Blockbuster bonds trade flat after missed payment; CIT debt up on news; NewPage, Anadarko firm

By Stephanie N. Rotondo

Portland, Ore., July 2 - As was largely expected, the distressed debt market was rather muted on Friday, as market players left their desks to get a jump on the long holiday weekend.

"Nothing is trading actively," a trader said. "The market is just shut down."

"Obviously it's really quiet," said another trader. "A lot of people are out."

Blockbuster Inc. bonds began trading flat, traders said, after the company missed a coupon payment that was due on Thursday. The company said it had secured a forbearance with a majority of noteholders and that it continues to talk with bondholders regarding a recapitalization effort.

Meanwhile, CIT Group Inc.'s notes headed upward in the final trading day of the week. The gains came as the company issued a string of announcements, including additions to its management team.

Blockbuster trading flat

Blockbuster bonds were trading flat, or without accrued interest, after the company missed a July 1 coupon payment on its 11¾% notes due 2014, according to traders.

A trader said the 9% notes due 2012 were trading "+/-9," though he noted that the level "implies they are closer to 6."

The trader added that he "didn't really see any two-sided markets" for the 11¾% notes. However, he did see bids in the high-50s, "which obviously was down," he said.

Another trader quoted the 9% notes at 8½ bid, 10 offered and the 11¾% notes at 58 bid.

"Seems pretty low," he remarked. But he added that the bonds were around "64 the day before, so they are not that far off."

The Dallas-based movie rental chain said Thursday it had secured a forbearance on the 11¾% interest payment from noteholders holding approximately 70% of the senior secured debt. The forbearance agreement gives the company until Aug. 13 to remedy the missed payment.

Had Blockbuster made the payment, it would have paid out $23.9 million in an amortization payment - which includes a 6% redemption premium - and another $18.5 million in interest.

"We appreciate the ongoing support of our senior secured noteholders and other parties involved in our ongoing exploration of recapitalization opportunities," stated Jim Keyes, chairman and chief executive officer, in a press release.

"The company determined that entering into the forbearance agreement and not making the payments at this time are in the best long-term interests of the company and our stakeholders. The agreement provides us with additional time and flexibility as we continue to take steps to implement a more appropriate capital structure to support the company's strategies for long-term growth and enhanced financial performance as we pursue a balance sheet recapitalization."

"This probably sets some kind of record between the time of a new issuance and a default in the bonds," wrote Gimme Credit LLC analyst Kim Noland in an afternoon commentary, though she noted that the bonds aren't "technically" in default until the forbearance expires. "While the decision to not pay the noteholders provides some needed liquidity, the company is still beset by competitive issues, including a new offering by Best Buy that make its longer term future hazy."

Also on Thursday, Blockbuster announced that shareholders had voted against a reverse stock split, according to preliminary figures. As such, the company's stock remains out of compliance and the New York Stock Exchange informed the company that its class A and B shares would be delisted.

Fitch Ratings said it has not yet taken any action on Blockbuster's rating following the news, but that it would downgrade the ratings after Aug. 13 if the payment default is not cured.

Moody's Investors Service, however, cut Blockbuster's corporate family rating to Ca from Caa3.

CIT up on news

CIT Group's debt moved up following a series of announcements made late Thursday and early Friday, a trader said.

"Bonds were better," the trader said, seeing the 7% notes due 2016 at 92¼ bid, 92½ offered. The 7% notes due 2017 - "probably a good benchmark," he said - were meantime up a point around 92.

Late Thursday, the New York-based commercial lender provided an update on its progress regarding "key corporate initiatives." CIT said it had closed on two new funding facilities totaling about $800 million and had completed approximately $500 million in corporate finance asset sales. Additionally, the company said it had prepaid $1.25 billion of first-lien debt.

And, on Friday, the company announced the hiring of two executive positions. Carol Hayles was added to the team as corporate controller, while Scott T. Parker was joining as the new chief financial officer.

NewPage, Anadarko firm

Elsewhere in distressed territory, NewPage Corp.'s 11 3/8% notes due 2014 inched up slightly to 881/4, a trader said.

Anadarko Petroleum Corp. remained active - "there is lots trading," a trader said - and better. The 5.95% notes due 2016 improved to 871/2, while the 6.95% notes due 2019 moved up to 881/4.

"Paper was generally up half a point to a point," the trader said, speaking specifically about the Houston-based oil and gas company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.