Ply Gem paper gets a boost on earnings; Blockbuster bonds droop; First Data dips post-numbers

By Stephanie N. Rotondo

Portland, Ore., Nov. 13 - Earnings played a big role in the distressed debt market Friday, as fresh results were given credit for the majority of the day's price movements.

Ply Gem Industries Inc., for example, saw its bonds gain as much as 4 points on the day following the release of third-quarter financials. Traders also called the credit one of the day's most active issuers.

Meanwhile, Blockbuster Inc.'s bonds remained under pressure. The company posted its earnings late Thursday, but the notes had begun trading lower ahead of the quarterly report.

Also, First Data Corp.'s debt - corporate and bank - took a hit in trading. Market sources attributed the softness to less-than-stellar third-quarter results.

Ply Gem gets a boost

Ply Gem Industries' bonds were "up a bunch," according to a trader, following the release of the company's third-quarter results.

The trader said the 11¾% notes due 2013 ended in a 96 bid, 97 offered "kind of ZIP code," which he deemed "up in the neighborhood of a good 3 points."

Another trader called the issue the "most active bond by far," also placing the paper at 96 bid, 97 offered. That compared with 93 bid, 94 offered previously.

"They reported good numbers," the second trader said.

For the third quarter, the Cary, N.C.-based building products company posted net sales of $293.5 million, down 14.4% from the previous year's sales of $342.8 million.

Adjusted EBITDA came to $57.6 million, compared with $41.9 million for the same quarter of 2008.

However, the company managed to swing to profit, its net income coming to $4.4 million for the quarter. In the same period of 2008, Ply Gem posted a net loss of $4.1 million.

"Ply Gem's third quarter and first nine months of 2009 sales and Adjusted EBITDA results continue to reflect the challenging conditions that exist in the housing market today," stated Gary E. Robinette, president and chief executive officer, in the earnings release.

"However, despite the fact that single family housing starts were down 36.2% and 15.5% in the second and third quarters of 2009, respectively, Ply Gem demonstrated an improvement in our third quarter Adjusted EBITDA compared to last year.

"Although there are some signs of improvement in the housing sector, we remain cautious as the market remains fragile," Robinette continued. "Thus Ply Gem will continue to focus on managing our cost structure while maximizing cash flow and outperforming the market place in all business units, allowing us to emerge stronger when the housing market recovers."

Blockbuster bonds droop

Unlike Ply Gem, Blockbuster's debt continued its downward course following the reporting of third-quarter financials.

One trader said the 9% notes due 2012 "got smoked," falling to 46 bid, 47 offered. That equaled a 7- to 8-point decline on the day.

Another trader said the "crappy numbers" pressured the Dallas-based movie rental chain's debt. The 9% notes were seen at 44 bid, 46 offered, versus 53 bid, 55 offered "a couple days ago. So those are down almost 9 points for the week."

The second trader also saw the 11¾% notes due 2014 slipping to 92 bid, 93 offered from 94 bid, 95 offered.

The bonds had started to fall during Thursday trading, ahead of the after-market close release of the quarterly report.

For the quarter, Blockbuster reported revenues of $910.5 million, versus $1.16 billion for the third quarter of 2008.

"The 21% revenue decrease is primarily attributable to a 14% decline in same store comparables due to the company's temporary shift in focus to manage the business for liquidity and the macroeconomic environments," the company said in the earnings release.

"The other factors that affected third quarter total revenue included the reduction in company-operated stores and the negative impacts of foreign currency exchange."

Operating loss came to $10.2 million, compared with $3.5 million the year before. Net loss was $116.8 million, or 60 cents per share, compared with a loss of $20.6 million, or 11 cents per share.

The wider loss was attributed to write-offs associated with the sale of Xtra-Vision Ltd.

"With the capital structure improvements behind us we are returning our focus to the operations of the business," stated Jim Keyes, chairman and CEO, in the release.

"In the fourth quarter we are adding inventory, expanding product assortment, increasing advertising and reaching out to our customers in new and exciting ways. With the addition of Blockbuster Express branded vending kiosks and the mass market deployment of Blockbuster On Demand on internet connected devices to millions of homes across the U.S., we have dramatically increased our points of presence and made it more convenient for our customers to access the latest movies and games the way they want."

First Data debt softens

In other earnings news, First Data's debt structure took a hit on the back of the company's quarterly results.

In the bonds, a trader pegged the 9 7/8% notes due 2015 at 93 "towards the end of the day," a loss of 1.5 to 2 points.

Another trader quoted the issue at 92 bid, 93 offered, down from 94 bid, 95 offered on Thursday.

"Lots of those traded," he said.

Also, the company's term loan debt softened on Friday following the release of quarterly earnings that were less than impressive, according to traders.

One trader had the term loan B-1 quoted at 85¼ bid, 86¼ offered, down from 85¾ bid, 86¾ offered, the term loan B-2 quoted at 85 bid, 86 offered, down from 85½ bid, 86½ offered and the term loan B-3 quoted at 84¾ bid, 85¾ offered, down from 85¼ bid, 86¼ offered.

Meanwhile, a second trader had the term loan B-1 quoted at 85 3/8 bid, 85 7/8 offered, down from 85 7/8 bid, 86 3/8 offered, the term loan B-2 quoted at 85¼ bid, 85¾ offered, down from 85¾ bid, 86¼ offered and the term loan B-3 quoted at 85 bid, 85½ offered, down from 85½ bid, 86 offered.

For the third quarter, First Data reported a net loss of $288.9 million, down 76% from a net loss of $164.4 million in the comparable period last year.

Adjusted EBITDA for the quarter was $532 million, down 23% compared with $688.5 million in the third quarter of 2008.

However revenues for the quarter were up 13% at $2.443 billion, compared with $2.164 billion last year primarily driven by a new Bank of America Merchant Services alliance. Bank of America Merchant Services is the company's largest merchant acquiring alliance and was established in June after the extension of similar alliances with Wells Fargo and PNC in recent quarters.

"Despite a tough economy, we are taking advantage of unique opportunities in the marketplace," said Michael Capellas, chairman and CEO, in a prepared statement. "We are focused on our future as we continue to invest in new product development, reduce costs and expand our distribution channels."

First Data is a Greenwood Village, Colo.-based provider of electronic commerce and payment services.

Broad market mixed

Elsewhere in distressed territory, New Plan Excel Realty Trust Inc.'s bonds were seen weakening, leading one trader to opine, "They are probably going to have to file."

The trader said the longer putable issues were trading at 66 bid, 68 offered, while short paper ended at 63 bid, 64 offered.

The trader also saw Spheris Inc.'s 11% notes due 2012 trading at 55.5 bid, 56 offered.

"Those haven't traded in forever," he said.

Cooper-Standard Automotive Inc.'s 8 3/8% notes due 2014 were meanwhile seen holding steady at 26 bid, 27 offered.

Sara Rosenberg contributed to this article.

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