Primus notes weaker; Buffets' bonds edge higher; American Color Graphics debt quiet

By Stephanie N. Rotondo

Portland, Ore., Nov. 6 - Primus Telecommunications Group Inc.'s bonds slipped as much as 3 points Tuesday, despite positive feelings in the marketplace on the name.

One trader attributed the decrease in the debt to the current state of the distressed market, calling it "ugly" and "tough to get a bid."

Analysts remain upbeat about the company and believe it is poised for a turnaround in the next fiscal year.

After getting walloped in the previous session, Buffets Holding Inc., the operator of such restaurants as Hometown Buffet and Old Country Buffet, saw its bonds manage to rebound, though very slightly. Traders also reported that the notes were "not nearly as active."

It was likewise quiet in American Color Graphics Inc.'s debt. The company announced it would seek approval from its noteholders to defer interest payments, but the bonds held steady, though were seen quoted wide.

"I think everybody is just taking a step back," said one trader about the lack of activity in the junk sector. He said that market players were leery given what was "going on in the broader markets. It's all negative news."

Primus notes dip

Primus Telecommunications' 8% notes due 2014 fell Tuesday, despite decent earnings and a positive conference call held late Monday.

One trader saw the notes offered at 60.25, while another said he saw offers of 60 to 60.5, which he called down 3 points.

Another trader said the bonds were "quoted down a lot today," as the debt ended the day at 58 bid, 60 offered, down from the previous day's closing level of 62 bid, 64 offered.

"It's a funny name," the trader said of the bond's mysterious decline.

"It's an ugly market," he continued. "It's tough finding a bid."

Another trader called the bonds down 2 points at 58 bid, 60 offered.

An analyst who sat in on Monday's conference call said it "went well" and "management was fairly upbeat."

"They had a very good quarter of blocking and tackling," the analyst said.

The analyst went on to say that the quarterly figures, while not overly fantastic, were as expected and the company was positioning itself for a better 2008.

"They aren't going to turn around in just one quarter," he said.

The analyst said the company has already taken steps to better its books, including buying back $7 million of its 12¾% notes due 2009 and "further investing in new growth [businesses]" with higher gross margins than some of its current core sectors.

And, with "plenty of cash" to fund any potential budget shortfalls until 2009, "The management team has done this before," the analyst said. He said the group has previously "backed itself into a corner" but managed to regroup and emerge relatively stronger.

Meanwhile, Jeffries issued a research report on the telecommunications provider, which restated its buy recommendation on the 8% notes.

"Primus has made progress in building its new higher-margin initiatives, which tracked at an annualized revenue rate of $220 million as of the end of the third quarter of 2007, up from an annualized $200 million at the end of the prior quarter," the report said. "We believe Primus will continue its cost discipline and meet its growth objectives, and that it has the liquidity to be fully funded (the company had $109 million of unrestricted cash at the end of the third quarter of 2007) for its plan to replace earlier lost revenue and EBITDA."

Buffets bonds edge up

After getting whacked down almost 20 points in the previous session, Buffets' bonds managed to "creep back up," a trader said.

The trader quoted the 12½% notes due 2014 slightly better at 46 bid, 47 offered. At another desk, a trader said the bonds "crawled a little higher," ending the day at 46.5 bid, 47.5 offered, up from 45 bid, 46 offered.

Yet another trader said he saw the debt "hovering" around 46.5 bid, 47.5 offered.

The restaurant operator's corporate debt slipped in the previous session after the company released poor results for the first quarter of 2007.

Standard & Poor's downgraded the company on Tuesday, lowering the corporate credit rating to CCC from CCC+. The ratings agency attributed the cut to, among other things, the likelihood that Buffets will breach its maximum leverage ratio covenant in the next quarter.

"More ominously for bondholders, the company hired restructuring firm Houlihan Lokey to advise on the capital structure," wrote Kim Noland, analyst for Gimme Credit LLC, in the research group's afternoon comments.

American Color debt quiet

A trader said there was "not much activity" in American Color Graphics' bonds after the company announced it would look to defer interest payments on its debt.

The trader said the 10% notes due 2010 were quoted wide at 65 bid, 70 offered. He noted that he saw several prints around 66. Another trader also said he saw the bonds trade "around 66-ish."

In a press release, the company said it had already received consents from 78.4% of its noteholders.

"If you have already got a large amount of consents, most of those bonds are going to be tied up, so it won't trade," a trader said. Of the noteholders that have not yet given their approval on the deferral, "I suspect [they] are going to sit on their bonds."

Broad market tidbits

James River Coal Co.'s 9 3/8% notes due 2012 were pegged at 86.25.

"They have been bouncing around the 83 to 87 level," a trader said. The trader noted that there was a "possibility" that, as coal prices are lower than the current price of oil, exporting to Europe and even as far as China may help the industry pick up.

The trader also quoted Blockbuster Inc.'s 9% notes due 2012 at 89.

"Big deal," he said. "They are sort of stuck there."

Meanwhile, Movie Gallery Inc.'s first-lien term loan was softer on Tuesday on no particular news, a trader said.

The first-lien term loan ended the day at 87 bid, 88 offered, down from 87½ bid, 88½ offered, the trader said.

Linens n'Things floating-rate notes are continuing to hang around the 64 mark, with one trader placing the debt at 63.75. Another trader said the bonds closed at 64 bid, 64.5 offered.

Claire's Stores Inc.'s 9¼% notes closed at 82.5 bid, 84.5 offered, while its 9 5/8% notes ended the day at 80 bid, no offer.

Sara Rosenberg contributed to this article.

© 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.