Blockbuster bonds bomb; NewPage debt keeps diving; Visteon regains some ground; Smurfit slips

By Stephanie N. Rotondo

Portland, Ore., Jan. 21 - The distressed debt market once again had a weak tone to it Thursday, according traders.

"In general, the market was definitely weaker," a trader said. "It was kind of sloppy with the equities."

Blockbuster Inc. typified that weak tone, as the company's bonds lost about 30 points on the day. The massive decline came as the movie rental chain gave a lowered forecast for 2009 total-year earnings, due to less-than-expected holiday sales.

NewPage Corp. also ended softer, as it had for several sessions preceding Thursday's. The notes fell another 5 points, bringing the total losses over the last week to about 20, according to a trader.

Visteon Corp. was one of the few credits that posted gains, however. The automotive parts supplier's debt ended up a few points, with one market source pointing to chatter that another reorganization plan - or at least an amendment to the current one - was being negotiated.

Blockbuster bonds bomb

Blockbuster's bonds dominated the distressed market, as the company's bonds traded down roughly 30 points lower.

"It's all Blockbuster today," a trader said of the 9% notes due 2011. He saw the issue hit a low of 25 and a high of 40 before settling back in to 32 bid, 33 offered. That compared to levels around 60 on Wednesday.

Another trader pegged the bonds at 30 bid, "32-ish" offered, while the 11 ¾% notes due 2014 were at "+/- 80," down "roughly 18 points."

The Dallas-based movie rental chain said late Wednesday that its holiday sales were "well below expectations," and, as such, provided an adjusted earnings forecast for 2009.

The company is projecting EBITDA of $195 million to $205 million, while net loss is expected to be around $183 million to $193 million.

"During the fourth quarter we redirected our efforts to restore top line performance, especially for the month of December as we tried to leverage the holiday season," stated Jim Keyes, chairman and chief executive officer, in a press release.

"We increased inventory levels to support a higher in stock availability and invested in advertising to drive traffic in stores and online. In spite of these efforts, our performance during the holidays was well below expectations and anticipated adjusted EBITDA was affected, specifically in the month of December where as much as 30% of our full year EBITDA has historically been generated. Lower than expected international results also contributed to the change in our expectations."

On the news, Standard & Poor's cut its view on Blockbuster to negative, while Gimme Credit analyst Kim Noland pointed to concerns about the bigger picture.

"Blockbuster's poor performance highlights our concern about longer term trends," she wrote in an afternoon note to clients. "We have cautioned that its in-store bricks and mortar model is a dinosaur and that the company is facing intense competition from Netflix, Redbox and others on the forefront of download technology."

NewPage keeps diving

NewPage's debt "continued its slide," a trader said, as the papermaker's notes dropped another 6 to 7 points on the day.

The trader called the 10% notes due 2012 "fairly active," ending at 63 bid, 64 offered. That compared with levels around 70 on Wednesday.

Another trader saw the bonds slipping another 5 points to end at 64 bid, 65 offered.

"They've been wild," he said, adding that they were down "almost 20 points in a week."

The Miamisburg, Ohio-based company's debt has been trading down all week. The declines started to get hot and heavy on Tuesday when the company announced its CEO had resigned and also reported preliminary fourth-quarter results. At that time, a trader told Prospect News that the numbers "seemed to disappoint" investors.

Visteon regains some ground

Visteon paper was one of the more active names, as well, according to traders.

A trader said the 7% notes due 2014 ended higher at 48, compared with closing levels of 45 previously.

"So they are up about 3 points," he said.

Another trader also called the bonds "a little bit better," also around 48. The bonds had been on the quiet side and a bit softer prior to Thursday's session.

According to the second trader, the activity in the name was likely due to "stuff going on with a court filing," referring to documents filed earlier in the week in which the Van Buren Township, Mich.-based company said it was in talks with bondholders regarding an alternative bankruptcy proposal.

Under the current plan, which was filed in December, senior lenders walk away with about 96% of the new equity in the company. The remaining 4% goes to retirees. Bondholders get nothing.

But the new plan would pay some bank debt, while reinstating the remainder. Bondholders - secured and unsecured - would see some form of recovery, likely new equity via a rights offering.

In other Visteon news, the company's private $1.9 million sale of its radar ECU unit was approved.

Elsewhere in the autosphere, General Motor Corp.'s 8 3/8% notes due 2033 were "weaker," a trader said, "just below 28." He deemed that about a quarter-point to half-a-point lower.

Smurfit notes slip

Smurfit-Stone Container Corp.'s debt ended the day weaker, according to market sources.

One source said there was "a few trades" in the 8% notes due 2017. He saw the bonds finishing around 871/2, which he deemed "down a couple points."

Another source saw the 8¼% notes due 2012 at 871/4, a loss of more than 1 point.

Spansion loan going well

Spansion Inc.'s $450 million five-year term loan is heard to be "coming along very well" ahead of Friday's commitment deadline, according to a market source.

The term loan is talked at Libor plus 550 basis points with a 2.5% Libor floor and an original issue discount in the 98 area, and carries 101 soft call protection for one year.

Barclays and Morgan Stanley are the lead banks on the exit financing term loan.

Also as part of the exit package, the company will be getting a new $65 million ABL revolver; however, different banks are leading this part of the transaction.

Total leverage is less than 2.0 times.

Spansion is a Sunnyvale, Calif.-based maker of flash memory products.

Sara Rosenberg contributed to this article.

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