Buyers step up to Quebecor; Trump, Tropicana better; retailers improve; Sea Containers weaker

By Stephanie N. Rotondo

Portland, Ore., Jan. 24 - After a volatile trading session Wednesday, investors were a little more cautious Thursday.

"There was a lot less activity," a trader said. "Today has been more of a watch-and-see kind of market."

Buyers were still taking their chances with Quebecor World Inc., however. The Canadian printer's debt gained as much as 5 points on the day after the news that the company had gotten a greenlight on its interim financing.

An overall firmer market helped Trump Entertainment Resorts Inc. and Tropicana Entertainment LLC, also known as Wymar Operating. The struggling Atlantic City casinos were anywhere from 1 point to more than 3 points better.

Meanwhile, the retail sector got a shot in the arm as well. Considered to be one of the weakest sectors in distressed territory, retailers such as Michaels Stores Inc. moved up 5 points while others, such as Rite-Aid Corp., gained at least 3 points. Burlington Coat Factory Warehouse Corp. also continued to improve.

A settlement with its pensioners might be in Sea Containers Ltd.'s future, or so said a filing with the bankruptcy court Thursday. Still, the company's bonds were called weaker during the session.

Buyers step up to Quebecor

"Real buyers" have started taking an interest in Quebecor World, a trader said, resulting in an at least 3-point gain in the printer's debt.

The trader pegged the 4 7/8% notes due 2008 around 54, which he deemed up 4 points.

At another desk, a trader said the bonds were 3 to 5 points firmer, the 4 7/8% notes at 53 and the 6 1/8% notes due 2013 at 54.

Another trader saw Quebecor's bonds up around 4 points across the board, the 4 7/8% notes and the 6 1/8% notes up to 53 bid, 55 offered, while the 9¾% notes due 2015 advanced to 56 bid, 58 offered and the 8¾% notes due 2016 were at 55 bid, 57 offered.

Another trader quoted the 6 1/8% notes up 5 points, though at 49 bid, 51 offered.

The bonds were further pushed up by news late Wednesday that a U.S. bankruptcy court had approved its interim debtor-in-possession financing. The company now can access $750 million of its $1 billion DIP arranged by Credit Suisse and Morgan Stanley. The company has said it will use the funds to pay wages and other operations costs.

"It gives them more time," a trader said of the court approval on the interim financing. "So that drove that one up."

The Canadian company had a 5 p.m. ET deadline on Wednesday to obtain approval on the financing agreement; otherwise the banks could have pulled their commitment. A hearing on the final proposal is scheduled for March 6.

Trump, Tropicana gain ground

Struggling gaming names got a boost from a generally firmer marketplace, traders reported.

One trader called Trump Entertainment Resorts' 8½% notes due 2015 "up a few points" at 71 bid, 72 offered from 68 bid, 69 offered previously. He said Tropicana Entertainment's 9 5/8% notes due 2014 were also a few points better around 60.

Another trader, however, called Tropicana's debt "barely up, maybe 1 point," also around 60.

A market source deemed Trump's bonds more than 3 points higher around 71.5 from 69.

In the news, Trump might have gotten a reprieve, as the Atlantic City Council has learned that it cannot appeal a $34 million tax settlement with the casino operator. According to news reports, council members have since stated that the deal - which was inked in November - was a bad one. The council planned to appeal the settlement but recently learned that it could only do so if it found proof that something in the process was done incorrectly.

Over at the Tropicana, a New York developer submitted a $950 million buyout proposal earlier this week. The bid is $100 million over the last offer from Colony Capital LLC.

Retailers bouncing back

Retailers continued to firm along with the overall market.

"A number of retailers crept back," a trader said.

Leading the pack was Michael's Stores. The arts-and-crafts store's 11 3/8% notes due 2016 gained 5 points to around 80 from 75.

Following Michael's was Rite-Aid, whose 9½% notes due 2017 edged up 3 points to 74.

Burlington Coat Factory Warehouse also continued its upward momentum, its 11 1/8% notes due 2014 closing around 78. Another trader called the bonds up 3 points at 77 bid, "no right side."

