Masonite bonds, loan soften; Portola files bankruptcy, bonds steady; Michael's Stores loan gains

By Stephanie N. Rotondo

Portland, Ore., Aug. 28 - Masonite International Inc. held a conference call Thursday to discuss its quarterly results - and the results was not good.

A market source said the call did not go well, which was further evidenced by the price movement of the company's debt structure. The bank debt fell about a point, and the bonds were down a deuce. Still the source opined that had more players been around, the declines might have been bigger.

Portola Packaging Inc. officially filed its pre-packaged bankruptcy plan Wednesday. But come Thursday, the filing had little effect on the company's bonds, though bondholders are slated to receive all of the new stock in the reorganized company.

After falling in the previous session, Michael's Stores Inc.'s term loan reversed its direction. The debt closed the day slightly higher than on Wednesday, when it had fallen on the back of its financials.

The bond market will close early on Friday and will be closed entirely on Monday in honor of Labor Day.

Masonite structure softens

Masonite International's term loan weakened following the release of negative financials - and what one trader called a bad conference call.

The term loan was quoted at 84½ bid, 85½ offered, down from Wednesday's levels of 85½ bid, 86½ offered, a trader said.

In the bonds, a trader quoted the 11% notes due 2015 at 38 bid, 43 offered.

The trader added that there was a print in the 39 context first thing, which he called "definitely lower" than the last trades on Aug. 21 around 44.

"It's lower, but not by a huge amount," he said.

Another trader also saw the bonds trade in the 39 area, which he called down 2 points, "then it was finished."

"There was barely anyone around to trade," he said. "Maybe [the bonds] would have gone down further if more of the community were in."

He added that the conference call to discuss the results "did not go very well."

For the second quarter, the company reported a net loss of $688.6 million, compared to net income of $5.4 million last year.

Sales for the quarter were $507.8 million, down 13.8% from $588.9 million in the second quarter of 2007.

"Masonite's second-quarter results were negatively impacted by the persistent deterioration in the U.S. housing market. Lower operating volumes led to margin compression that was further exacerbated by significant inflation in our raw material, energy and transportation costs," said Fred Lynch, president and chief executive officer, in a news release.

For the first half of the year, the company's net loss was $716.2 million, compared to net income of $2.4 million in the previous year's comparable period.

Sales for the six months declined 16.1% to $972.1 million from $1.158 billion in the first six months of 2007.

Also, net debt increased $102.4 million to $2.035 billion on June 30 from $1.933 billion on March 31, 2008. On Dec. 31, 2007, net debt was $1.910 billion.

As has been previously reported, the company is in negotiations with the lenders under its senior secured credit facility regarding an amendment and a waiver of the non-compliance with the adjusted EBITDA and interest coverage ratios.

Masonite is a Tampa, Fla.-based manufacturer of residential and commercial doors.

Portola files, bonds steady

Portola Packaging filed its pre-packaged bankruptcy plan, but that did not do much for the company's bonds.

A trader said the 8¼% notes due 2012 were at 15 bid and have "been there for weeks."

Under the pre-packaged plan, noteholders are to receive 100% of new equity in the company. Wayzata Investment Partners LLC will be the controlling shareholders once the plan is effective, sometime in October.

"We are pleased to have achieved such strong support for a consensual restructuring that dramatically improves our balance sheet, reduces our annual cash interest obligations by approximately $15 million and enables continued reinvestment in our products and future growth," president and chief executive officer Brian Bauerbach said in the release.

Portola Packaging is a Batavia, Ill.-based designer, manufacturer and marketer of tamper-evident plastic closures, bottles and equipment for the beverage food industries, as well as plastic closures and containers for the cosmetics industry.

Michael's Stores loan gains

Michaels Stores' term loan moved higher on Thursday, recouping some of the losses it posted in the previous session on earnings, according to a trader.

The term loan was quoted at 77 bid, 78 offered, up from 76 3/8 bid, 77 7/8 offered on Wednesday. On Tuesday, the loan was being quoted at 77½ bid, 78½ offered.

"It's just up with the rest of the market I guess. Most things feeling pretty good today," the trader remarked.

On Wednesday, the term loan had dipped in reaction to quarterly and first half of the fiscal year numbers.

For the second quarter, the company reported a net loss of $25 million, compared to a $44 million loss for the 2007 second quarter; net sales were $796 million, compared to $788 million last year; and adjusted EBITDA declined to $73 million, or 9.2% of sales, from $90 million, or 11.4% of sales.

For the six months ended Aug. 2, the company reported a loss of $45 million, compared to a $67 million loss for first half of fiscal 2007; net sales were $1.643 billion, compared to $1.627 billion last year; and adjusted EBITDA was $170 million, or 10.3% of sales, versus $203 million, or 12.5% of sales.

Michaels Stores is an Irving, Texas-based arts and crafts specialty retailer.

Broad market mixed

Harrah's Entertainment LLC's bonds ended the session mixed, traders reported.

One trader pegged the 10¾% notes due 2016 at 67 7/8 bid, 68 offered. Another called that issue down slightly at 67.75 bid, 68 offered.

The second trader also saw the 5 5/8% notes due 2015 at 39.5 and the 5¾% notes due 2017 at 39.25, up just over half a point.

Meanwhile, Idearc Inc.'s 8% notes due 2016 continued to get better, ending the day almost a point higher at 45.75 bid.

Sara Rosenberg contributed to this article.

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