NewPage surges on tariff decision; Blockbuster bonds may reach zero, some say; Ply-Gem active

By Stephanie N. Rotondo

Portland, Ore., March 3 - Distressed debt ended Wednesday better, a trader said, though another noted that overall volume in the secondary world was pretty light.

The second source said that total turnover came to about $1.3 billion - and that included a new $1.4 billion issue from HCA Inc., which he called "a sleeper."

"Some new deals came," the first trader added. "It loosened some paper up, but it's still pretty tight."

Still, the second source remarked that there were "a few things that were fairly busy." Of those, NewPage Corp. took the top spot.

The papermaker's bonds were among the day's most active issues, if not the most active. Traders attributed the surge to news regarding the U.S. Department of Commerce's decision to impose tariffs on some imported paper products.

Blockbuster Inc. also continued to be active in trading, though the bonds were still hanging around the same levels they have been for at least a week. As the company explores its restructuring options, some believe that the bonds could soon reach zero.

There was no news out to explain renewed investor interest in Ply-Gem Industries Inc.'s paper. Though the debt ended the day largely unchanged, traders saw a fair amount changing hands.

NewPage surges on tariff decision

NewPage debt was one of the day's most actively traded names, according to traders, spurred by a recent Department of Commerce decision to impose tariffs on coated paper imported from China and Indonesia.

A trader said the credit had seen "a lot of activity in the last two days," with the bonds gaining a point in the midweek session. He quoted the 10% note due 2012 at 61 bid, 62 offered and the 11 3/8% notes due 2014 at 97 bid, 98 offered.

Another market player saw about $75 million to $80 million of the 11 3/8% notes changing hands around 971/2. About $25 million of the 10% notes traded at 60 bid, 61 offered.

At another desk, yet another source pegged the 10% notes around 601/2, which he deemed half a point better.

Miamisburg, Ohio-based NewPage - along with Appleton Coated Paper LLC and Sappi Fine Paper North America and the United Steelworkers union - commended the action taken by the Commerce Department, as it will "offset the unfair advantage provided by subsidization," the group said in a joint press release.

According to a Commerce report, "Chinese coated paper was subsidized by an average rate of 8.38%."

"We have a world-class work force; highly competitive, well-managed assets; and sound environmental practices from proper forest management to efficient use of energy and raw materials to low-cost transportation and logistics," remarked Tom Curley, president and chief executive officer, in the release. "Given a balanced score card and level playing field, we believe NewPage can compete with anyone in the global marketplace."

Blockbuster bonds to zero?

Blockbuster remains a popular name among investors and trading in the Dallas-based movie rental chain's bonds continues to be quite active.

But while a trader characterized trading in the 9% notes due 2012 as busy - he said that about $20 million of the paper traded - the bonds were still hanging around the 19½ bid, 20 level.

With continual news flowing out of the company, there is "always somebody that thinks they are doing something new or different," the trader said. "Personally, I think these go to zero soon."

Another trader also saw the 9% notes steady around 20, though he called the 11¾% notes due 2014 "better" at 74 bid, 74½ offered.

The second trader agreed that the bonds "may eventually get to zero, but I don't know what the catalyst might be.

"There is already a lot of bad news baked in," he added.

Still, he noted that Blockbuster has a fair amount of liquidity currently and that something will have to come along to "force" the company into restructuring. As previously reported, the company has hired financial advisers to explore its options, but it is unclear what a restructuring would look like.

"We'll see how much longer they can breath some life into [the bonds]," he said.

Blockbuster has struggled to shore up its balance sheet during the economic downturn, leaving some to question the company's so-called bricks and mortar business model. Those questions only gained credibility as companies such as NetFlix and RedBox gain in market share.

In fact, Blockbuster is striving to keep up with the Joneses - in this case, the aforementioned RedBox - by reinstating late fees. Customers will be charged $1 per day for late movies for up to 10 days. On the 15th day, the customer will be charged for the movie.

However, if the movie is returned within the next 30 days, the customer will receive store credit for the price of the movie minus a $10 late fee charge.

On Tuesday, Moody's Investors Service dropped Blockbuster's probability-of-default and corporate family ratings to Caa3 from Caa1.

"This is given Blockbuster's stated desire to pursue a transaction which would strengthen its capital structure, which when given its weak financial performance, may well result in it making an offer to exchange some of its debt at a material discount to par," said Maggie Taylor, Moody's senior credit officer, in a statement.

Ply-Gem active, steady

Ply-Gem Industries' 11¾% notes due 2013 traded actively - though unchanged - on Wednesday on no news.

A market source saw the CCC-rated paper at 101½ bid, 102 offered, with about $20 million of the issue trading.

"There was some volume in them," another source said, placing the paper at 102½ bid, 103 offered. "But price action wasn't all that different."

The Cary, N.C.-based building products company will release its fourth-quarter results on march 19. A conference call to discuss the earnings will be held at 10 a.m. ET.

Broad market gains strength

Elsewhere in distressed territory, Tronox Worldwide LLC's 9½% notes due 2012 "continue to run up," according to a trader. He pegged the issue at 102½ bid, 103 offered.

Clear Channel Communications Inc.'s 11% notes due 2016 were also "trending higher," the trader said, ending at 71 bid, 71½ offered.

Meanwhile, General Motors Corp.'s benchmark 8 3/8% notes due 2033 came in a little bit to 31½ bid, 32 offered.

MBIA Inc.'s 14% surplus notes due 2033 had a nice jump, a trader said, to around 61 from levels around 50 last week. He noted that the company posted numbers on Tuesday, which caused the gains.

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