Linens n'Things' floating-rate notes due 2014 were fairly actively traded, with a trader calling them down a point at 42 bid, 44 offered, but another pegging them at 43 bid, 44 offered, which he said was up from recent levels around 41 bid, 43 offered.

According to Standard & Poor's, the retail and restaurant sector is the second-hardest hit in the distressed arena, with 14% of the overall junk bonds. In Wednesday's US Distressed Debt Monitor, S&P stated that retailers were one of three sectors that "are heavily reliant on consumer spending, which is anticipated to continue its slide in 2008."

Settlement for Sea Containers?

A pension settlement could be in store for Sea Containers, according to a filing with the U.S. Bankruptcy Court in Delaware.

A trader said the shipping company's debt was weaker on the day, its 10¾% notes that were to have matured in 2006 around 60. Another market source called the 7 7/8% notes that are due Feb. 15 down 2 points at 62.

Another trader said he had "not seen anything lately" in Sea Containers' bonds but quoted its 10¾% notes offered at 60, which he said was off from recent levels showing offers at 65.

According to the court filing, the Bermuda-based company is seeking a stay on discovery regarding its pension fight. The company said that it hopes to come to terms with the pensioners soon, or else emerging from bankruptcy soon will be impossible.

Tembec rejects plan, bonds stagnant

Tembec Inc. said on Thursday that it rejected a competing financing proposal from Jolina Capital Inc., as it would not "reasonably be expected to result in a transaction more favorable to Tembec and its stakeholders...than the proposed recapitalization transaction announced by Tembec on Dec. 19."

In December, Tembec announced a recapitalization plan that included a debt-for-equity swap and a new loan - a move that would reduce its interest payments by $67 million per year. So far, 65% of its noteholders have agreed to the deal.

And with that agreement comes a decline in trading activity in the Canadian company's debt.

"They are barely trading anymore," a trader said of the forest products company's bonds. He said the debt was trading generically in the high-30s.

PRC loan up on filing

PRC LLC's first-lien bank debt gained some ground on Thursday in reaction to news that the company filed for Chapter 11, according to a trader.

The first-lien paper was quoted at 53 bid, 58 offered, up from the high-40's, the trader said.

The company's second-lien bank debt was quoted at 5 bid, 15 offered, the trader added.

On Wednesday, PRC filed for bankruptcy protection to complete a financial restructuring that its senior secured lenders and its second-lien secured lenders have agreed upon.

Under the restructuring, post-bankruptcy secured claims will be repaid by a $40 million to $45 million three-year exit facility.

Of the total pre-bankruptcy first-lien lenders claims, $40 million will be rolled over as part of a four-year second-lien term loan, $40 million will be exchanged for a five-year 12% unsecured note, and the balance will converted into 80% of the equity interests in a top-tier holding company.

Second-lien lender claims will receive 20% of the equity interests in the reorganized company, warrants to purchase up to 4% of the equity interests in the holding company with an exercise price based on an enterprise value of $170 million and warrants to purchase up to 2% of the equity interests in the holding company with an exercise price based on an enterprise value of $200 million.

In connection with the filing, PRC will get an up to $30 million DIP financing facility via RBS that is priced at Libor plus 450 basis points.

PRC is a Plantation, Fla., provider of customer relationship management services.

Broad market tidbits

Delphi Corp.'s debt was called "unchanged, maybe a smidge lower" following a day of volatile activity the previous session. A trader pegged the debt - which is now trading about the same across the board - around 36.

A big rally in homebuilder equity was seen as the catalyst for Tousa Inc.'s gain Thursday. A trader said the 9% notes due 2010 earned 4 points on the day, closing around 44.

A fight with its bank lenders has done little to propel movement in Solutia Inc.'s bonds. When asked if the recent news about the banks pulling out of a financing deal would affect the corporate debt, a trader said "no, but only because the bonds never trade anymore; otherwise they would be lower."

Sara Rosenberg and Paul Deckelman contributed to this article.

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