NewPage gyrates on new-boss news; Blockbuster bounces back a bit; Smurfit loan starts trading

By Paul Deckelman and Sara Rosenberg

New York, Feb. 10 - NewPage Corp.'s bonds were bouncing around busily on Wednesday, first falling in an apparent continuation of the recent slide seen in coated-paper sector credits, but then coming off their session lows following a midday company announcement that it had hired a new president and chief executive officer, to finish only moderately lower on the day.

Sector peer Appleton Papers Inc.'s recently priced bond issue continued to retreat, as did the bonds of another credit from that same sector, Verso Paper Holdings LLC/Verso Paper Inc.

Bankrupt Chicago-based paperboard and paper-based packaging producer Smurfit-Stone Container Corp. meantime took another big step this week towards existing Chapter 11, with the launch and pricing of its $1.2 billion six-year term loan, part of its exit financing; traders saw that loan hit the secondary bank-debt market on Wednesday. There was also active trading in the company's junk bonds, which were seen down around a point.

Away from paper-related names, junk traders saw brisk activity in Blockbuster Inc.'s beleaguered bonds, with the Dallas-based movie-rental company's notes seen having firmed a little from the lows at which they had ended trading on Tuesday, although there was no firm positive news out about the troubled company.

Claire's Stores Inc.'s bonds were seen on the upside in the wake of the retailer's announcement late Tuesday of preliminary fourth-quarter results.

Problem-plagued gaming credits were another losing bet on Wednesday, with continued downside in Harrah's Operating Co. and MGM Mirage bonds.

Blockbuster bonds busy, better

A trader said that Wednesday's market was characterized by "some of the same names [as seen on Tuesday] bouncing all around," among them Blockbuster Inc.'s 9% senior subordinated notes due 2012 and its 11¾% senior secured notes due 2014.

The movie-rental company's bonds "bounced around pretty good today," he said, seeing the 113/4s in a 63-64 context and the 9s around 16-18, with a last trade around 17 on "plenty of volume." He also saw "a decent amount" of trading going on in the 113/4s.

The Blockbuster bonds were up by several points from Tuesday closing levels around 60½ for the 113/4s and 15 for the 9s, though there was no fresh positive news out on the company, which is expected to post a sizable loss for the fiscal fourth quarter and 2009 fiscal year ended Jan. 3 when it reports its numbers and holds a conference call in exactly two weeks, after the market close on Feb. 24.

Blockbuster's bonds have been sliding precipitously since Jan. 21, when the company revealed that its all-important December sales were much worse than expected and thus warned that it will post a full-year loss of somewhere between $183 million and $193 million - nearly double the roughly $100 million of red ink analysts had been forecasting, on average. Before that negative guidance, the 9% notes had been trading in the lower 60s, and the 113/4s traded just under par.

NewPage knocked down, despite news

It was another tough day for holders of NewPage Corp.'s bonds - even though the troubled Miamisburg, Ohio-based coated-paper manufacturer had huge news, released during the afternoon - it has hired a new president and CEO to take the place of the executive whose sudden resignation last month has been seen as one of the key factors that threw those bonds into the tailspin they have suffered over the past few weeks.

Even with the company's announcement that E. Thomas Curley will come aboard as president and CEO, "NewPage got beat up," a trader said, pegging its 10% notes due 2012 down around a 46-47 context, which he said represented a 6 point loss on the day

He saw not much activity in its 12% notes due 2013, which continued to languish in the mid-30s. "The activity was in the 10s," he said.

Another market source saw over $13 million of the 10s trading on Wednesday, quoting them going home at just a shade over 47, versus the previous day's close at 53, although strictly on a round-lot basis, it was around a 4 point loss on the day. But the source saw even more activity - estimating over $40 million worth - in NewPage's 11 3/8% notes due 2014. Those bonds gyrated as low as 85 before coming back later in the day to close around 87, down about a point on the session.

"The 11 3/8s were bouncing around," a trader said, "and then news [of the Curley appointment] came out around noon [ET] and they started bouncing back." He too saw the bonds bottom at 85 pre-news, and then come back up to 87, off a point on the day but about unchanged on the open.

He likewise saw the 10s fall from an opening level of 49½ to a nadir of 46, before coming back later in the day to end at around 47 - off the lows, but still well down from the Tuesday closing level around 50-51.

NewPage announced that Curley will take over the positions vacated last month by Richard D. Willet, Jr., whose unexpected and only vaguely explained resignation, announced on Jan. 19, sent the company's bonds tumbling. The 10s had been trading around 82 and its 11 3/8s around par before the news of Willet's resignation, which came along with quarterly numbers regarded by market observers as weak.

While Curley is respected as a veteran manager, none of his experience is directly connected to running a paper company. After starting his executive career with General Electric Co., he later joined Caterpillar Inc., Cooper Cameron Corp. - the latter a maker of industrial valves - and Rolls-Royce plc, where he most recently served as president of the Rolls-Royce Energy business.

Elsewhere in the paper sphere, NewPage sector peer Appleton Papers recently priced issue of new 10½% senior secured notes continued to struggle, with one trader quoting the bonds as having fallen as low as 91½ bid, 93½ offered, while another saw them offered at 93 - down a little from recent levels in the 92-93 area, and well down from the 98.035 level at which the Appleton, Wis.-based paper company priced its $305 million issue of the bonds on Jan. 29 to yield 11%.

