Claire's plans new issue, debt gains; OPTI quiets down, ends flat; Harry & David bonds dip

By Stephanie N. Rotondo

Portland, Ore., Feb. 11 - A trader said the secondary market ended the week with "reasonable" trading volume, with total trades coming in over $1 billion.

"For a day with no new issue, that's not too bad," he said.

Friday was also a somewhat news-driven day, which resulted in Claire's Stores Inc. seeing some action.

The company announced preliminary quarterly results and also said it was planning a new issue. The combined news gave Claire's debt - corporate and bank paper - a boost.

OPTI Canada Inc. meanwhile continued to trade in decent size, but not nearly as actively as it had on Thursday on the back of an earnings release and operations status update. Traders deemed the bonds unchanged on the day.

However, Harry & David Holdings Inc. continued to go back and forth, a trader said, as the bonds dipped a few points during the session. The bonds had previously traded up on the back of fiscal second-quarter numbers.

Claire's plans new issue

Claire's Stores' debt traded up after the company released preliminary quarterly results and announced plans for a new issue.

One trader saw the 10½% notes due 2017 trading "up a couple points," closing at 102½ bid, 103 offered.

Another market source saw the 9 5/8% notes due 2015 at around 103.

At another shop, a trader said there was "a little bit" of trading in the name, but "I wouldn't say that there was all that much [price] movement.

"Those bonds were already trading north of par," he added.

In the bank debt, traders said the new issue news - and what the proceeds would be used for - helped the company's term loan gain ground.

The term loan was quoted by one trader at 98 7/8 bid, 99 1/8 offered, up from 97¾ bid, 98¼ offered, and by a second trader at 98¾ bid, 99½ offered, up from 97¾ bid, 98¼ offered.

For the fourth quarter, the Pembroke Pines, Fla.-based retailer is forecasting net sales around $422 million, a 2.7% increase over 2009 comparables. Sales for the year are also expected to be better at $1.43 billion, a 6.3% gain year over year.

Claire's also said it was intending to sell $400 million of second-lien notes due 2019. The company will use the proceeds to pay down its credit facility.

According to one market source, Claire's has performed "below our expectations but certainly good enough to sell $400 million of junk bonds.

"In this market, I'm not sure it matters," he added regarding the company's financial forecast.

"It seems a little ahead of itself," said another source.

Said another source, who doesn't follow the credit: "If true [regarding the new issue] it sure makes me think we are reaching a credit bubble for sure."

OPTI less busy, unchanged

Investors continued to keep OPTI Canada bonds busy, but far less so in Friday trading than on Thursday, traders reported.

One trader said just $30 million to $40 million of the Calgary, Alta.-based company's assorted issues changed hands, compared to hundreds upon hundreds of millions that turned over Thursday on the back of the company's earnings release.

The trader said the subordinated issues - the 7 7/8% and 8¼% notes due 2014 - were unchanged at 48 bid, 48½ offered.

Another trader said "they continue to trade, but not a lot of price movement," also pegging the paper with a 48 handle.

In addition to releasing its fourth-quarter and full-year earnings on Thursday, the company held a conference call to discuss its operations status, specifically those at the Long Lake project. Though the project began 2010 positive, it ended without the company reaching the production levels it had previously expected. As such, company executives warned that the forecast given in November might not be met "unless operations improve in the near term."

Harry & David 'vacillating'

A trader said Harry & David Holdings' 9% notes due 2013 were down a couple of points on the day, pegging the paper at 38 bid, 38½ offered.

"They just keep vacillating back and forth," he said, referring to the mid-week levels around 40 after the company announced its fiscal second-quarter results.

The numbers came out on Tuesday. For the 13 weeks ended Dec. 25, net sales dipped 1.8% to $262.1 million from $267 million the year before.

Net income was $13.8 million, versus $31.7 million in the same quarter of fiscal 2010.

As of Dec. 25, the Medford, Ore.-based specialty foods retailer had a cash balance of $66.9 million and accounts payable of $57.9 million.

As previously reported, the second quarter results were such that the company fell out of compliance with its revolving credit facility.

"Based on the company's current working capital and anticipated working capital requirements, the company will not be able to finance continuing operations, including servicing its payment obligations under its senior notes, without securing new capital and restructuring its obligations," Harry & David said in the earnings release.

The company said it would hold talks with creditors "in an effort to recapitalize."

Blockbuster slides

A trader said Blockbuster Inc.'s debt "never really came together."

He said the 11¾% notes due 2014 were "quoted down pretty good [on Thursday]" following reports that the company was looking to sell itself. He said the notes had previously traded in the high-40s but were then offered at 40 on the back of the news.

He noted that the debt wasn't trading, "but they have definitely been quoted down on that news."

Broad market mixed

Among other distressed issues, Nebraska Book Co. Inc.'s 10% notes due 2011 traded "up and down" around par, a trader said.

The trader also saw a "little scrap" of NewPage Corp.'s 12% notes due 2013 trading around 31, which he called unchanged.

Trading in Clear Channel Communications Inc. was meantime "very scrappy," according to the trader. He said the 11% notes due 2016 were the only ones to trade in any size, moving up a point to around 97.

Sara Rosenberg contributed to this article

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