Linens debt softer on potential pre-packaged filing; Univision bonds, loan slip; Dole down, AMD up

By Stephanie N. Rotondo

Portland, Ore., April 8 - An article in the New York Post Tuesday prompted investors to take a second look at Linens n'Things Inc. bonds.

In relatively active trading, the retailer's debt slipped slightly on the report that the company was looking to file a pre-packaged reorganization plan. The report also gave new insight into the recent gains in the debt: According to the article, private equity firm Apollo Management, which acquired the company in 2005 in a leveraged buyout, has been buying up the bonds in an effort to have more control during the restructuring process.

Meanwhile, Univision Communications Inc. announced that it would draw down its revolving credit facility. Market players had mixed reactions to the news, but the company's debt - corporate and bank - responded by moving lower during the session.

Dole Foods Co. Inc.'s notes were among the more active names of the day, but a trader said price movement was minimal. The activity was spurred by news that the company was looking to sell some of its land assets as a way to deal with upcoming debt maturities.

Elsewhere, a lowered sales forecast hurt Advanced Micro Devices Inc.'s bonds, though traders said the name was barely quoted.

Overall, traders reported a mixed bag of a day.

"It was pretty active, but no real [price] direction to stuff," a trader said.

Another trader said it was "on the quiet side."

"The market has been strong for the past couple of days and it felt like it was taking a bit of a breather," he said.

"It was just a real mixed day," he added. "Some names were weaker, maybe on profit taking."

Linens edges lower on potential filing

News that Linens n'Things may soon be filing a pre-packaged reorganization plan sent the retailer's bonds down, albeit slightly.

One trader said the floating-rate notes due 2014 "went nowhere," closing at 38 bid, 39 offered.

Another trader pegged the bonds at 38.5 bid, 39.5 offered, while another said the debt was "a little bit lower" at 38 bid, 39 offered.

According to an article in the New York Post, Apollo Management is looking to unload the struggling home decor store. The article also stated that the private equity firm has been swooping up a large amount of the company's debt in an effort to gain more control over a potential restructuring, which might include a debt-for-equity swap.

Linens bonds have been steadily pushing higher of late, and the article's assertion that Apollo has been buying up debt made sense to many market players.

"Somebody's been buying them, and it hasn't just been short covering," said one trader, who noted that he had heard a rumor that it was Apollo.

Another trader also saw some truth in the article.

"That is probably why [the notes] have crept up from 30," he said.

Another trader, however, was somewhat skeptical, stating that the Post was "not the best source of information."

Still, traders are not ruling out a bankruptcy filing.

"They will probably file," said a trader, "especially if their suppliers have cut them off."

According to the trader, the article also noted that Linens has failed to pay some of its suppliers. In mid-March, vacuum manufacturer Dyson sued Linens for failing to pay back invoices. Linens, however, denied the allegations, stating that the money Dyson refers to was money owed to Linens.

Linens n'Things is a Clifton, N.J.-based specialty retailer.

Elsewhere in the sector, Claire's Stores Inc.'s 10½% notes due 2017 gained 2 points to 48.5 bid, 49.5 offered, while its 9¼% notes due 2015 were unchanged at 64 bid, 66 offered.

Bank draw down hurts Univision

Univision announced it would draw down nearly its entire revolving credit line Tuesday, which traders said may or may not be good news for bondholders.

One trader called the 7.85% notes due 2011 "slightly better," quoted between 84 and 86, though he noted there were "no offers."

Another trader, however, said the bonds got "beat up," ending in the high-80s. At another desk, a trader pegged the notes at around 85.

The first trader said the company is thinking of using proceeds to pay off its maturities, adding "it's really a wash for bondholders."

But another source said he was "not a big fan of companies taking down their bank lines."

"They might be trying to do it now before they trip a covenant," he said. "They better get it now while they can. They certainly couldn't get fresh money in this market."