"It seems like the whole paper sector is taking a beating," he opined.

Another sector name, Memphis, Tenn.-based coated-paper maker Verso, was also seen lower on Wednesday. Its 9 1/8% notes due 2014 were seen around 88½ bid, off from 89¼ on Tuesday.

Smurfit-Stone loan starts trading

Also among the paper names, bank-debt traders said that Smurfit-Stone Container Corp.'s $1.2 billion six-year term loan (B2) hit the secondary market on Wednesday, with levels seen by one trader at par bid, 100½ offered on the open and then moving down to 99¼ bid, 99¾ offered.

A second source said he saw the loan quoted at 99 3/8 bid, 99 7/8 offered, adding that it "should trade up in two days time, though, because CLOs will look to pick this up in the secondary."

Pricing on the term loan is Libor plus 475 bps with a 2% Libor floor and 101 soft call protection for two years, and it was sold to investors at an original issue discount of 99.

During syndication, pricing on the term loan was reverse flexed from Libor plus 500 bps, the discount tightened from 981/2, and a 50 bps ticking fee was added to the tranche.

The term loan does not include any maintenance covenants. However, there is a debt incurrence test of 2.0 times interest coverage.

JPMorgan, Deutsche Bank and Bank of America are the lead banks on the deal.

Proceeds from Smurfit-Stone's term loan, along with a new $650 million four-year asset-based revolver, will be used for exit financing when it emerges from bankruptcy. The company sought protection from its bondholders and other creditors with a Chapter 11 filing with the U.S. Bankruptcy Court in Wilmington, Del., in late January 2009.

Through the company's plan of reorganization, debt will be reduced by $2.9 billion. Pre-petition secured lenders will be repaid in full and there will be an equity distribution to about $3 billion face value of unsecured obligations.

The company's pro forma capital structure as of March 31 is expected to include 2.5 times total debt and 2.3 times net debt. By comparison, the company's current structure as of Dec. 31 included 8.0 times total debt and 6.5 times net debt.

While the company's new loan was trading, back in the junk bond market traders also saw a bit of activity in its bonds. Smurfit "moved around a little bit," one said, seeing issues such as its 8¼% and 8 3/8% notes due 2012 and its 8% notes due 2017 all trading in a mid-70s context, which he said was down perhaps a point from Tuesday's close.

"They didn't trade very actively today," he said, but they did get quoted down right around that 75 level," he said, with the 81/4s "the most active one of the bunch."

At another desk, the 81/4s were seen finishing just over 75, although a trader there said the bonds were nearly down a deuce on the day.

Claire's climbs on numbers

Away from the paper sector, a trader said that Clare's Stores' "held up pretty well" despite an overall negative tone in the market, quoting its 9 5/8% notes due 2015 as having risen to 75 bid from Tuesday's 70-71 range.

Another market source saw the company's 10½% notes due 2017 close at 72½ bid, up from around 70 previously.

The notes rose in the wake of Tuesday's late-session release of preliminary quarterly numbers. For the quarter ending Jan. 30, the Pembroke Pines, Fla.-based specialty retailer said it expects to post net sales of $411 million, a 4.5% increase year over year. Consolidated same store sales meantime improved by 2.1% for the time period.

Adjusted EBITDA is expected to be between $91 million and $95 million, compared to $76 million for the same quarter of fiscal 2008. Cash and equivalents were also better at $199 million.

Claire's said it would file its full results on or before April 30.

Gaming's losing streak continues

Back on the downside, bonds of such big gaming companies with exposure to the underperforming Atlantic City market as MGM Mirage and Harrah's Entertainment continued to struggle on Wednesday.

A market source quoted Harrah's 10% notes due 2018 down nearly a point at 72½ bid, while its 11¼% notes due 2017 were marginally easier around the 101 level.

At another desk, the 10s were seen having fallen about 1¼ points to the 72 area, while Las Vegas-based Harrah's 10¾% notes due 2016 were seen even further down - off as much as 5 points to the 71 level.

MGM Mirage fared no better, with its 6 5/8% notes due 2015 closing down nearly 2 points at 78 bid, its 8½% notes coming due in September down almost a full point to 99, and its 11 3/8% notes due 2018 pegged as 5 point losers at 88.

Harrah's and crosstown rival MGM's bonds were continuing the downturn seen on Tuesday after the publication of monthly gaming results by authorities in Atlantic City, where both companies have a presence. For the month of January, the Jersey Shore gaming center's dozen casinos won $294.2 million from their customers - an 8.5% decline from January 2009 levels, and the 17th straight month in which the casinos have reported weakening revenue.

News reports Tuesday also indicated that MGM is looking into the idea of selling its valuable 50% stake in Atlantic City's glitziest and most profitable casino resort, the Borgata, which it runs as a joint venture with Boyd Gaming Corp. The reports say that MGM is considering the step in order to settle questions raised by New Jersey gaming regulators over its ties to a controversial Chinese casino family whom MGM has as a partner in its casino operations in Macau.

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