Rite Aid mixed; Sprint weaker; Univision gives back gains; Foamex steady; Ch. 11 fears shadow Smurfit

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Jan. 23 - Word of a new piece of debt and a downgrade resulted in a mixed debt structure for Rite Aid Corp., traders reported on Friday.

The company's term loan was better bid, according to one source, but bond traders did not see the corporate debt fare as well. Still, even bond traders gave mixed reports as to what caused the slide. One trader said the rating cut "hurt more" than anything else, but another trader said that news "did little" to the debt.

Meanwhile, Sprint Nextel Corp.'s bonds closed out the week a little softer. Earlier in the week, the wireless network provider announced new plans for business subscribers, a move aimed at stealing market share from its main rival, Verizon. However, some have expressed that the new plans will do little to help the company.

Univision Communications Inc.'s term loan lost most of the gains it had earned on Thursday, according to traders. The loan had run up on news that the company had settled a lawsuit.

A skipped interest payment did little to hurt Foamex International Inc.'s bank debt, traders said. One source indicated that it was expected the company would enter into its grace period instead of paying the coupon.

Bankruptcy chatter continued to plague Smurfit-Stone Containers Corp. The bonds closed the day weaker to unchanged, depending on whom you asked, as some speculated that a filing was imminent.

Rite Aid structure ends mixed

Rite Aid's term loan was seen bid a little higher by some market players following the company's announcement that it is working on getting a new accounts receivable securitization loan, according to a market source.

The source said that he saw the term loan quoted at 59½ bid, versus a 58 bid on Thursday.

However, a different source claimed that the debt was basically unchanged at levels in the 58 bid, 62 offered context.

The bonds did not fare so well either, though a trader remarked that a downgrade from Moody's Investors Service "hurt more" than news of the new debt.

The trader said the 9½% notes due 2017 were the biggest loser, falling to 34 bid, 35 offered from around 38 previously. However, he added that the 10 3/8% notes due 2016 and the 7½% notes due 2017 were "not too much different" at 72 bid, 74 offered and 60 bid, 63 offered, respectively.

But another trader said the downgrade "did little" to affect the notes, pegging the 10 3/8% notes at 70 and the 9 3/8% notes due 2015 at 33.

"It makes sense as I don't think anyone with even half a brain cares what the rating agencies say anymore," he stated.

On Friday, Rite Aid revealed in an 8-K filed with the Securities and Exchange Commission that it has received a commitment for an up to $200 million second-lien accounts receivable securitization term loan due Sept. 14, 2010.

The loan is priced Libor plus 1,400 basis points and contains 101 call protection.

Citigroup is the sole lead arranger and bookrunner on the deal, and has committed to provide $100 million of the loan, while the remaining $100 million will be syndicated on a best-efforts basis through the earlier of closing and Feb. 20.

Proceeds will be used to provide funding for the acquisition of receivables or participation interests therein.

In addition, the company announced that it amended its existing receivables financing agreement, extending the commitment for 364 days until Jan. 21, 2010.

In connection with the amendment, borrowing availability under the existing facility was reduced by about $100 million and there will be an additional roughly $100 million step-down on Feb. 20.

After the news, Moody's said that it downgraded Rite Aid's corporate family ratings to Caa2 from Caa1, with a negative outlook, and its first-lien credit facility to B3 from B2.

According to the rating agency, the downgrade acknowledges the near- to medium-term pressures that Rite Aid's liquidity faces should it be unable to generate very significant improvements in its free cash flow and reflects the opinion that the current capital structure is likely unsustainable at the current level of operating performance.

Moody's went on to say that it expects availability under Rite Aid's $1.75 billion asset-based revolver will continue to erode unless the company is able to significantly reduce its free cash flow deficits through improvements in working capital and operating performance.

In addition, the newly revised corporate rating considers that the company's revolver and $145 million term loan maturing in September 2010 and that, given the current state of the credit markets, Rite Aid faces potential difficulties in refinancing these facilities, Moody's continued.

Rite Aid is a Camp Hill, Pa.-based operator of a chain of retail drugstores.

