Neiman, Claire's, Linens drop amid spending pullback; Ford GM take a hit; broad market remains weak

By Stephanie N. Rotondo

Portland, Ore., Oct. 8 - As the economy continued to crumble Wednesday, distressed debt traders reported that everything - give or take a few - was lower on the day.

But even as trading in the stock market remained high, bond traders deemed the day as "boring."

"It was another one of those days," a trader said. "Lots of red."

The retail sector, for one, was indeed red as retail sales figures for September started to trickle out and showed that consumers were not yet ready to spend freely. Neiman Marcus saw its bonds dive about 6 points during the session after they posted a nearly 13% decline in revenue for the month. Meanwhile, Claire's Stores Inc.'s debt continued to slide, while trading in Linens n'Things came to a virtual standstill.

Distressed bank loans have also been a target of weary investors of late. Traders said that General Motors Corp., along with rival Ford Motor Co., continue to see losses in their bank debt, attributed mostly to technicals.

Neiman, Claire's, Linens drop

Retailers continue to struggle as the economy melts down, which was further exemplified by Neiman Marcus' monthly sales report.

On the back of the report, market sources saw the high-end retailer's debt take a hit. One source called the 9%notes due 2015 drop more than 6 points to 74 bid, while another said the paper generally fell from the low-80s to the low-70s.

Neiman's term loan was yet another casualty, though traders blamed the overall technical picture more than the poor September revenue results that were announced.

The term loan was quoted at 74 bid, 77 offered, down from 77 bid, 80 offered, traders said.

"Everything is down. You don't expect any numbers to come out good now," one trader added.

For the five weeks ended Oct. 4, Neiman reported total revenues of $415 million, down 11.1% from $466 million for the five-week period ended Sept. 29, 2007.

Comparable revenues for September were $406 million, down 12.9% from $466 million last year.

"September was a challenging month for us given the country's financial crisis, the impact of Hurricane Ike, as well as difficult comparisons with last year's 100th anniversary events," said Burt Tansky, chairman and chief executive officer, in a news release.

"Based on our September performance and the current economic environment, we expect customer demand will remain weak for an extended period of time. As a result, we currently anticipate that our fall season gross margin will decline on a year over year basis and that inventory levels will be higher than planned. Our entire team is focused on stimulating sales, lowering inventory levels, reducing expenses and evaluating all capital projects," Tansky added in the release.

Elsewhere in the sector, Claire's Stores' bonds continued to drift lower.

"They continue to come in hard," said one trader of the notes. "I don't know how they make it."

The trader quoted the 9¼% notes due 2015 at 37 bid, 39 offered and the 10½% notes due 2017 at 28 bid, 30 offered.

Another trader pegged the 9¼% notes at 38 bid, 39 offered, the 10½% notes at 29 bid, 30 offered and the 9 5/8% notes due 2015 at 20.5 bid, 21.5 offered.

But even more rumors of possible liquidation did little to Linens n'Things' floating-rate notes due 2014.

"They have pretty much stopped trading," one trader said.

However, another trader placed the bonds at 18 bid, 20 offered, again affirming his belief that the debt was "worthless."

The Clifton, N.J.-based seller of home goods and décor said Wednesday that it would ditch its reorganization plan altogether and instead put itself up for auction on Tuesday. An unnamed stalking horse bidder is expected to be at the auction, the company said, adding that the party has proposed liquidating the company. Still, the company said it has also received inquiries from others interested in the retail store, and some want to keep the company together.

In a related sector, Sbarro Inc.'s 10 3/8% notes due 2015 fell 3 points to 61 bid.

GM, Ford loans take a hit

The distressed loan cash market in general continued to be plagued with an overabundance of paper and not enough buyers, pushing paper down once again, according to a trader.

"Overall market still down. Seeing some people sniff around on some paper, but still very heavy. Lot of people need liquidity at the moment," the trader said.

"Distressed [is] down two to three points. Very quiet. Things trading in very small size," the trader continued.

Some names that were down on Wednesday included General Motors and Ford, although these were by no means the only issuers to succumb to the selling pressure.

General Motors and Ford were just two examples of how the secondary market suffered on Wednesday, as well as how it has been punished over the past few weeks, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 53.5 bid, 55.5 offered, down from Tuesday's levels of 56 bid, 57 offered, the trader said.

By comparison, at the start of this month, General Motors' term loan was quoted in the lower 60s and late last month it was more in the 70 context.

As for Ford, a Dearborn, Mich.-based automotive company, its term loan was quoted at 54 bid, 56 offered, down from previous levels of 55.5 bid, 57.5 offered, the trader remarked.

Like General Motors', Ford's term loan was quoted in the lower 60s at the very start of this month. Late last month, the term loan was seen in the upper 60s to 70s context.

Distressed market remains weak

Although the stock market remained on the volatile side, bond traders reported a lack of anything worthwhile going on in their sphere of influence.

"Funds are just selling everything they can," said one trader. "And if you have to sell something, it is going to hurt."

"I don't think the market knows which way to go," said another, adding that there was "still forced selling," with very little interested buyers.

GMAC LLC's paper came in, its 7¾% notes due 2010 at 53 bid, 55 offered. One trader called the 6¾% notes due 2014 active and a point weaker around 36.

Idearc Inc.'s bonds were also softer, but by comparison, not that much, one trader said. He quoted the 8% notes due 2016 at 22.5 bid, 23.5 offered, while another saw the debt around 23.

Lehman Brothers Holdings Inc.' senior paper remained unchanged at 13 bid, 14 offered.

Quebecor World Inc.'s 6 1/8% notes due 2013 were "getting beat up," a trader said, ending the session at 17 bid, 19 offered.

Station Casinos' 7¾% notes due 2016 were also named as a loser of the day, closing at 41 bid, 43 offered, down 3 to 4 points.

Charter Communications Inc.'s 11% notes due 2015 drifted lower to 53 bid, 54 offered, while its 10¼% notes due 2010 dipped to around 79.

Sara Rosenberg contributed to this article.

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