Burlington Coat, Pep Boys moving up; Tropicana secures forbearance, bonds steady; Delphi dips

By Stephanie N. Rotondo

Portland, Ore., April 16 - The distressed bond market had an overall "better tone," one trader said Wednesday, following a more than 200-point gain in the Dow Jones Industrial Average.

"Everything leaped higher," one trader said of the market's performance.

"The market was better," opined another.

Retailers as a whole moved up during the session. But it was Burlington Coat Factory Warehouse Corp. that led the way, gaining as much as 2.5 points after the company released its third-quarter results late Tuesday.

Pep Boys - Manny, Moe & Jack's debt also felt better, which a trader attributed to a sale-leaseback agreement announced earlier in the week.

In the gaming sector, Tropicana Entertainment LLC secured a forbearance agreement from its creditors as it entered into restructuring talks with the group. The bonds, however, saw little price movement, closing the day essentially unchanged - though they continue to trade flat.

With its emergence from bankruptcy put off, Delphi Corp. is negotiating terms of a $4.1 billion debtor-in-possession facility. Earlier in the week, the company's chairman said that the current credit market condition, as well as the pullout of key investor Appaloosa Management, has meant the company's Chapter 11 exit would likely take months. As such, the company's bonds "inched lower," as one trader put it.

Burlington Coat, Pep Boys rise

Retailers were generally better during the session, with Burlington Coat Factory Warehouse leading the pack.

The distressed retailer posted its third-quarter numbers late Tuesday, and the improved figures helped the bonds gain as much as 2.5 points on the day.

One trader quoted the 11 1/8% notes due 2014 at around 81, deeming that "up a couple points." Another trader called the bonds 2.5 points better, trading in a wide range between 79 and 82. The trader noted that the bonds closed the day toward the higher end of that range.

Another source said the bonds "peaked" at 81.75, with a market of 81.5 bid, 82.5 offered, up from 79 bid, 80 offered previously.

Also, the company's term loan was quoted at 82¾ bid, 83¾ offered, up from 82 bid, 83 offered, a trader said.

They had "relatively good [earnings] - nothing fantastic but OK," the trader added.

For the three months ended March 1, Burlington posted net sales of $987.1 million, a $0.2 million decrease year over year. Net income also fell to $26.8 million from $31.1 million. The company attributed the dip in sales and income in part to "weakened consumer demand."

For the nine months ended March 1, Burlington showed consolidated net sales of $2.6 billion, a 0.6% decrease from the same period of 2007. However, the Burlington, N.J.-based company incurred a tighter net loss for that period, at $0.4 million versus $9 million.

Burlington will host a conference call to discuss the results at 10 a.m. ET on Friday.

Meanwhile, Pep Boys' debt came a close second to Burlington, also closing up 2 points, as the bonds continue to push higher on a sale-leaseback agreement announced Monday, a trader said.

The 7½% notes due 2014 ended the session around 87.

On Monday, Pep Boys announced that it had closed on the sale of 23 properties for $74.3 million. Proceeds from the sale are expected to be used to repay debt. The Philadelphia-based company also entered into an agreement to lease back the properties for 15 years with four five-year options.

Among other retail names, Bon-Ton Stores Inc.'s 10¼% notes due 2014 inched up to 70, while Claire's Stores Inc.'s 10½% notes due 2017 closed at 50 bid, 51 offered from around 49 previously.

Both Linens n'Things Inc. and Blockbuster Inc. issues were on the quieter side, with Linens' floating-rate notes due 2014 ending the session unchanged at around 41 and Blockbuster's 9% notes due 2012 likewise holding steady at around 82.

Tropicana obtains forbearance

Tropicana Entertainment's bonds held tight as the company entered into restructuring talks with its noteholders and obtained a default forbearance.

A trader said the 9 5/8% notes due 2014 closed at around 51, noting that the debt had been slightly higher two days ago.

"But I didn't see a lot of action in them [Tuesday], so I would say they were unchanged for the most part," he said.

Another trader said there was "nothing special" in the notes, which he pegged at 50 bid, 51 offered.

"They have been trading flat for a while now," he added.

At another desk, a trader saw the bonds at 50.5 bid, 51.5 offered.

"I don't think that was really anything different," he said.

In an 8-K filed with the Securities and Exchange Commission, Tropicana said its noteholders had agreed to a forbearance agreement, which gives the company until May 15 to come up with a restructuring plan. Under the agreement, the company will pay Wilmington Trust Co. $4 million for its indemnity claim.

The agreement could expire as early as May 1, however, if the company fails to pay a $3 million forbearance fee.

The company said that if restructuring talks do not produce a plan amenable to all parties, a bankruptcy filing could be likely.

Tropicana is a Fort Mitchell, Ky.-based gaming entertainment provider.

Delphi debt slips

As it is unlikely it will be exiting bankruptcy soon, Delphi is negotiating the terms on a $4.1 billion second amended DIP facility and hopes to extend the maturity of the loan to Dec. 31, 2008.

Whether that made investors uncomfortable, or if it was something else, was unclear, but Delphi's bonds "inched lower," as one trader put it.

The trader quoted the company's debt generically at 36, while another saw the 6.55% notes that were to have matured in 2006 down a point at 36 bid, 36.5 offered.

Another trader pegged the 2006 issue at 36 bid, 38 offered and the 6½% notes due 2013 at 35 bid, 37 offered. He also saw the 7 1/8% notes due 2029 at 38 bid, 40 offered, though he called that "not much changed."

According to papers filed with the bankruptcy court overseeing its case, Delphi plans to launch the DIP extension on April 17. The company said the new agreement will be similar to its other DIP agreements, though it expects it to be "more costly due to the current status of the capital markets."

Delphi is a Troy, Mich.-based automotive parts supplier.

Broad market mixed

A trader said Idearc Inc.'s 8% notes due 2016 traded up 1 point to "close to 70." Another trader said the phonebook publisher's bonds were "still marching up," closing 1.25 points better at 69.5 bid, 70.5 offered.

"I think they just got oversold," the trader speculated as the reason for recent gains in the name.

Neff Corp.'s bonds were deemed "active in the morning" by one trader, who pegged the 10% notes due 2015 at around 49.

"There was no real reason, just a generally positive market," he said of the move.

There was "not a lot of action" in Spectrum Brands Inc.'s bonds, a trader said, though he called the debt "probably a smidge lower." He placed the 11¼% variable-rate toggle senior subordinated notes due 2013 at 84, down half to three-quarters of a point.

Sara Rosenberg contributed to this article.

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