Freescale improves on news; Neiman steady to better on numbers; Hunstman shrugs off debt issue

By Stephanie N. Rotondo

Portland, Ore., Sept. 9 - The distressed debt market closed out Wednesday on a firmer tone, continuing its upward climb.

Freescale Semiconductor Inc. was one of the day's gainers. Traders saw the company's bonds moving up as much as 3 points on the day following news that the company had rehired some workers. Also, the chief executive officer made some positive comments regarding the state of the chip industry in an interview with the EE Times India.

Neiman Marcus Group Inc.'s debt was also better, or at least steady. The company reported its fourth-quarter results during the session.

Meanwhile, Huntsman International LLC's bonds reacted little to news the company was adding a $600 million bond issue. The notes were seen ending unchanged to maybe a tad better.

Smithfield Foods Inc. released its quarterly report on Tuesday, but seemed to have little effect on the company's debt. However, come Wednesday, the bonds were reported to have dropped 1 to 2 points.

Freescale improves on news

Freescale Semiconductor's debt moved higher during Wednesday trading, following news that the company had "rehired workers as orders picked up," a trader said.

The trader placed the 8 7/8% notes due 2014 around 71.

At another desk, a source called the issue "up a couple points from where it has been" at 71 bid, 72 offered. Several other sources echoed the 71 to 72 range.

In addition to the news regarding the rehired workers, the company top executive also speculated the recession was over and that the semiconductor space was shaping up for an upward cycle in an EE Times India interview.

"It is crystal clear that the recession is over," Rick Beyer said in the interview. "This gives us confidence. Also, the third quarter is shaping up better than the previous two. I hope this is the beginning of a return to steady growth, though no one can say how long it will take to return to normalcy."

Beyer also noted that the various economic stimulus initiatives from the U.S. government - as well as stimulus packages from across the globe - had helped the sector. In particular, he noted the Cash for Clunkers program, as many carmakers use Freescale technology.

Neiman steady to better

Neiman Marcus Group's capital structure ended the day mixed after the company reported its fourth-quarter results.

In the bonds, a trader said the debt "started the day a little lower," with a 75 handle, before moving up to 76.5 bid, 77 offered.

But another market source deemed the notes lower, pegging the 10 3/8% notes due 2015 at 75.5 bid, down about a point.

Meanwhile, Neiman's term loan softened after the company came out with the results for the quarter ending Aug. 1. However, the loan spent the rest of the day inching higher until it ended the day close, if not in line, with previous levels, according to traders.

The term loan was quoted by one trader at 83 1/8 bid, 84 1/8 offered, slightly down from Tuesday's pre-number levels of 83½ bid, 84½ offered. This trader said the loan reached a low of 81¼ bid, 82 offered on Wednesday but then "slowly drifted up."

"It was pretty active. Market feels pretty strong. Cash coming off the sidelines. People looking to pick stuff up," the trader said in explanation of why Neiman Marcus' term loan rebounded.

A second trader, meanwhile, had the company's loan quoted at 83¼ bid, 84 offered, compared with 83 bid, 84 offered before earnings were released. This trader had the loan moving to 81 bid, 83 offered on Tuesday night after numbers came out and opening at 81¼ bid, 83¼ offered on Wednesday.

"Overall market was stronger so it moved up with the market but numbers were definitely disappointing. Seems like market just shrugged off the numbers," the trader added.

Late Tuesday, Neiman Marcus revealed that its fourth quarter net loss was $168.6 million, compared with a net loss of $35.7 million in the 2008 fourth quarter. This year's loss includes non-cash pretax impairment charges of $143.1 million and $31.3 million.

Operating loss for the quarter was $192.1 million, compared with an operating loss of $6.2 million last year.

The adjusted operating loss was $49 million, compared with adjusted operating earnings of $25.1 million in 2008.

And total revenues for the quarter were $768 million, compared with $1.03 billion in the prior year, and comparable revenues decreased 23.4%.

Neiman Marcus also reported that its adjusted EBITDA for the fourth quarter was $5.7 million, compared with adjusted EBITDA of $86.1 million in the fourth quarter of fiscal year 2008.

"Fiscal year 2009 was a very challenging year for our company. We quickly began addressing the many challenges we faced due to the sharp decline in our business, precipitated by the downturn in the economy," said Burton M. Tansky, chairman and chief executive officer, in a news release.

"We tightly managed our expenses, resulting in a total reduction of $183 million, which included the elimination of approximately $100 million of non-variable costs from our expense structure this year. We also aggressively reduced our inventory levels to be more in line with demand, ending the year with 23% less merchandise than last year.

"In total, we ended the year with cash of $323 million, an $84 million increase from last year. In addition, we recently renegotiated our $600 million revolving credit facility and extended the maturity to 2013," Tansky added in the release.

"Neiman comparable sales (which were still down over 16% in the month of August on easy comparisons) were not hugely shocking as management has warned that sales would be very soft through the fall season," wrote Gimme Credit analyst Kim Noland in an afternoon note.

"On the positive side, the company reduced inventory levels, ending the year with 23% less inventory than last year. Plus it recently obtained a revolver extension to 2013, shoring up liquidity.

"The company is not out of the woods, however," Noland concluded.

Neiman Marcus is a Dallas-based high-end specialty retailer.

Elsewhere in the world of retail, Blockbuster Inc.'s 9% notes due 2012 "continue to rip," a trader said, placing the issue around 67.

Michael's Stores Inc.'s 11 3/8% notes due 2016 also moved up, trading with an 89 handle.

Huntsman shrugs off new debt

Huntsman International's existing bonds seemed little affected by word the company was pricing a new $600 million debt issue Wednesday.

One source deemed the 7 7/8% notes due 2014 unchanged to half a point better at 88 bid, 89 offered. Another source echoed that market.

The second source also said he saw an 83 bid for the new 5½% notes due 2016. With the 7 7/8% trading with an almost 11% yield, he speculated the 5½% notes would yield around 9%.

"So they must be pricing them at a deep discount," he opined.

Sure enough, the issue was priced at 80, with a 9.567% yield via Credit Suisse.

Huntsman International is based in the Woodlands, Texas and manufactures differentiated chemicals.

Smithfield loses ground

Smithfield Foods' bonds were weaker just one day after the pork producer reported a wider quarterly loss.

A trader quoted the 7% notes due 2011 at 92.5 bid, 93 offered, down half a point on the day. He also saw the 7¾% notes due 2017 trading around 73, calling that "down a point from yesterday, but unchanged from last week."

Another trader saw the 7% notes falling 2 points to 92.5 bid, 93.5 offered, while the 7¾% notes dipped a point to 72 bid, 73 offered.

On Tuesday, Smithfield posted a $107.7 million loss for its first quarter of fiscal 2010. That compared with a loss of $13.2 million the year before. Revenues dropped 13% to $2.72 billion.

But despite the loss, some market players are agreeing that there is upside in the company.

"Smithfield has solved its near-term liquidity and bank covenant concerns, and we expect that its credit quality will begin to improve over the next quarter or two," wrote Gimme Credit analyst Vicki Bryan in a morning report. "Smithfield bonds are up 2-5 points since June, and most range from 85-100."

Bryan maintained a buy rating on the 2011-2013 unsecured issues, as well as the secured notes.

Sara Rosenberg contributed to this article.

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