AbitibiBowater bonds boosted; Quebecor debt rallies; Graphic Packaging notes better

By Stephanie N. Rotondo

Portland, Ore., Feb. 21 - It was an up-and-down day in the distressed bond sector Thursday as the equity markets went in the hole.

"Some things opened higher, but then gave back their gains in the afternoon," a trader said.

Continued concerns about the state of the economy have resulted in hesitant investors. With myriad sectors facing a downturn, some are wondering when the bottom will come.

"People are now saying the bottom of the housing sector will be the end of 2008," one trader said, though he speculated it could be longer than that.

Others are worried about the goings-on in the retail sector and how consumer spending will be affected in the coming months.

"People are worried about retail sales," the trader noted.

One of the bigger news items on the day was bond insurer MBIA announcing that it would withdraw from trade group Association of Financial Guaranty Insurers. The company said it no longer shared a "vision" for the future of the bond industry.

"It was an interesting turn of events," a trader said. "All eyes are on that situation."

As the market tried to figure out what that news meant for them - and the overall marketplace - Abitibi Consolidated Inc., or more commonly, AbitibiBowater, saw its bonds gain some ground. The move came despite a ratings downgrade, and some speculated that there was a glimmer of hope for the flailing forest products company.

Meanwhile, Quebecor World Inc.'s debt continued to rally. It was still not entirely clear what sparked the move that began in Wednesday's session, though some referenced Tuesday's credit default swap auction.

In a somewhat related sphere, Graphic Packaging Corp. reported its fourth-quarter results, and the company's bonds traded higher. According to one trader, the numbers were "pretty good," though there is still no word on the proposed merger with Altivity Packaging LLC.

AbitibiBowater bonds better

Despite a downgrade from Fitch Ratings, AbitibiBowater bonds were "up a fair amount," in the words of one trader.

The trader quoted the forest products' company's 8.55% notes due 2010 at around 68 from 60 bid, 62 offered previously. He also saw the 7.95% notes due 2011 at 70 from "67 and change."

Even longer-dated paper fared better during the session, the trader said. He said the 8½% notes due 2029 moved up to the low-50s from the high-40s. According to another source, those bonds last traded at 51.5.

"Paper was definitely up," he said.

At another desk, a trader pegged the 6.95% notes due 2008 at 93 bid, 94 offered and the 8½% notes at 52 bid, 52.5 offered.

"There's just better buyers," the trader said, noting that the gains were likely due to "a little short covering and a little hope."

"I think people are cautiously optimistic that they may be able to ride out the storm," he said. He added that there is the belief that there will be "some type of deal done to help them stay alive."

The trader also added that any losses the bonds might have incurred from the ratings cut were already priced in.

Another source saw the 6.95% notes coming due on April 1 improve to 92 bid, 94 offered from 89 bid, 91 offered, while the 8.85% bonds due 2030 jumped 4 points to 54 bid, 56 offered.

Fitch Ratings lowered the issuer default rating on the merged company to CCC from B-, placing the business smack in the middle of distressed territory. The senior unsecured debt also fell to CCC/RR4 from B-/RR4.

The downgrade was attributed to increasing pressures in the newsprint and lumber industries, as well as the shift toward electronic media.

Meanwhile, sector peer Ainsworth Lumber Co.'s 7¼% notes due 2012 lost a point to just over 64.

Quebecor continues to rally

Quebecor World's debt continued to see gains Thursday, following a boost from Wednesday's session.

A trader called the 6 1/8% notes due 2013 "a little better," at 45.5 bid, 46 offered, up from previous levels around 44. However, another trader deemed the bonds up as much as 4 points at 45.5.

At another desk, a trader said Quebecor's shorter-dated bonds - the 4 7/8% notes coming due on Nov. 15, 2008 and the 6 1/8% notes - continued to gain, moving up 2 points to 45 bid, 47 offered. However, the company's longer bonds, like the 9¾% notes due 2015 and 8 3/8% notes due 2016, were unchanged at 48 bid, 50 offered.

Another source saw the 4 7/8% notes at 45.5, up some 2.5 points, while yet another source saw both those bonds and the 2013 issue get as good as 46.

During Wednesday trading, a trader attributed the printer's upward movement to "chatter" about potential asset sales. The trader said the market was buzzing that there were "interested parties" in certain parts of the company's business.

However, other traders pointed to Tuesday's CDS auction, where bonds traded at 41.25. Some speculated that the auction piqued investor interest, bringing in more buyers.

Graphic Packaging notes gain

Better earnings helped Graphic Packaging bonds get about 1.5 points stronger on the day.

A trader said the 9½% notes due 2013 closed the day at 93.5 bid, 94 offered. He noted that the bonds were quoted at 92 bid, 93 offered prior to the numbers.

"The numbers were pretty good," he said.

The paperboard-packaging provider posted net sales of $601.9 million for the fourth quarter of 2007, a 6.4% increase year over year. Net loss narrowed significantly to $0.7 million from $35.9 million.

Earlier this month, Graphic Packaging voluntarily extended - for the fourth time - the waiting period in the proposed merger with Altivity Packaging LLC. The date was pushed up to Tuesday. However, there has been no word on the current status of the pending deal, valued at $1.8 billion.

Broad market mostly better

There has not been much activity during the last few sessions in Finlay Fine Jewelry Corp., a trader said, but a ratings downgrade prompted some movement in the company's debt Thursday.

The trader quoted the 8 3/8% notes due 2012 at around 46.

Moody's Investors Service cut the notes to Caa3 from Caa1, citing poor operating performance and increased debt levels related to the acquisition of Bailey Banks & Biddle.

Earlier this month, Finlay said that 94 of its 316 locations in Macy's would not continue for business once its license agreements with the department store expired.

Meanwhile, Level 3 Communications Inc.'s paper was deemed at least 1 point better, its 9¼% notes due 2014 at around 80.

That company's debt has come under fire of late. A trader said the day's gains were likely "somebody just trying to push them higher."

At another desk, a trader said he heard there was a "positive report" out on the company, possibly from Bank of America. The trader also noted, "Revenue numbers were good."

"The market may have oversold these," he speculated, adding, "They are survivors."

Tropicana Entertainment LLC, also known as Wymar Operating, saw its 9 5/8% notes due 2014 slip half a point to a point to 51.5 bid, 52 offered.

A trader saw Charter Communications Inc.'s bonds "down again today," with the 10% subordinated notes due 2014 off 2 points at 45 bid, 47 offered and its 8 3/8% senior notes due 2014 lower by 0.25 point at 91.75 bid.

However, another market source pegged the company's 11% notes due 2015 at 67.5 bid, down nearly a point on the day.

Yet another trader deemed the cable provider's debt down about half a point, the 11¾% notes due 2014 at 49 and the 11% notes at 67.5.

Paul Deckelman 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.