Rite Aid new issue firms; United Rentals weaker; Smithfield debt heavy; Dollar Thrifty loan dips

By Stephanie N. Rotondo

Portland, Ore., July 1 - Rite Aid Corp.'s new notes traded much more actively on Tuesday than when they first entered the marketplace on Monday, traders reported.

The new issue, part of the company's tender offer, inched higher during the session, while other issues ended weaker. Rite Aid extended the offer for another week and also increased the principal amount of the new notes.

Meanwhile, United Rentals Inc.'s debt dropped some. The slip came as the company announced it would waive certain conditions of its Dutch auction tender.

Smithfield Foods Inc. announced that it would add more debt to its structure, which put pressure on the pork processor's bonds. The bonds have already experienced some losses recently as flooding in the Midwest sent corn futures higher. The new notes are slated to pay off bank debt.

After weathering a rough second quarter, Dollar Thrifty Automotive Group Inc. said it would likely miss its previous full-year earnings guidance. As a result, the car rental company's bank debt traded lower.

Rite Aid new issue gains

Rite Aid's new 10 3/8% notes due 2016 traded actively on its second day on the market, distressed traders reported.

One trader called the debt up about half a point at 91 bid, 91.25 offered versus its issue rice of 90.586. Another echoed that market, adding that the Camp Hill, Pa.-based pharmacy chain's other issues were "not trading that much." He pegged the 7½% notes due 2017 around 80.5, unchanged.

Another source deemed the 8 5/8% notes due 2015 weaker by 2.5 points at 64.5 bid.

Rite Aid said Tuesday that it increased the principal amount of the new issue by $25 million to $470 million The company also extended its tender offer for its 8 1/8% notes due 2020, 9¼% notes due 2013 and 7½% notes due 2015 to July 8. Rite Aid plans to use proceeds from the new issue, as well as a new term loan, to fund the debt exchange.

In a morning report, Gimme Credit analyst Kim Noland wrote that Rite Aid's acquisition of the Brooks and Eckerd stores has produced negative results. As sales slipped in the first quarter, other issues popped up.

"Balance sheet leverage is climbing and liquidity has recently become strained forcing the company to engage in an expensive tender," Noland wrote. "Even though Rite Aid reaffirmed fiscal 2009 guidance, we think it will be tough for the company to achieve projected 2% to 4% comp store sales growth."

United Rentals weakens

Equipment rental company United Rentals saw its bonds fall about 1 point during Tuesday's session.

A trader called the debt active, with the 7¾% notes due 2013 at 78.75 bid, 79 offered and the 6½% notes due 2012 at 89.25 bid, 89.75 offered.

Another trader said the bonds were "down roughly a point," the 7¾% notes around 79 and the 6½% notes around 89. Another source placed the 7% notes due 2014 at 77 bid, also a point lower.

The losses in the paper came as the company announced that it would waive a condition on its Dutch auction tender offer for its common shares. According to the condition, the company's stock could not fall more than 10% below its June 16 price. The condition went into effect when the stock slipped below $19.82.

United Rentals is based in Greenwich, Conn.

Elsewhere in the sector, Neff Corp.'s 10% notes due 2015 "lost a couple more points" to close at 35 bid, 36 offered.

Smithfield bonds hurt by new debt

Smithfield Foods' bonds ended the day lower after the company announced it would add more debt to its structure.

One trader said the bonds were "actively trading," with the 7¾% notes due 2017 at 84, which he called "off a little bit." At another desk, a trader called the bonds "slightly lower," with the 8% notes due 2009 at 99 bid, par offered, the 7% notes due 2011 at 90.5 bid, 91.5 offered and the 7¾% notes due 2013 at 88 bid, 89 offered.

The pork processor said Tuesday that it would offer $350 million in senior convertible notes due 2013, an effort to repay some of its bank debt. The Smithfield, Va.-based company also said that it plans to sell 7 million new shares of stock to Cofco, a Beijing-based company.

Standard & Poor's has already placed a BB- rating on the new issue. The agency also said the rating is on CreditWatch with negative implications.

Earnings miss weighs on Dollar loan

Dollar Thrifty's term loan B headed lower after the company warned that it would miss its previously issued earnings guidance, according to a trader.

The term loan B was seen offered at 80, down from Monday's offer price of 851/2, the trader said, adding that he was just seeing offers on the debt, not bids.

On Tuesday, Dollar Thrifty said that its second quarter was below expectations with challenges primarily in the areas of revenue per day and vehicle depreciation costs.

The company also said that the balance of the year looks worse than previously forecasted as a result of overall economic trends.

As a result, the company does not expect to meet the previously issued guidance for full-year non-GAAP earnings per share of $1.00 to $1.50 and corporate EBITDA of $97 million to $115 million.

Based on the company's present forecast, it still expects to remain profitable on a non-GAAP basis, with a minimum of $50 million in corporate EBITDA for the year.

"We believe overall fleet capacity has come down in the industry going into the summer travel season, reacting to the anticipated decline in industry wide demand. We believe this may help support pricing in the third quarter, but it is extremely difficult in the current environment to accurately forecast any more than the shortest term outlook," said Gary L. Paxton, president and chief executive officer, in a news release.

"Our focus in this tough operating environment is on executing our strategy to achieve improvements in revenue diversification, fleet utilization, productivity and cost control," Paxton added in the release.

More details on the company's financial performance will be provided when results for the second quarter are released on Aug. 5.

Dollar Thrifty is a Tulsa, Okla.-based vehicle rental company.

Broad market mostly lower

Harrah's Operating's 10¾% notes due 2016 saw "a lot of action," though the bonds ended unchanged at 82.5 bid, 82 5/8 offered, a trader said. Trump Entertainment Resorts Inc.'s 8½% notes due 2015 slipped a point to 60.5.

Idearc Inc.'s 8% notes due 2016 held steady in Tuesday trading, closing at 63 bid, 63.25 offered.

Delphi Corp.'s bonds "kept drifting down," a trader said, pegging the debt at 18 bid, 19 offered.

After posting losses in the previous session, Spectrum Brands Inc.'s 11% notes due 2013 were "a little lower," hovering around 80.

Quebecor Inc.'s 6 1/8% notes due 2013 fell 1.5 points to 2 points to 33.5.

Sara Rosenberg contributed to this article.

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