Lyondell lackluster on Reliance news; U.S. Concrete paper quoted flat; Rite Aid still moves up

By Stephanie N. Rotondo

Portland, Ore., Feb. 22 - The distressed debt market was relatively better on Monday, but according to some sources, interest in "higher-grade stuff" was taking attention away from the lower-rated credits.

That could explain why trading in Lyondell Chemical Co. - the subsidiary of LyondellBasell - was so lackluster. Traders said the bonds were better to unchanged following news that Indian chemical maker Reliance Industries Ltd. was considering increasing its offer for the company. However, the news did serve to push up the company's bank debt.

U.S. Concrete Inc. was notable Monday, not for its trading activity, but for the fact that it was being quoted flat, or without accrued interest. Last week, the company said it had hired financial advisers to explore its restructuring options.

Meanwhile, Rite Aid Corp. continued to climb higher in active trading. That trend began last week following news of the Walgreens/Duane Reade deal.

And, Clear Channel Communications Inc.'s bonds remained busy and better. There was still no explanation as to why the bonds have been so popular of late.

Lyondell lackluster on Reliance news

Trading in Lyondell Chemical's bonds was "not nearly as active as I would have thought," a trader said, as rumors circulated that Reliance Industries Ltd. was planning to up its bid for the chemical maker.

He called both the 9.8% notes due 2020 and the 7 5/8% notes due 2026 up a point at 82 and 251/2, respectively.

"There should have been more [trading]," another market source said. That source called the notes "all kind of where they have been," seeing about $4 million of the 9.8% notes moving around "82 and change." The 7 5/8% notes were pegged at 241/2.

Meanwhile, parent company LyondellBasell's pre-petition CAM was better in the secondary market on the market chatter, according to a trader.

The CAM was quoted at 71 bid, 73 offered, up from Friday's levels of 70¾ bid, 71½ offered, the trader said, adding that the paper was as high as 73 bid, 74 offered in the morning before coming back in a little.

News reports out late Sunday indicated that Reliance was considering offering more than $14.5 billion for Lyondell in a combination of stock and cash. Last month, Reliance was reported to have submitted a $13.5 billion bid.

In more recent news, Lyondell inked a settlement with unsecured creditors and lenders regarding its leveraged buyout on Feb. 16. The settlement was valued at $450 million, well over the originally anticipated $300 million.

LyondellBasell is a Netherlands-based polymers, petrochemicals and fuels companies.

U.S. Concrete paper quoted flat

U.S. Concrete's debt was also on the quiet side, traders reported Monday. However, what was notable was that the bonds were being quoted flat, or without accrued interest, potentially a harbinger of things to come.

A source said he saw no trading in the name, but did see the 8 3/8% notes due 2014 quoted at 53 bid, 55 offered, flat.

"They were in the 60s with [interest] fairly recently," he added.

Another trader said he saw markets of anywhere from 53 bid, 55 offered to 55 bid, 57 offered, also flat.

On Friday, the Houston-based concrete manufacturer said it was exploring its options to improve its capital structure. To that end, it had hired Lazard Freres & Co. LLC and AlixPartners as financial advisers and Kirkland & Ellis LLP as legal counsel.

In addition to announcing the hiring, U.S. Concrete also said it had received a waiver to skip its upcoming April 1 coupon and that it had amended its senior credit facility.

"We believe that engaging in discussions with our bondholders to improve our capital structure and provide financial flexibility is in the best interest of the company and its constituents," said Michael W. Harlan, president and chief executive officer, in a press release.

"As we have previously disclosed, we continue to face economic headwinds which, combined with the recent inclement weather we have experienced in each of our markets, has placed added pressure on our liquidity. We believe the amendment of our senior credit facility provides us with additional access to liquidity to continue to provide quality service and products to our customers throughout this process."

On Monday, Standard & Poor's cut its rating on the company to CC from CCC+, citing the potential restructuring.

Rite Aid still moving up

Rite Aid debt was still trending higher in Monday trading, continuing a trend that began last week when it was learned that Walgreens was taking over Duane Reade Inc. That news fueled chatter that Rite Aid was the next takeover target.

A trader placed the 9½% notes due 2017 at 841/2, up 4 points on the day.

Another source saw the 8 5/8% notes due 2015 improving nearly a point to 86¼ bid.

The Camp Hill, Pa.-based pharmacy chain is expected to release its February sales report on March 4.

Elsewhere in the retail arena, Blockbuster Inc.'s 9% notes due 2012 were "much more active than on Friday," according to a trader. Still, the notes were unchanged, trading around the 19 mark.

Clear Channel remains active

Clear Channel Communications' remained on the active-trading list Monday, though there was still no news to explain why.

A trader said about $15 million of the 11% notes due 2016 traded about a point better at 70 bid, 71 offered.

Another trader also called the issue "up about a buck" around 70.

Clear Channel is a San Antonio-based multimedia company.

Sara Rosenberg contributed to this article

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