Month-end doings bring lackluster distressed trading; Blockbuster holds after Coinstar reports

By Stephanie N. Rotondo

Portland, Ore., Oct. 29 - Month-end pricing and curiosity surrounding upcoming elections combined to make Friday a quiet day in distressed land.

"The Street is remarkably quiet; accounts are remarkably quiet," a trader said, noting that total trading volume in the secondary universe barely crossed $1 billion.

Another trader added that the "countdown to elections" was having an affect on the market.

Still, the market was "for the most part unchanged," the first trader said. "If anything, maybe an eighth to a quarter cheaper."

The second trader agreed, saying that most credits were "trading within the confines" of Thursday markets.

Blockbuster Inc. remained at its lows as rival Coinstar Inc. reported its third quarter results. Coinstar's quarterly report showed a significant increase in DVD revenues, pointing to further losses in Blockbuster's market share.

Meanwhile, Nebraska Book Co. Inc. continued to get hit, according to traders. One trader said the company and its parent had been the victim of a downgrade a few weeks ago, but that the bonds only started to respond to that this week.

Clear Channel Communications Inc. made the most active list in an otherwise mundane day. The bonds traded up slightly, but with no news out to explain why.

Blockbuster bonds steady

Blockbuster debt was virtually unchanged - though still trading at pennies on the dollar - after RedBox-operator Coinstar Inc. posted earnings that beat analyst estimates.

A trader saw the 9% notes due 2012 trading at 13/4.

"They have been trading between 1 and 2 for the last two weeks," he said.

Another trader quoted the paper at 1½ bid, 1¾ offered.

Bankrupt Blockbuster has lost market share to companies like Coinstar, as consumers began trending away from brick-and-mortar stores. That point was further brought home as an increase in DVD revenue helped Coinstar increase its revenue stream by 42% year over year. Revenues from its DVD segment alone increased 54.2%.

For the quarter, Coinstar brought in $380.2 million in revenues, $305.5 million of which came from the DVD unit.

Coinstar also posted a profit of $19.5 million, or 60 cents per share, for the three months ending Sept. 30. While that was down from a profit of $41.4 million, or $1.34 per share, the year before, it beat analyst expectations of a 50-cent-per-share profit.

Nebraska Book getting hit

Nebraska Book Co.'s 11% notes due 2013 remained at its recently depressed levels, traders said, but the story continued to generate interest.

"They hadn't traded in a long time," a trader said of the 11% notes. Then the notes "got hit the other day," falling into the high-70s.

He quoted the notes at 76 bid, 77 offered, "way down from where they had been."

Another trader pegged the bonds at 76 bid, 76½ offered, down "a little bit" on the day.

According to the first trader, the Lincoln, Neb.-based textbook seller was downgraded by Moody's Investors Service a couple of weeks ago and it took the debt that long to respond.

On Oct. 14, Moody's dropped its rating on NBC Acquisition Corp. - the parent company of Nebraska Book Co. - to Caa1 from B3, with a possibility of further downgrade. The 11% notes were dropped to Caa3 from Caa2.

"The downgrade of NBC's ratings reflect the amplified refinancing risk as a major portion of the company's public debt and bank credit facilities will need to be refinanced or restructured over the next 11 months," Moody's said in a statement.

"In addition, Nebraska Book Company may face restrictions during 2011 that would limit its ability to upstream dividends to its parent, which are utilized to meet interest payments on the parent's senior discount debentures.

"Should NBC have difficulty refinancing its debt, it could be forced to pursue a restructuring transaction that Moody's could consider a distressed exchange, and hence a default."

Clear Channel trades up

Clear Channel Communications' bonds were "a little bit active," a trader said, though there was no news out on the San Antonio-based multimedia company.

The trader called the 5¾% notes due 2013 up half a point at 901/2.

Another trader echoed that level and also saw the 5½% notes due 2016 increasing marginally to 541/4.

Broad market firm, unchanged

Among other distressed names, NewPage Corp.'s 10% notes due 2012 were "fractionally higher" at 63½ bid, 64 offered, according to a trader.

The trader also saw Great Atlantic & Pacific Tea Co. Inc.'s 11 3/8% notes due 2015 "still sitting" around 74 bid, 75 offered.

"A couple million keep changing hands, but nothing too significant," he said.

At another shop, a trader said General Motors Corp.'s benchmark 8 3/8% notes due 2033 were stronger around 361/4.

Tribune Co.'s bonds - which tend to trade on top of one another - were "straddling 50," the second trader said.

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