Movie Gallery better after two-session slide; Bon-Ton bounces around on bad numbers

By Paul Deckelman

New York, Nov. 29 -Movie Gallery Inc.'s bonds, which were being beaten down to sharply lower levels over the previous two sessions, were seen to have recovered on Thursday in line with a rise in the bankrupt Dothan, Ala.-based video rental company's bank debt, which was also seen recovering.

Elsewhere, Bon-Ton Stores Inc.'s bonds were seen gyrating around in heavy trading featuring many big-block transactions after the York, Pa.-based department store operator reported a sharply wider third-quarter loss versus its year-ago red ink and sharply lowered its full-year earnings guidance, citing the continued soft retailing environment. However, the initial losses did not last and the paper was seen essentially unchanged on the session.

Traders otherwise saw the distressed-bond market - along with the overall high yield sector - to be much calmer than the markets had been earlier in the week, particularly during Wednesday's frenetic session fueled by big stock market gains.

Movie Gallery moves up, a little

Movie Gallery's 11% notes due 2012 were seen by a trader to have moved up to 16 bid, 19 offered from prior levels as low as 13 bid, 15 offered, which the bonds had reached in two days of carnage Tuesday and Wednesday which saw them give up at least a third of what little remaining value they have.

Another trader pegged the bonds as high as 17 bid, 19 offered.

The bonds had tumbled down into the mid-to-lower teens from levels about 10 points higher starting on Tuesday and continuing on Wednesday, in line with a fall in its first-lien bank debt to below 80. But on Thursday, that term loan was higher, with traders speculating that the momentum is a result of some movement on the company's exit structure.

The first-lien term loan went out at 82 bid, 83 offered, up from around 80½ bid, 81½ offered, traders said.

"It feels like the terms of a potential exit structure are being worked out. People are a little more emboldened by the name once they get more clarity on what the exit will look like," one trader said.

"I think people are looking at the exit facility that they're going to roll into, looking at what the terms might be and what it might trade like, and I guess they think it will trade closer to par than they did yesterday," the trader continued.

"There's nothing public out on an exit facility. It's all just a guess," the trader added.

Bon-Ton bounces around on numbers

Elsewhere, Bon-Ton Stores' 10¼% notes due 2014 came back from early losses to end around unchanged, despite the company's report of a sharply wider quarterly loss and its lowered outlook.

A trader said that there was "a lot of sideways trading" in the credit, which "fell in the morning, dropping about a point. It did come back in the afternoon to end about unchanged," at 79 bid, 80 offered.

"People expected worse" from the earnings report, bad as it was, another trader said, pegging the bonds at an opening low of 78.5 bid, 79.5 offered, down from 79.25 bid, 79.75 offered Wednesday. After that initial retreat, he said, "the bonds came back. A lot of shorts were being covered." He saw the bonds ending at 80.5 bid, 81 offered, which he called up a point.

Another market source said that the bonds opened at 80, around where they had finished Wednesday, fell as low as around 78, then arced as high as 81.5 before ending right where they had begun, at an even 80, in very active trading.

Shareholders were much less forgiving of the bad numbers than bondholders were. While there was a little early upside movement in the company's NYSE-traded shares, perhaps on the feeling that things could have been worse, that mild euphoria quickly faded and the shares ended up plunging $2.57, or 19.29%, to $10.75. Volume of some 1.3 million shares was almost triple the norm.

Bon-Ton reported that it lost $19.4 million, or $1.17 per share, in the third quarter, nearly double its year-ago loss of $10.9 million, or 66 cents per share. The company cited soft and challenging conditions in the retail industry and severely cut its full-year profit forecast to $1.50 to $1.80 per share, well down from $2.75 to $2.90 per share that it had projected back in August.

Abitibi up on belt-tightening

A distressed-bond trader was quoting AbitibiBowater Inc.'s 8.5% notes due 2030 at 68 bid, 70 offered, up from, 66.5 bid, 68 on Wednesday, while seeing the forest-products company's 8 3/8% notes due 2015 also better at 72 bid, 74 offered.

He cited the Montreal-based company's announcement that it would cut costs by closing four paper mills, idling operations at others, and suspending its shareholder dividend.

Other closures are possible in 2008, company executives said on their conference call, as the company - formed by the recent merger of Bowater Inc. and Abitibi-Consolidated - tries to bring its output more in line with reduced newsprint demand.

Delphi seen mixed

A trader saw Delphi Corp.'s 6.55% notes due 2006 down ¾ point at 67.25 bid, 69.25 offered. But another trader saw the bankrupt Troy, Mich.-based automotive parts maker's 6½% notes due 2013 up 1 point at 67 bid, 69 offered.

Delphi said that it had obtained a further postponement, to Dec. 6, of the bankruptcy court hearing on its disclosure statement. It sought the extra time to try to iron out objections of some stakeholders to the company's plan of reorganization. It said that the postponement would not affect its plans to emerge from Chapter 11 early next year.

Sara Rosenberg contributed to this report.

© 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.