Trico files, bonds improve; Blockbuster senior bonds better; NewPage debt spurned by analysts

By Stephanie N. Rotondo

Portland, Ore., Aug. 26 - The distressed debt market continued to be quiet on Thursday as the summer doldrums set in.

"It was not very fun at all," said one market source.

Another trader noted that big dealers aren't providing liquidity, which is resulting in wider bid-offer spreads.

"If you have to buy it, you have to pay up," he said. "If you want to sell, you have to sell down."

With the market being as subdued as it has been over the course of the week, traders are theorizing that next week will be even worse.

"We're now shut right through the beginning of September," a trader said. "People are just clearing stuff up and waiting for the new issue barrage."

Even Trico Marine Services Inc.'s bonds were little moved by news the company had filed for bankruptcy. But as one trader pointed out, the filing was pretty much expected.

Blockbuster Inc.'s senior secured notes gained some ground during trading, though there was no news out to explain the gains. A source opined that the lift could have been someone having to buy the debt - and having to pay a premium for it.

Also, NewPage Corp. showed little reaction to a research report that came out late Wednesday. The report deemed the papermaker's debt as "increasingly toxic," and recommended investors stay well clear of it.

Trico files, bonds improve

Trico Marine Services' debt "did what always happens after they declare [bankruptcy], which is go up," a trader said.

Still, the trader noted that the Chapter 11 filing "was so expected, so [the bonds] didn't have a big jump."

He pegged the 11 7/8% notes due 2014 at 87 bid, 88 offered, up from 86 bid, 87 offered. The convertible notes were also a tad better, he said, seeing the 8 1/8% notes due 2013 at 18 bid, 19 offered and the 3% notes due 2027 at 6 bid, 8 offered.

At another desk, the 8 1/8% notes were quoted at 18¾ bid, 19 offered, up from 16¼ bid, 18 offered a couple of days ago.

Another trader noted that the bankruptcy filing "didn't include the 11 7/8s, so the whole capital structure was bid-for today. He estimated the 11 7/8% notes at 86½ bid, while the 8 1/8% notes were in the high teens.

"I would say there were better buyers around on both," he said.

After warning of a potential bankruptcy filing earlier in the month, Trico made good on its threat and announced late Wednesday that it had sought Chapter 11 protections.

The voluntary filing came as the company attempted to restructure its balance sheet.

"Over the last several months, we have worked diligently to improve our liquidity, including through the sale of $3 million of non-core assets, the sale of a North Sea class vessel for $16 million and additional cost-cutting initiatives," said Richard A. Bachmann, chairman, president and chief executive officer, in a statement.

"While we are beginning to see indications of improved operational performance, the combination of a sluggish economy, a highly leveraged balance sheet and imminent interest payments due, has led us to determine that a court-supervised restructuring is the best course of action for the company and its stakeholders."

The Woodlands, Texas-based deep-sea driller has already lined up $35 million in debtor-in-possession financing from Tennenbaum DIP Opportunity Fund and other funds managed by Tennenbaum Capital Partners, LLC.

Blockbuster bonds moving up

Blockbuster's 11¾% notes due 2014 headed up in Thursday trading, though there was no news out to act as a catalyst.

A trader quoted the notes at 50 bid, 51 offered, up from the 47 bid, 48 offered context they had been trading for the better part of a week.

"Someone might have had to buy some [paper]," the trader speculated and, given the market conditions, they would have had to pony up.

Another trader pegged the paper at 50 bid, 52 offered, compared with 46 bid, 47 offered previously.

And, yet another said that Blockbuster's senior secured notes due 2014 "traded up a couple of points" to climb above the 50 mark, versus recent bid levels in a 46-47 context. He said the bonds got as good as 51 bid, 52 offered before easing slightly from that peak to end around 50 bid, 52 offered, calling it up around 3 points versus Wednesday's finish.

The Dallas-based movie rental chain is currently operating within an extended forbearance agreement, which it had obtained after failing to make the interest payment on the 11¾% notes on July 1. The forbearance was suppose to expire on Aug. 12, but was extended to Sept. 30.

However, the 9% notes due 2011 have a coupon coming due on Sept. 1. The previous forbearance agreement prohibits making that payment.

The company has said it was unlikely to make that payment anyway.

Analysts spurn NewPage

NewPage bonds were on the quiet side and unchanged despite a scathing research report put out by CreditSights Inc.

Traders placed the 11 3/8% notes due 2014 anywhere from 80½ bid, 81 offered to 81½ bid, 82½ offered. The 10% notes due 2012 were seen trading with a 32 handle.

In a research note published Wednesday, CreditSights analysts Rahul Gandhi and Chris Ucko called the Miamisburg, Ohio-based papermaker's debt "increasingly toxic."

"We understand from market participants that Cerberus, the majority equity holder, has been bulking up its share in the second liens," the analysts wrote in the report. "This is not a positive indication for current bondholders as its means that Cerberus is looking to climb up the capital structure to ensure it retains control of the equity in any potential restructuring."

The analysts recommended that investors "stay out of the name."

Market remains weak

Elsewhere in the distressed debt sector, Tribune Co.'s paper - which tends to trade on top of one another - was seen around 45, according to a trader.

Another market source saw Rite Aid Corp.'s 8 5/8% notes due 2015 falling 1½ points to 81 bid.

A trader saw General Motors Corp.'s 8 3/8% benchmark bonds due 2033 around 32 bid, 32½ offered, which he called pretty much unchanged on the day, though on "decent volume."

Paul Deckelman contributed to this article

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