Idearc bonds stronger, loan slips; Neff holds on despite downgrade; Retail, gaming end weaker

By Stephanie N. Rotondo

Portland, Ore., May 7 - With the equity markets turning downward Wednesday, the distressed bond market followed suit.

"The market was softer, especially in the afternoon," a trader said.

Still, another trader enthused that there was more activity in the marketplace.

"It's good," he said. "It has been a busy week."

Bucking the broad market trend, Idearc Inc.'s bonds remained on the incline after reporting stronger first-quarter results on Tuesday. The company's term loan, however, fell in sympathy with the rest of the market.

Standard & Poor's downgraded Neff Corp., a day after the company reported weak first-quarter numbers. But, as the numbers were in line with expectations, the company's bonds managed to hold steady - if not end slightly better - despite the ratings cut.

Retail names, such as Linens n'Things Inc. and Bon-Ton Stores Inc., were seen weaker with the overall market. In the gaming sector, Trump Entertainment Resorts Inc. also ended the session with a softer tone.

Meanwhile, Delphi Corp.'s debtor-in-possession credit facility was reallocated Wednesday and broke for trading late in the day.

Idearc bonds stronger, loan dips

Idearc's bonds were "strong like the wind," a trader said, after posting better-than-expected numbers on Tuesday.

The trader quoted the 8% notes due 2016 at 69 bid, 70 offered, up 2 points. Another trader pegged the paper at 69.5, which he said was "probably a little better."

At another desk, a trader saw the bonds up a point to 68.5 bid, 69.5 offered, still riding the momentum from Tuesday's better-than-expected numbers. Another trader saw them unchanged at 68 bid, 69 offered.

A market source saw the bonds inch up half a point to 69.25 bid.

However, Idearc's term loan was lower as it came in with the rest of the cash market, according to a trader.

The term loan was quoted at 82½ bid, 83¼ offered, down from 83 bid, 84 offered, the trader said.

The cash market in general was said to have weakened Wednesday on some profit taking, oil prices and stocks being softer.

One trader had the cash market down by at least a quarter, while a second trader said it was down by an eighth to a quarter.

Nasdaq closed down 44.82 points, or 1.80%; the Dow Jones Industrial Average closed down 206.48 points, or 1.59%; the S&P 500 closed down 25.69 points, or 1.81%; and the NYSE closed down 171.51 points, or 1.80%.

For the first quarter, Idearc reported an 8% increase in profit to $111 million, versus $103 million the year before. The rise in profit came despite a nearly 5% dip in revenues and as operating costs fell 9% to $431 million.

But with advertising revenue experiencing a decline, the company said in its conference call Tuesday that it expected to face some obstacles though 2008.

Shelley Lombard, an analyst with Gimme Credit LLC, said in a morning report that Idearc's ability to pay down some debt and increase its cash balance mean that the company should have little trouble dealing with upcoming debt payments - $45 million this year and up to $200 million in 2009 and 2010.

Still, with $9 billion in debt and high leverage, Lombard said recovery on the company's corporate debt was "questionable."

"We expect the bonds to underperform," she wrote.

Idearc is a Dallas-based publisher of phonebook and Internet directories.

Elsewhere, sector peer R.H. Donnelley's debt was about a point softer, a trader said.

The 8 7/8% notes due 2016 closed at 63.5 bid, 64.5 offered, while the 8½% notes due 2010 ended at 98 5/8 bid, 99.5 offered.

Neff hangs on despite downgrade

Equipment rental company Neff received a downgrade from S&P Wednesday, but that did little to hurt the company's debt.

A trader called the 10% notes due 2015 "slightly better" at 47 bid, 48 offered, compared to levels of 46.5 bid, 47.5 offered Tuesday. Another trader quoted the bonds at 47 1/8 bid, 48 offered, up 1 point.

At another desk, a trader said the bonds traded at "47 and change," which he called unchanged despite the downgrade.

"That is kind of were they were, even with the downgrade," he said.

S&P slashed its rating on Neff to B from B+, with a negative outlook. The ratings agency attributed the cut to the company's weakened performance in the current economic climate.

On Tuesday, Neff released its first-quarter results, which, while poor, fell in line with market expectations.

"No one expected good numbers," a trader said.

For the first quarter of 2008, Neff reported revenue of $68.8 million, versus $80.4 million the first quarter of 2007. The company dipped to a loss in 2008, posting a net loss of $12.7 million, compared to a profit of $1 million the previous year.

Retail names weaker, gaming mixed

The retail sector slipped along with the broader market, traders reported.

Linens n'Things' floating-rate notes due 2014 opened at 38 bid, 39 offered but closed lower into a 37 bid.

"Those bonds are 30 points overpriced," the trader said.

Another trader also pegged Linens' notes at around 37. The trader quoted Bon-Ton Stores' 10¼% notes due 2014 at around 77, also softer.

The trader said that weakness in the sector, along with the broader market, might be due to profit taking, especially in names that had been on the increase of late.

Elsewhere, Claire's Stores Inc.'s 10½% notes due 2017 were down more than a point at just above the 53 bid level.

Meanwhile, the gaming arena was mixed, as one trader said there was "not a ton going on in gaming today."

The trader called Trump Entertainment's 8½% notes due 2015 unchanged at around 62, while another source called the bonds down nearly a point, also around 62.

At another desk, a trader said he did not see much in Tropicana Entertainment LLC's 9 5/8% notes due 2014, though he quoted the bonds up 1 point to near 52, versus levels around 50 bid, 51 offered previously.

Delphi DIP breaks

Delphi's debtor-in-possession facility reallocated and broke for trading late in the day Wednesday, according to a trader.

The $2.75 billion second-lien term loan C was quoted at 99¼ bid, 99¾ offered, the trader said.

The second-lien loan is priced at Libor plus 525 bps with a 3.25% Libor floor. Lenders got a 200 bps amendment fee with this tranche.

Delphi's $4.35 billion DIP facility also includes a $1.1 billion revolver and a $500 million first-lien term loan.

The first-lien loan is priced at Libor plus 400 bps with a 3.25% Libor floor. Lenders got a 150 bps amendment fee with this tranche.

During the syndication process, the revolver was upsized from $1 billion, the first-lien term loan was downsized from $600 million and the second-lien term loan was upsized from $2.5 billion.

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan the left lead.

Proceeds are being used to refinance the company's existing DIP facility with one that matures at a later date.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Broad market slips

Charter Communications Inc.'s debt was "about the same," a trader said, quoting the "old" 10¼% notes at 98 bid, 99.5 offered and the 9.92% notes due 2014 at 57.25 bid, 58.25 offered. Another trader, however, called the cable operator's debt "better, although they gave back a smidge from the highs." He pegged the 11% notes due 2015 at 83 bid, 83.5 offered, down from the high of 84.

A trader said that Tousa Inc.'s debt has slowly been inching up, the 9% notes due 2009 now trading at 63 bid, 65 offered.

Hawaiian Telcom's 12½% notes due 2015 closed at 27 bid, 28 offered.

A trader said Residential Capital LLC's bonds "remain pretty active," though he called the 2013 issue "not too much different" at around 50.

Swift Transportation Co. Inc.'s 12½ notes due 2017 were unchanged at 34 bid.

MagnaChip Semiconductor LLC's 8% notes due 2014 were a point better at 60 bid, 61 offered on "no news," a trader said.

Sara Rosenberg and Paul Deckelman contributed to this article.

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