Distressed debt drops ahead of holiday; Clear Channel turns downward; Hawker debt remains weak

By Stephanie N. Rotondo

Portland, Ore., Nov. 10 - The distressed debt market closed out the midweek trading day on the softer side as players readied for Thursday's market close due to Veteran's Day.

"Straight down," a trader said of the day's performance. "About 85% of everything was off."

The negative tone of the market caused Clear Channel Communications Inc.'s bonds to end their recent run-up. The debt had been trending higher before the company's earnings release on Monday, but by Wednesday, traders saw the notes falling 2 to 3 points.

Hawker Beechcraft Acquisition Co. LLC paper continued to decline following the company's late Tuesday earnings release. The bonds had fallen a point or two ahead of the announcement and remained under pressure on Wednesday.

But even a remarkable quarterly profit heralded by General Motors Corp. did little to push the carmaker's bonds upward. Still, traders did note that the debt closed out the day up from its intra-day lows.

One of the day's few outliers was Great Atlantic & Pacific Tea Co. Inc., which a trader said had been moving up recently. The notes might also have been pushed higher by news of a sale-leaseback announced late Tuesday.

Clear Channel ends run-up

Clear Channel Communications was "notable," a trader said, as the company's debt fell 2 to 3 points, without any news to cause the declines.

"I didn't see any particular reason [for the loss]," the trader said. However, the generally weak market, combined with a "nice little run-up pre-numbers [on Monday]" might have played a role.

He pegged the 10¾% notes due 2016 around 80 and the 11% notes due 2016 around 781/2.

Another trader said the 10¾% notes were down a deuce at 801/4, while the 11% notes were 3 points softer, around 771/2.

On Monday, the San Antonio-based multimedia company's parent, CC Media Holdings Inc., reported a 6% increase in revenues year over year, bringing the total to $1.48 billion for the third quarter of 2010. The company noted that had it not been for foreign-exchange rates, the increase would have been 7%.

However, net loss widened to $150.4 million from $92.7 million the year before.

Clear Channel Outdoor Holdings Inc. meanwhile posted a 5% increase in revenues at $695.1 million. And, its net loss fell to $31.9 million from $34.1 million.

Hawker losses mount

Hawker Beechcraft Acquisition Co. debt continued to lose ground after the company reported its third quarter earnings after the market closed on Tuesday.

One trader placed the 8½% notes due 2015 around 77, compared with 79 bid, 80 offered previously.

Another trader also saw the paper around the 77 level, calling that down a point on the day.

The second trader also saw the 9¾% notes due 2017 slipping a point to end around 62.

Yet another source deemed the 8½% notes over a point weaker at 77 bid.

The Wichita, Kan.-based aircraft manufacturer said its sales dropped $163 million to $594.7 million for the third quarter. The decline came as the company delivered just 49 aircraft, down from 64 delivered during the same quarter of 2009.

Hawker's operating loss, however, was better than year-ago comparables at $81.4 million.

Hawker also managed to cut its cash burn in half, running through just $26.8 million, versus $58.5 million the previous year.

GM dips despite profit

General Motors' bonds started the day of weaker, according to traders, but managed to "recover a little bit towards the end," a trader said.

H saw the benchmark 8 3/8% notes due 2033 trading around 35 in early trading, but finishing around 36.

Another trader also saw the 8 3/8% notes closing around 36, while the 8¼% notes due 2023 dipped a point to 35 and the 7.20% notes due 2011 slipped as much to 343/4.

The gyrations in the Detroit automaker's debt came as the company reported a $2 billion quarterly profit on revenues of $34.1 billion.

The quarter marks GM's third consecutive profit and the company's chief executive, Dan Akerson, reiterated his expectation that the company would post its first full-year profit since 2004 in 2010.

Investors are also waiting for the company's highly anticipated initial public offering, which is expected to price Nov. 17, with trading to commence on Nov. 18.

A&P trending higher

A trader said Great Atlantic & Pacific Tea Co.'s 11 3/8% notes due 2015 have been "trending a little bit higher," ending Wednesday's session at 80 bid, 82 offered.

Another trader called the notes "about unchanged, maybe even up a little bit" at 80 bid, 81 offered. That compared with 79 bid, 80 offered on Tuesday, he said.

The upward trend in the Montvale, N.J.-based supermarket operator's debt was further fueled when the company announced a sale-leaseback transaction late Tuesday.

Under the terms of the agreement, Winstanley Enterprises LLC agreed to purchase 100% of A&P's interest in six Pathmark retail properties in New York, New Jersey, Pennsylvania and Delaware.

A&P will be paid $89.8 million for the properties, 95% of which are occupied and leased to A&P.

"This agreement is another step forward in our comprehensive turnaround strategy," said Sam Martin, president and chief executive officer, in a statement. "We continue to analyze areas across the business to identify ways such as these to further strengthen our financial foundation and improve our performance."

Broad market under pressure

Elsewhere in Distressedland, First Data Corp.'s 9 7/8% notes due 2015 were seen dropping 1½ points to 87 3/8.

Harrah's Entertainment Inc.'s 10% notes due 2018 meantime fell nearly 3 points to 903/4, according to a trader.

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