On the bank debt side, Univision's strip of institutional bank debt came under quite a bit of pressure early on in the session and then partially rebounded as investors were jumpy over the news that the company drew most of its revolving credit facility and initiated a delayed-draw term loan borrowing, according to traders.

The institutional debt ended the day at 76 bid, 77 offered, down from 78 bid, 79 offered on Monday, and it traded as low as 74, traders said.

"Very ominous sign for the company to draw all of its revolver without any covenant breach or liquidity problems that people know about," one trader remarked. "It's covenant light so it's not like they have to worry about a covenant breach."

The trader went on to say that the draw created "concern over the credit in general. Why do they need to draw all the money now? It's media. It's extremely levered. People worry about slight bumps. Difficult outlook."

Another underlying issue that may have caused the bank debt to fall in trading on Tuesday is that, if the company repays the bridge loan and the bonds, it would be clear of maturities into 2009 - which may sound like a good thing but for those investors who were hoping for some way to get better terms on the bank debt, it's not, a trader explained.

The trader said that some people are hoping that the company will need an amendment at some point so that the lenders could get better pricing and covenants on the debt. Looming maturities was one issue that lenders hoped could create a favorable situation for them, the trader added.

In an 8-K filed with the Securities and Exchange Commission, Univision said it had borrowed $700 million from its $750 million credit facility, stating that there were "no immediate needs" for the extra capital, but in the current market, wanted to have "greater financial flexibility."

The company also said it might use a portion of the funds to pay down its $500 million bank second-lien asset sale bridge loan by as much as $250 million. Along with that, Univision said it is looking to borrow $250 million from its $450 million senior secured delayed-draw term loan to pay its senior notes coming due in October.

Univision is a Los Angeles-based Spanish language broadcaster.

Among other media-related names, Tribune Co.'s 4 7/8% notes due 2010 traded up 1 5/8 points at 56.

Dole slips, AMD gains

In response to the news that it was looking to sell land assets in Hawaii and California, Dole Foods' bonds were traded actively, though a trader said there was little price movement.

The trader quoted the 8 5/8% notes due 2009 around 88, down half a point.

The potential asset sale is a move aimed at avoiding default on upcoming maturities. $350 million in debt will become payable in 2009.

Meanwhile, Advanced Micro Devices' debt inched up, despite a lower forecast for the first quarter.

A trader said the 7¾% notes due 2012 gained a point to 80 bid, 81 offered, while another placed the bonds in the low-80s.

On Monday, the company said it would cut jobs, a move most market players were expecting. But the lower sales figures did come as a surprise. Wall Street analysts were predicting $1.61 billion in sales for the first quarter of 2008, but the company said the figures will look more like $1.5 billion - 22% higher than the first quarter of 2007 but 15% lower than the fourth quarter.

Broad market tidbits

A trader is speculating that Sprint Nextel Corp. "may have issues through 2008," bringing them closer to distressed bond players' radar.

"They have a lot of debt," the trader said. "Distressed players like something that is large."

The trader also said that the market was "refocusing" its attention on distressed homebuilders.

Elsewhere, a trader said Delphi Corp.'s bonds were "creeping back" toward the end of the session, closing at 40 bid. Another source, however, called the bonds overpriced.

"I think those bonds go lower," he said. "I think they are worth 20."

Neff Corp.'s 10% notes due 2015 ended at 48.5 bid, 50.5 offered.

"I can't figure that one out," said one trader, who believes the debt is overvalued. "Same with Swift [Transportation Co. Inc.]"

Swift's 12½% notes due 2017 traded at 45 bid, 47 offered, while the bank debt came in at 75 bid, 76 offered.

IdleAire Technologies Corp.'s senior discount notes due 2012 closed at 30 bid, 31 offered. Recently, the in-cab services provider said there was "substantial doubt" about its future.

"That's tied to the trucking industry," a trader said. "I would think they would get more business. Truckers aren't driving, they're parking."

"Maybe there are less truckers on the road," he conceded.

Sara Rosenberg and Paul Deckelman contributed to this article.

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