Lower forecast hurts Chiquita bonds; Boyd gains, MGM strains; Idearc notes slip on downgrade

By Stephanie N. Rotondo

Portland, Ore., June 16 - A lowered quarterly forecast meant weakness in the bonds of Chiquita Brands International Inc. Monday.

The company said that higher costs and weather issues that resulted in decreased volume would likely hurt the bottom line for the upcoming quarter. While the company also said it expects the fourth quarter to stabilize, investors were nonetheless spooked, and the company's debt fell as much as 3 points.

But even as Chiquita was called the "notable name" of the day, several traders reported that their focus was instead on the U.S. Open.

"Tiger Woods was the focus of the day," one trader said. "His sudden-death victory over Rocco Mediate kept Wall Street invigorated."

In more relevant news, Boyd Gaming's paper continued to gain on rumors of a potential buyout. Since Friday, investors have boosted the company's bonds by about 5 points. One market source, however, remains skeptical.

Also in the gaming sector, MGM Mirage's bonds were softer on the day, though it was not clear why.

Standard & Poor's downgraded Idearc Inc.'s rating Monday. The agency said concerns surrounding EBITDA and whether the phonebook publisher could return to more stable levels were to blame for the cut. Still, Idearc's debt was relatively quiet, ending slightly lower to unchanged.

Lowered forecast lowers Chiquita debt

Chiquita Brands' bonds fell as much as 3 points during the first trading session of the week after the company lowered its forecast for its next quarter.

One trader said the company's debt was "definitely off," its 8 7/8% notes due 2015 at 90 bid, 90.5 offered and its 7½% notes due 2014 around 86.

Another source quoted the 8 7/8% notes at 90 bid, 91 offered, down from 94 bid, 95 offered late last week. A market source pegged the 7½% notes around 86, down 3 points.

"They got killed," a trader said.

The Cincinnati-based produce company said higher costs will likely weigh on finances in the third quarter. As such, the company said it expects to post a significant loss.

Poor weather in key growing areas, such as Central America, was also blamed for the lowered guidance. Inclement weather has resulted in weaker or flat volumes.

"We expect these factors to result in a difficult third quarter, which is likely to reflect a significant loss, and a more normal fourth quarter," said Fernando Aguirre, chairman and chief executive, in a statement.

Meanwhile, rival Dole Foods' bonds also ended the day softer, its 7¼% notes due 2010 at 91.75 bid, 92.25 offered and its 8 5/8% notes due 2009 at 97 bid, 97.5 offered.

Boyd helped by rumors, MGM slips

Continued rumors of a buyout boosted Boyd Gaming's debt yet again Monday. The bonds, which had gained about 3 points on Friday on the buzz, moved up another 1 to 2 points, a trader said.

The trader quoted the 7 1/8% notes due 2016 around 80, while another source pegged the 7¾% notes due 2012 at 92.25 bid, up nearly a point.

But as investors seem to be excited by the rumor, one market player is more skeptical.

"I don't believe it," he said. "Who the hell is buying them? Maybe Tropicana? A merger of equals?

Elsewhere in the gaming arena, MGM Mirage's debt was 'a little bit weaker," a trader said. He saw the 7½% notes due 84.5 bid, 85 offered and the 7 5/8% notes due 2017 at 84.5 bid, 84.75 offered, down 1 to 1.5 points.

Another source deemed the 6 5/8% notes due 2015 at 83 bid, down almost 2 points.

Aside from a report that 10 pedestrians were run over on the Las Vegas Strip - where the Mirage is located - there was no news out to provoke such a move.

Harrah's Operating's 5¾% notes due 2017 also closed weaker at 54.75 bid.

Idearc bonds downgraded

A trader said Idearc's bonds were "fairly quiet" during trading, despite a rating cut from Standard & Poor's.

The trader called the 8% notes due 2016 unchanged at 72. But at another desk, the bonds were seen down half a point at 71.75 bid.

S&P said it cut Idearc's corporate credit rating to B+ from BB and removed all other ratings from negative watch. The rating on the company's corporate debt was like wise lowered to B- from BBB-.

The rating agency said that uncertainties regarding EBITDA were the cause of the downgrade.

Idearc is a Dallas-based telephone directory publisher.

Broad market mostly lower

Claire's Stores Inc.'s bonds "continue to drift," a trader said, as investors continue to worry about the company's past quarterly performance.

The trader placed the 9¼% notes due 2015 around 58. At another desk, a trader saw the 10½% notes due 2017 at 46.5 and the 9¼% notes at 58 bid, 59 offered, which he called unchanged.

Other retailers were also seen weaker on the day. Michael's Stores Inc.'s 11 3/8% notes due 2016 slipped to 84.5 bid, 85 offered, while Rite Aid Corp.'s 8 5/8% notes due 2015 closed at 75 bid, 1 point softer.

Away from that sector, Residential Capital LLC's 6 3/8% notes due 2010 gained a bit, though a trader attributed the move to short covering. The trader quoted the bonds at 54 bid, 55 offered.

A trader saw Quebecor World Inc.'s bonds down 5 points on the day, its 4 7/8% notes coming due on Nov. 15, 2008 dropping to 42 bid and its 9¾% notes due 2015 and 8 3.4% notes due 2016 falling to 54 bid.

Young Broadcasting Inc.'s 10% notes due 2011 were down half a point at 66, while Spectrum Brands Inc.'s 7 3/8% notes due 2015 were a point lower at 66.

Paul Deckelman contributed to this article.

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