargo Securities LLC is a lead on the revolver as well.

Proceeds from NewPage's debtor-in-possession deal will be used to repay outstanding revolver debt and for general corporate purposes during the company's Chapter 11 process.

The company announced its bankruptcy filing early this month, saying that the goal is to facilitate a debt restructuring and position the overall business for long-term success.

Investors weren't surprised by the bankruptcy news since the company had already warned that this step may have to be taken back in mid-August. At that time, it was revealed in a filing with the Securities and Exchange Commission that there are issues with the maturity of the company's revolver due to its floating-rate and 10% second-lien senior secured notes not being refinanced.

NewPage is a Miamisburg, Ohio-based producer of printing and specialty papers.

Sara Rosenberg contributed to this article

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