Distressed market shuts down for the holiday; Sbarro flat to softer; broad market subdued

By Stephanie N. Rotondo

Portland, Ore., Dec. 23 - The distressed debt market closed early Thursday ahead of Christmas Eve, and traders remarked that volumes were nearly non-existent.

"It was totally useless," a trader said of the day.

"It was pretty slow," said another, noting "anemic" trading volumes.

Still, the market continued to be firm, for the most part.

Sbarro Inc., however, was on the weaker side - or unchanged, depending on whom you asked. There was no news out to act as a catalyst.

Sbarro steady to softer

Sbarro's 10 3/8% notes due 2015 were either weaker to unchanged, depending on whom you talked to.

One market source placed the paper around 45, noting that "they were trading at these levels in October, so I don't think there is anything new here."

Another source, however, deemed the bonds down half a point to a point, also around 45, while another called the notes 1½ points cheaper at 45½ bid.

At another desk, a trader saw the notes at 45 bid but noted that it was "only one trade." He suggested that "it might be slightly higher than where it's been," although another market source who pegged the bonds at 45 called them down a deuce on the day.

"There has not been much activity in this name," the first trader said.

There was no fresh news out on the Melville, N.Y.-based fast food chain.

A&P holds in

A trader said that he "didn't see a whole lot of anything" in the Great Atlantic & Pacific Tea Co. Inc.'s 11 3/8% senior secured notes due 2015, calling them virtually unchanged at around 89 bid, 91 offered.

The bonds were well down from the levels in the mid-90s at which those bonds had begun the week after notching hefty gains the prior week in the aftermath of the Montrose, N.J.-based supermarket operator's Dec. 12 Chapter 11 filing.

He also saw the company's 5 1/8% convertible notes due 2011 and 6¾% converts due 2012 quoted about a point higher at 33 bid. "That's quotes," he cautioned - "there was really no activity to speak of, just some small trades."

The 11 3/8s had traded around 80 before the bankruptcy filing, the 5 1/8s around 72-73 and the 63/4s around the lower 50s. On Dec. 10, the last session before the filing, the 5 1/8s had swooned 45 points and the 63/4s around 25, down to the upper 20s, while the 11 3/8s temporarily dipped into the upper 70s but came back to finish little changed.

After the bankruptcy filing, the 11 3/8s moved up over several sessions to as high as the mid-90s while the convertibles rose to the lower 30s. All of the A&P paper is now trading flat, or without the accrued interest, in the wake of the bankruptcy filing.

Traders say the convertibles trade substantially below the 11 3/8s because the underlying stock into which they could be converted is virtually worthless - the de-listed shares now trade at 15 cents, versus their 52-week high of $13.00 set back in early January 2010 - rendering the paper no better than unsecured junk bonds.

Broad market subdued

The broader market was trending upward, though volumes were very light ahead of the Christmas Eve holiday.

A trader said Harrah's Entertainment Inc.'s 10% notes due 2018 were a "smidge better" at 89½ bid, 90 offered.

At another desk, the notes were seen a quarter-point higher at 89¾ bid.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 were meantime seen "creeping up given that their stock has been running up," a trader said.

He pegged the paper around the 33 mark.

Paul Deckelman contributed to this article

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