Sprint bonds weaker

Sprint Nextel's debt slipped about 1 point across the board during Friday's session, a trader said.

The trader placed the 7 5/8% notes due 2011 at 84, while the 6% notes due 2016 slipped to 66. He noted that the 6% were "maybe down more than a point" on the day.

At another desk, a trader saw the 6.9% notes due 2019 fall to 66, while the 6 7/8% notes due 2028 slipped to 56 bid, 57 offered. He also saw the 8 3/8% notes due 2012 at 80 bid, 81 offered and the 8¾% notes due 2032 at 62 bid, 63 offered.

On Thursday, Sprint announced new plans directed at its business subscribers. The plans were seen as a way Sprint could compete with its rivals, such as Verizon.

However, not everyone believed that the new plans would do much to help the company steal market share. According to one report, a Morgan Stanley survey indicated that for every customer Sprint managed to get from Verizon in the fourth quarter, Verizon got its hands on 10 Sprint customers.

Sprint has scheduled a conference call to discuss its fourth-quarter results at 8 a.m. ET on Feb. 27.

Sprint Nextel is an Overland Park, Kan.-based wireless services provider.

Univision gives back gains

Univision Communications's term loan B gave up a good portion of its gains from the previous session as things seemed to calm down a bit now that the initial excitement over a settled lawsuit with Grupo Televisa SAB disappeared, according to traders.

The term loan B was quoted by one trader at 48½ bid, 49½ offered and by a second trader at 48 bid, 50 offered. On Thursday the loan was seen at 51 bid, 53 offered, after rallying from Wednesday's levels of 46 bid, 48 offered.

The debt had run-up on Thursday because of news that the lawsuit with Televisa was settled and dismissed, and that the current Program License Agreement, which runs through 2017, was revised to increase payments to Televisa in exchange for incremental rights for Univision.

Univision is a Los Angeles-based Spanish-language media.

Foamex loan unchanged

Foamex International's first-lien term loan shrugged off news that interest payments were skipped by the company as levels stayed in line with where they were previously seen, according to a trader.

The first-lien term loan was quoted at 28 bid, 32 offered, unchanged from Thursday, the trader said.

"People knew this was happening," the trader added in explanation of why the announcement didn't affect bank debt levels.

On Friday, morning, Foamex said that it did not make the $7.3 million interest payments on its first-and second-lien term loans that were due on Jan. 21 after the expiration of a grace period.

The company said that it expects to get a forbearance agreement from its revolver and first-lien term loan lenders shortly, and that it is currently in talks with lenders holding more than a majority of its first-lien term loan about restructuring options including a possible amendment.

In addition to the interest payment news, Foamex was also hit with downgrades from Moody's on Friday.

The company's corporate rating was cut to Ca from Caa2, the first-lien term loan was cut to Ca from Caa2 and the second-lien term loan was cut to C from Caa3. The outlook is negative.

Moody's said that the downgrade was a result of the lenders being able to require all amounts outstanding and exercise all their rights and remedies under the credit facility because of the missed interest payments.

Foamex is a Media, Pa.-based producer of polyurethane foam-based solutions and specialty comfort products.

Smurfit steady despite Ch. 11 buzz

Market players continued to see bankruptcy as an option for Smurfit-Stone Containers after Standard & Poor's cut its rating on the company's loans.

In the bonds, a trader said the notes were "a little softer but still in the same zone," adding that 10.5 bid, 11.5 offered "still covers all four issues."

But another trader saw the 8 3/8% notes due 2012 gain about half a point to 11 bid, 12 offered. He called the 7 3/8% notes due 2014 unchanged at 10.75 bid, 11.75 offered.

"It looks like there was some action, but it doesn't look much different," he said. "Maybe a touch better."

Despite making its coupon payment on Jan. 15, many still think that Smurfit might have to restructure.

On Jan. 19, the Wall Street Journal published an article that claimed the company had hired bankruptcy counsel and that a Chapter 11 filing could come within the next two weeks. Smurfit is expected to post "significantly lower" earnings for the fourth quarter.

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