Rite Aid mixed on debt exchange news; ResCap completes tender offer, bonds steady to slightly firm

By Stephanie N. Rotondo

Portland, Ore., June 4 - Rite Aid Corp. was the more notable of names in Wednesday's distressed bond market after the company announced a debt exchange offer.

But the news resulted in the drug store chain's bonds ending the day mixed. Those notes that were included in the tender gained at least a dozen points post-announcement. Notes that were not included in the deal, however, fell about a point during the session.

Elsewhere, Residential Capital LLC announced that it had wrapped up its own exchange offer. The news came just one day after the company said it needed more cash to survive through the end of the month. Still, sources seemed surprised that there was not more action in the name, and the bonds ended the day virtually unchanged to slightly better.

Overall, traders reported that Wednesday's session "felt like a Monday," leaving some to wonder what was going on.

"It was just small bits here and there," a trader said.

Rite Aid mixed on debt exchange news

Rite Aid's structure ended the day mixed after the company announced a cash tender offer for its 8 1/8% notes due 2010, its 9¼% notes due 2013 and the 7½% notes due 2015.

One trader saw the 7½% notes trading actively at 108.75 bid, 109.75 offered. Its other notes, however, such as the 9½% notes due 2017, the 9 3/8% notes due 2015 and the 8 5/8% notes due 2015, fell about 1.5 points to 77 bid, 78 offered.

"I would have thought there would have been a lot more trading," he noted.

At another desk, Rite Aid paper was once again deemed active, the 9¼% notes at 99.5 bid, par offered, the 7½% notes at 108 bid, 109.5 offered and the 8 5/8% notes at 76 bid, 77 offered.

Yet another source said the 7½% notes and the 9¼% notes gained about a dozen points on the news, the 7½% notes closing around 109 and the 9¼% notes around 97. Longer-dated paper, however, slipped "a little bit," with the 8 5/8% notes and the 9½% notes ending around 77.

In a press release, Rite Aid said it would fund the tender from new debt financing. The company said it also does not plan on making any coupon payments on the notes until the final settlement date.

Rite Aid is a Camp Hill, Pa.-based pharmaceutical store chain.

Retail sector largely quiet

Among other struggling retailers, a trader said Linens n'Things filed its 13-week cash flow report - "and it doesn't look good," he said.

However, the trader said there was little to no activity in the name, though he saw a bid in the low-40s, looking for an offer.

On a positive note, Blockbuster Inc.'s 9% notes due 2012 "continue into strength," the trader said. He quoted the bonds at 84 bid, adding that there has been no recent news to prompt the move.

Finlay Fine Jewelry Corp.'s 8 3/8% notes due 2012 were seen up a point at around a 41 bid, 42 offered context.

Still, aside from the action in Rite Aid debt, a trader said there was "not a ton going on" in retailers.

ResCap wraps tender offer

Despite news that ResCap had wrapped its tender offer - just one day after warning of additional liquidity needs - a trader was surprised there was not more activity in Residential Capital debt.

The trader said the 6 3/8% notes due 2010 stayed at 50 bid, 51 offered, while a "small piece" traded in the 6 1/8% notes due 2008 at 91.75 bid, 92.25 offered. The trader also saw the 8½% notes due 2010 with an 84 bid.

Another trader saw ResCap's 6½% notes due 2013 up a point to 48 bid, while another the 8 5/8% notes due 2010 firm a little to 89.5 bid, 90.5 offered and its 9 5/8% notes due 2015 at 59 bid, 60.25 offered. But he saw corporate parent GMAC LLC's 8% bonds due 2031 unchanged at around 74 bid, 75 offered. Another trader saw the GMAC issue at that level but called them up half a point.

ResCap announced on Wednesday that it had completed its exchange and cash offer for $14 billion in debt. Earlier in the day, the company had extended the tender deadline to 9 a.m. ET Wednesday from 11:59 p.m. ET Tuesday.

By the deadline, ResCap had tendered about $2.6 billion of the notes maturing in 2008 and 2009 and about $6 billion in notes coming due 2010 to 2015.

ResCap began the tender offer in early May as a way to push out upcoming maturities and avoid default. However, a default may still loom as the company warned Tuesday that its liquidity needs through the end of the month were more than three times what it originally estimated.

Residential Capital is a Bloomington, Minn.-based mortgage lender and subsidiary of GMAC LLC.

Broad market moving higher

Reports that Verizon was in talks to purchase Alltel sent the latter's bonds up 10 points, a trader said, with the 7% notes due 2012 ending the session close to par.

"If Verizon buys them, it will go to investment grade," he opined.

Meanwhile, Swift Transportation Co. Inc.'s 12½% notes due 2017 were "higher in the morning," another trader said, though "no one knows why." The trader called Wednesday's 39.5 bid "up significantly" from Tuesday's closing level of 37 bid, 38 offered.

Charter Communications Inc.'s CIH paper continues to swing upward. The 11¾% notes due 2014 were called "pretty strong" at around 70, wile the 9.92% notes due 2011 traded as high as 68.

A trader said there was "nothing in particular" to prompt the recent gains.

"People are just looking at it like it is too cheap," the trader speculated. "There is a lot of yield to it."

A trader saw the new Ply Gem Industries Inc. 11¾% secured notes due 2012, which priced at 99.072 on Monday, and which then hung around that issue price on Tuesday, "a littler softer" at 98.25 bid, 98.625 offered. A second trader called them 98.125 bid, 98.625 offered.

Paul Deckelman contributed to this article.

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