Six Flags sees 'substantial' boost; Blockbuster momentum continues; Nortel notes steady

By Stephanie N. Rotondo

Portland, Ore., Sept. 15 - Traders reported that "everything was up" during Tuesday trading - including bankrupt Six Flags Inc.

The amusement park operator's bonds gained about 4 points on the day - roughly half their current worth as of Monday. There was no news, but one source speculated that creditor committees might be winning the fight against Six Flags' reorganization plan.

Meanwhile, Blockbuster Inc.'s debt stayed the course and continued to climb ever higher. The bonds have been on this course for some time but were helped out by news Monday that the company was pricing a new debt issue to pay off its revolving credit facility.

While nearly everything else was seen firming, Nortel Networks Ltd.'s notes held their ground. Still, trading was "fairly active," according to a trader.

Six Flags sees 'substantial' boost

Six Flags' bonds moved up as much as 4½ points on the day, and one market source speculated that "large players" were making headway in their fight against the company's reorganization plan.

The source saw both the 8 7/8% notes due 2010 and the 9¾% notes due 2013 ending around 12, versus levels around 8¾ "the day before yesterday.

"So that's up substantially," he added.

Another source also saw the 9¾% notes at the 12 mark.

"There are a number of groups trying to make committees and trying to get exclusivity terminated," the first source said. "They want to get their own plans in."

The source noted that there are "a couple of large players involved in these." As the current plan gives bondholders "literally pennies," some are fighting the current plan and attempting to get the company valued higher.

"So they look like they might be having some success," the source opined.

According to court papers filed Aug. 21, Six Flags would turn the company over to lenders post-bankruptcy. Lenders are slated to receive 92% of stock in the newly reorganized amusement park operator, along with a new $600 million term loan. In exchange, the lenders would cancel about $1.13 billion of debt.

Bondholders holding about $400 million in debt would meanwhile receive 7% of the new stock, about 8% to 12% of the face value of their current holdings.

Other unsecured creditors, holding about $1.35 billion in debt, would get the remaining 1% of stock, or about 0.4% and 0.6% of what they are owed.

Six Flags is based in New York.

Blockbuster momentum continues

Dallas-based Blockbuster saw its bonds continue to improve, according to traders.

A trader called the 9% notes due 2012 up 1¾ to 2 points, trading between 71½ and 72 late in the day. Another market player quoted the issue at 71½ bid, 72¼ offered, up 1 to 2 points.

The movie rental chain has seen its debt moving ever higher of late. The momentum was first spurred by news that the company had sold off its Ireland business, Xtra-Vision, for up to $45 million in cash. On Monday, the bonds were again pushed upward on news the company was looking at adding a new debt issue to its capital structure.

The company intends to price a $340 million senior secured issue later this week. The notes would mature in five years but would come due May 2012 if Blockbuster was unable to refinance the 9% notes by a certain date.

Proceeds will be used to repay the company's existing revolver, which would help shore up liquidity.

But even though some in the know don't see how the 9% notes could get refinanced in the current market, others see the new issue as a boon for Blockbuster.

"All of this is good news for Blockbuster's liquidity and has had a salutary effect on bond pricing," wrote Gimme Credit analyst Kim Noland in an afternoon comment. "Upon completion of the new deal, we will likely raise our credit score."

Fitch Ratings has already placed a rating of B on the new deal.

"The successful completion of the notes offering will alleviate the liquidity concerns including requirements under the $250 million revolving credit facility, such as the amortization and prepayments over the next 18 months totaling approximately $311 million and the constraints on capital investments, which could hinder the execution of the company's operating strategy," Fitch said in a statement.

Nortel notes hold their ground

Nortel Networks' debt was "kind of sideways" just one day after the telecommunications company announced that Avaya Inc. was the winning bidder for its enterprise-telecommunications unit.

The trader said the 10¾% notes due 2016 and the 10 1/8% notes due 2013 were "fairly active" but were trading "in a very tight range" at 52½ bid, 53½ offered. He also saw the floating-rate notes due 2012 trading at 51¾ bid, 52½ offered.

At another desk, the 10 1/8% notes were called unchanged at 53 bid, 53½ offered.

Since filing for bankruptcy protections in January, Toronto-based Nortel has attempted to sell off certain non-core units. Avaya had made a previous pre-auction bid of $475 million for the unit, but in the end will fork up $900 million in cash and $15 million for an employee-retention program.

A hearing to approve the sale was delayed until Wednesday.

Elsewhere in the technology arena, Sprint Nextel Corp.'s notes were also seen largely unchanged. The bonds had gained in the previous session on rumors that T-Mobile parent Deutsche Telekom was considering making an offer for the company.

Still, a trader said trading in the name was "busy again," placing the 8 3/8% notes due 2017 at 98¾ bid, 99 offered.

The trader also pegged the 8¾% notes due 2032 at 92, up from levels around 90 on Monday.

Also, Spansion Inc.'s floating-rate notes due 2013 ended about 1½ points better at around 903/4.

Homebuilders end stronger

A trader exclaimed that "all the homebuilders are up points," adding that the sector "jumped up nicely."

He saw Beazer Homes USA Inc.'s 8 1/8% notes due 2016 were at 75 bid, 77 offered, "probably up 3 points," while its 8 3/8% notes due 2012 traded at 86 bid, which he called up 1¼ points, with "paper trading on that one."

He also saw Hovnanian Enterprises Inc.'s 6¼% notes due 2016 quoted in the high 60s, but he added that "I didn't see a lot of trading in that."

He saw Hovnanian's 11½% notes due 2013 quoted around par, "up almost 3 points, trading up to 99 7/8."

So, "homebuilders were feeling better."

William Lyon Homes Inc.'s 10¾% notes due 2013 were at a 49-51 context, which he called up "5 or 6 points" from recent levels.

"There's not a lot of trading in that one, it seems to be a thinner issue, but again, it's up with the rest of the homebuilders," he said.

He saw little or no activity in Standard Pacific Corp.'s established bonds, such as its 7¾% notes due 2013, hovering around 88 bid - down from recent levels above 91.

The trader said all of the company's action was in the recently priced 10¾% notes due 2016, which have moved up to around 96-97, well up from the 91.997 level at which the company priced that $280 million of notes - up from $200 million originally - last Thursday to yield 12 %.

"That's the active one in that [name], because it just came out," the trader said.

Paul Deckelman contributed to this article.

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