GMAC alters debt swap, bonds steady; Rite Aid gains, Claire's unchanged; Time Warner active, lower

By Stephanie N. Rotondo

Portland, Ore., Dec. 5 - Distressed bond traders said the equity markets late-day rally Friday did little to improve the tone in their world.

"The market felt weak this morning," a trader said. "Although, what is surprising is the swing in the market," citing the stocks' jump from negative territory to positive. "But I don't really think that has affected [the distressed] market."

GMAC LLC announced Friday that it had extended for a second time its early deadline on its exchange offer. The company also sweetened the terms for holders of the 8% notes due 2031. Debtholders were reportedly unhappy with how they were being treated. Still, the news did little to move the bonds, which were seen slightly weaker to unchanged.

Rite Aid Corp.'s 10 3/8% notes due 2016 were called one of the more active issues of the day. Traders saw the bonds inching higher just one day after the company reported flat same-store sales.

In the world of media, Time Warner Telecom Holdings Inc.'s bonds gained in activity, though not in value, traders reported. But there was no news out to explain the surge in trading, though the company is reportedly in talks with Yahoo Inc. about a possible asset sale.

GMAC alters debt swap

GMAC paper was unchanged to a touch weaker during the final session of the week as the company once again extended the early deadline for its exchange offer and restructured the terms for the 8% notes due 2031.

One trader saw the benchmark issue at 27 bid, 27.5 offered, versus 27 bid, 28 offered previously. However, he said the bonds traded as high as 29.5.

"GMAC, they trade all over the place," he noted.

The trader also saw the 5.85% notes due 2009 "pretty active," though he added that most trades were odd lots. Round lots were trading around 89 from 90 on Thursday. Odd lots were 86 bid, 87 offered.

At another desk, a trader said the 8% notes were "still hovering in the high-20s," though he saw them drop a tad from Thursday levels.

Another source called the 6 7/8% notes due 2012 at 39.5 bid, or 4 points weaker.

Over at GMAC's subsidiary, Residential Capital LLC, a trader saw the 8½% notes due 2010 "a little higher" at 30 bid, 32 offered.

GMAC extended the early tender deadline for a second time Friday, moving the date to Dec. 9 from Dec. 5. The financing arm of General Motors Corp. also sweetened the terms of the offer for holders of the benchmark issue.

Market players reported that bondholders did not like the original offer, which included subordinated debt. Holders of the 8% notes were the only ones to receive that debt. But noteholders scoffed at the offer, claiming to want to be treated like other bondholders.

Under the new terms, holders of the benchmark debt would receive $800 principal amount of new senior notes and $200 of liquidation reference of preferred stock for each $1,000 principal amount tendered. Those electing to swap for cash would receive $600, the same as the original offer.

Elsewhere in the financial world, Washington Mutual Inc.'s senior holding company paper - like the 4% notes due 2009 - "quieted down," but were still "a smidge better," a trader said, quoting the bonds at 65 bid, 65.5 offered.

"A decent amount" of iStar Financial Inc.'s 5.15% notes due 2012 traded at 30 bid, 32 offered, a trader said, but he saw no trades at all in MBIA Inc.'s 14% surplus notes due 2033, still at 48 bid.

Rite Aid notes gain

A trader touted Rite Aid's 10 3/8% notes due 2016 as "the most active high yield bond," though there was no real explanation for the action.

The trader said the bonds were trading around 67. Another also saw them trade with a 67-handle, calling that about half a point better.

Among the company's other issues, the 8 5/8% notes due 2015 dropped nearly 2 points to 26 bid.

On Thursday, Rite Aid reported flat same-store sales for November. Pharmacy sales gained 0.2%, while front-end sales declined 0.4%. At the company's Brooks and Eckerd stores, sales fell 2.1%, with pharmacy sales down 3% and front-end sales up 0.8%.

Total sales for the month dipped 2% to $2.48 billion. Third-quarter same-store sales, however, gained 1.4% and total sales slipped 0.9% to $6.44 billion.

In other news, the Camp Hill, Pa.-based company reached a $1 million settlement with the state of New York over sales of expired items, including food and baby products.

Among other retailers, Claire's Stores Inc.'s 10½% notes due 2017 were "basically unchanged," trading with a 13 handle, a trader said.

But another trader saw those bonds gain slightly to around 14. The trader also called the issue "kind of active."

Time bonds active, lower

Time Warner's bonds were called one of the more active issues of the day, but traders were not sure why.

A trader quoted the 9¼% notes due 2014 at 77 bid, 78 offered, "maybe a point lower."

Another trader also saw the bonds "on the active side," calling them half a point to a point weaker around 77.

Time Warner is reportedly in talks with Yahoo Inc. regarding a possible sale of Time's AOL business to the Internet company.

In other media names, Young Broadcasting Inc.'s 10% notes due 2011 dropped half its value, falling a point to 1 bid.

Broad market mostly lower

Pilgrim's Pride Corp.'s 7 5/8% senior bonds continued to firm to 26 bid, 28 offered, up around 3 points. Elsewhere in the sector, Smithfield Foods Inc.'s 7% notes due 2011 were quoted at 54 bid, 55 offered.

Freeport McMoRan Copper & Gold Inc.'s bonds continued their slide, with the 8 3/8% notes due 2017 at 63.75 bid, versus 65.5 on Thursday. Volume of $24 million was "a significant amount" on an inactive day, a trader said. The 8¼%notes due 2015 were 66.5 bid, 69.5 offered, down 3 points on the day with $22 million traded.

Another trader saw the '17s down 2 points at 64 bid, 65 offered, and the '15s also down a deuce at 66.5 bid, 67.5 offered.

A trader called NXP BV's 9½% notes due 2015 down 3 points at 15 bid, 16 offered.

He also saw Freescale Semiconductor's 9 1.8% toggle notes due 2014 open at 14 bid, 15 offered, way down from Thursday's closing level before news that it would PIK the interest on the bonds at 21 bid, 23 offered. Later, he said, the bonds got back up to 18 bid, 20 offered,

He saw Freescale's 10 1/8% notes due 2016 benchmark bond down 4 points at 24.5 bid, 25.5 offered.

Paul Deckleman contributed to this article.

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