McClatchy news lifts debt; ResCap mixed on upgrade; Burlington bonds dip; broad market stronger

By Stephanie N. Rotondo

Portland, Ore., Jan. 27 - The distressed debt market continued to trend upward Wednesday, and it was many of the same names leading the pack.

But some new names popped up during the session. McClatchy Co., for instance, had a busy day as the company put out a flurry of announcements, ranging from quarterly results to a tender offer to a new issue to fund said tender. As a result of the onslaught of news, the company's bonds ended several points better.

Elsewhere, Residential Capital LLC's debt closed the day unchanged to lower, depending on whom you asked. The movement came as the company received a credit upgrade, a result of another government capital infusion.

In other rating news, Burlington Coat Factory Warehouse Corp.'s credit status was affirmed during the session. Though the bonds did not trade all that actively, they were seen slightly lower than the day before.

McClatchy news boosts debt

It was a big news day for newspaper publisher McClatchy, which resulted in a 2- to 4-point gain in the company's bonds.

A trader said the 5¾% notes due 2017 were up 3 to 4 points around 72, while another source quoted the issue at 71½ bid, 72½ offered. The second source deemed that 2 to 3 points better on the day.

McClatchy repeatedly made headlines Wednesday, as the Sacramento-based company not only released its fourth-quarter results, but also announced a new issue and a tender offer for existing bonds. In addition to that, McClatchy also said that it had amended a credit agreement, which allowed for the new issue and the extension of some maturities.

For the fourth quarter, McClatchy reported a net loss of $32.4 million, or 38 cents per share. That compared with a loss of $20.4 million, or 25 cents per share, the year before.

Revenues meantime dropped 16.5% from the fourth quarter of 2008 to $393.2 million. The company also said it reduced its total debt by $174 million during the 2009 fiscal year.

"While we are seeing improving advertising revenue trends, we still have a lot of hard work ahead of us as we weather the current economic environment," said Gary Pruitt, chairman and chief executive officer, in the earnings release. "We will remain vigilant in realigning our costs to focus on our core competencies: high quality journalism, advertising sales and digital media."

Meanwhile, McClatchy said it would issue $875 million of senior secured notes due 2017, the proceeds of which would be used to refinance existing bank debt and to fund a tender offer for its 7 1/8% notes due 2011 and 15¾% notes due 2014.

According to the terms of the tender, holders of the 7 1/8% notes will receive $970 for every $1,000 of notes validly tendered. The 15¾% noteholders will get $1,115 for every $1,000 of notes tendered. Both issues include a $50 early tender add-on for every $1,000 of notes.

All told, McClatchy is looking to retire about $190 million in debt via the cash tender.

A roadshow for the new notes is expected to begin Thursday.

On the news, both Moody's Investors Service and Standard & Poor's said they were considering upgrading the company's credit rating.

ResCap mixed on upgrade

Residential Capital's debt ended the day mixed, according to market sources, as S&P upped its rating on the mortgage lender to B from CCC.

A trader said the 9 5/8% notes due 2015 were "up maybe a point from yesterday, but really that much changed," around 99.

Yet another trader said that ResCap's 9 5/8% notes were at 98¼ bid, 99¼ offered during the day, calling them up a half-point, even as "some of the comments with the headlines were a bit confusing." Later on in the day, the bonds ended up a full point, at 99 bid, on "a decent amount of trading."

However, another source deemed the 8 7/8% notes due 2015 about 2 pints weaker at 88½ bid.

S&P said it decision to alter its rating on ResCap - the money-losing unit of GMAC LLC - was due to the $3.8 billion capital infusion the parent company received form the federal government in December. GMAC then turned around and infused over half of those funds into ResCap.

The move by S&P follows a similar one made by Fitch Ratings just last week. Moody's said it was considering an upgrade last month after the company received another round of bailout funds.

Burlington bonds dip

Burlington, N.J.-based retailer Burlington Coat Factory saw its bonds end unchanged to a little bit lower Wednesday.

One trader pegged the 11 1/8% notes due 2014 at 103, though he said the paper was "not all that active."

Another source quoted the issue at 102 bid, 103 offered, down from 103 bid, 103½ offered.

During the day's session, Moody's announced it had kept Burlington's credit rating at B3, citing news form last week about amendments made to the company's asset-based revolving credit facility.

Broad market stronger

In the rest of distressed territory, the market continued to be dominated by the same few names, including Blockbuster Inc., Clear Channel Communications Inc. and NewPage Corp.

A trader said Blockbuster' 9% notes due 2012 were "still trading a lot" at 26 bid, 27 offered.

"That's up a little, but I don't think it's all that much different from yesterday," he said.

Clear Channel's 11% notes due 2016 were meanwhile also steady at 63 bid, 64 offered.

And, NewPage's 10% notes due 2012 were also seen bouncing back some, ending at 62 bid, 63 offered. That compared with 60 bid, 61 offered on Tuesday.

Visteon Corp.'s 7% notes due 2014 have been on "a real roller coaster" thus far this week, a trader said. He said the paper was trading at 46 bid, 47 offered earlier in the week and, during the midweek session, traded as high as 55 before settling back in to around 52.

Away from the always-active names, a trader expressed surprised that as many as $10 million of U.S. Concrete Inc.'s 8 3/8% notes due 2014 traded. He saw the bonds going home at 69 bid, 69 3/8 offered, while the day's low was 68 3/8. The Houston-based ready-mixed concrete producer's bond price "as moved up - we were trading these things in the 50s, they're up 15 points from when we got involved," just before the end of last year.

He continued, "To see that many bonds trade up at that level, it starts to lead me to believe that something could be going on with this company - or at least somebody thinks that there's more value than other people do."

Paul Deckelman contributed to this article.

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