Rite Aid reports improved earnings, bonds gain; GenMar falls as Oaktree agreement OK'd; AMR up

By Stephanie N. Rotondo

Portland, Ore., Dec. 15 - It was a stronger day for distressed debt, traders reported Thursday.

"The market was probably a little better," one trader said.

Rite Aid Corp. got a boost after the company reported a narrower loss for the third quarter. Both the company's bonds and bank debt were trading higher.

General Maritime Corp., however, was not as fortunate, as its bonds fell as much as 4 points on the day. The losses came as the company received the OK on a financing agreement with Oaktree Capital Management LP.

Meanwhile, AMR Corp.'s credit default swaps auction was held Thursday. A trader said subordinated paper rose about half a point, ending in line with the CDS settlement.

And, Catalyst Paper Corp. announced that it was deferring a coupon payment due to ongoing talks with creditors. Though traders didn't see much action in the debt, it was quoted lower.

Rite Aid up with numbers

Rite Aid paper moved up after the Camp Hill, Pa.-based drugstore chain reported improved numbers for the third quarter.

A trader said the 9½% notes due 2017 were the "most active," rising a point to end around 90.

"Some other ones were up more," he said, such as the 9 3/8% notes due 2015, which he saw moving up 3 points to 96.

The 8 5/8% notes due 2012 gained a deuce, he said, ending around 951/4.

Another market source pegged the 8 5/8% notes at 95¼ bid, up nearly 2 points.

In the bank debt, the tranche 2 loan was quoted at 94¾ bid, 95¾ offered, up from 93¾ bid, 94½ offered, and the tranche 5 loan was quoted at 95¾ bid, 96¾ offered, up from 94¾ bid, 95¾ offered, a trader said.

The company reported net loss of $52 million, or 6 cents per share, for the quarter ending Nov. 26. Revenues were $6.3 billion.

That compared to revenue of $6.2 billion the year before. The 1.8% increase was a result of better same-store sales, the company said.

Same-store sales were up 2% for the quarter.

Additionally, Rite Aid updated its fiscal 2012 guidance. The company expects sales to fall in a $25.85 billion to $26 billion range and for same-store sales to increase 1.15% to 1.75%.

Net loss is estimated to be between $325 million and $440 million.

GenMar takes a hit

General Maritime's debt was on the decline Thursday on news the company had won approval of its financing agreements with Oaktree Capital Management LP.

The agreements had been altered slightly to address creditor objections.

Still, the news was not necessarily positive for bondholders, according to a trader.

"Unsecured holders kind of got a doughnut there," he said.

He pegged the 12% notes due 2017 around 3, which was down from a 6-7 context previously.

Another trader saw the paper trading around 2, down from levels around 5.

Under the terms of the agreement between Oaktree and the New York-based oil tanker company, GenMar will receive a $75 million loan - provided by a group of lenders that includes Nordea Bank Finland plc - as well as a $175 million equity investment from Oaktree.

GenMar is also going ahead with plans to auction itself. Oaktree set the baseline bid. If Oaktree is not the winning bid, they will receive a $7.75 million breakup fee.

The fee was reduced from $12.5 million.

AMR rallies post-auction

AMR's CDS auction was held Thursday and was set at 23½ cents.

On the back of the results, a trader said the company's subordinated issues "rallied as high as 24," before settling back in at 231/2.

He deemed that up half a point.

AMR, the Fort Worth, Texas-based parent of American Airlines, filed for bankruptcy on Nov. 29.

Catalyst quoted lower

Catalyst Paper's bonds were quoted lower after the Vancouver, B.C.-based pulp and paper company said it was deferring a $21 million interest payment on its 11% senior secured notes due 2016.

"I didn't see anything in the way of trading," a trader noted.

He saw a 50 bid, 55 offered quote for the 11% notes, as well as a 5 bid, 10 offered market for the 7 3/8% notes due 2014.

He called that down 7 to 8 points for the seniors and down 5 to 6 points for the subs.

Another trader quoted the 7 3/8% notes at 3 bid, 13 offered and the 11% notes at 50 bid, 56 offered.

"They were 55-60 a couple days ago," he said of the latter securities.

The company said it was choosing to delay the interest payment due to ongoing talks with bondholders regarding a plan to deal with the company's debt structure. If Catalyst fails to come to an agreement or pay the coupon within the next 30 days, holders of the 11% notes can declare the bonds due and payable, with interest.

If the notes are accelerated and not paid within 30 days, that will then trigger an acceleration of the 7 3/8% notes, as well as on the company's ABL facility with JPMorgan Chase & Co.

Catalyst has hired financial adviser Perella Weinberg Partners to review alternatives to address Catalyst's capital structure.

Broad market tidbits

Elsewhere in distressed debt land, Caesars Entertainment Corp.'s 10% notes due 2018 were up a point at 633/4, according to a trader.

The trader also saw Hovnanian Enterprises Inc.'s 10 5/8% notes due 2015 falling a couple of points to 801/2, though in thin trading.

The company reported a narrower fourth-quarter loss on Thursday.

Another trader said MF Global Holdings Ltd.'s 6¼% notes due 2016 were "fairly active" at 311/2, which was "about the same to down a scrap."

Sara Rosenberg contributed to this article

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