NewPage keeps top trading finish; Rite Aid sales disappoint, notes softer; Blockbuster bullish

By Stephanie N. Rotondo

Portland, Ore., March 4 - Distressed debt finished on Thursday's session largely unchanged, but was still "better bid for," according to a trader.

NewPage Corp. continued to be touted as the most active in distressed territory, a trend that began Wednesday on the back of news regarding tariffs on imported glossy paper. But, also like Wednesday, the bonds maintained their levels.

Rite Aid Corp. was not so lucky, however, as the company reported another monthly decline in sales. That resulted in a 1- to 2-point loss in the pharmacy chain's notes.

But elsewhere in the retail world, Blockbuster Inc.' s bonds had a bullish day, attributed to comments made by the company's top executive in a CNBC interview. Traders reported the bonds had gained about 4 points during the session.

Meanwhile, Sprint Nextel Corp. shook off a downgrade from Standard & Poor's. Traders saw the wireless provider's bonds closing the day unchanged to even a little bit better.

NewPage maintains top trading spot

NewPage bonds remained the most active of distressed credits, traders reported, though the debt maintained its pricing levels.

A source said about $30 million of the 11 3/8% notes due 2014 changed hands, all around 971/2.

Another source quoted the issue at 97 bid, 98 offered, noting that the paper was "active again."

Trading in the Miamisburg, Ohio-based papermaker picked up on Wednesday following news that the U.S. Department of Commerce had chosen to impose tariffs on imported glossy paper from China and Indonesia.

In other papermaking news, Finnish port workers began an open-ended strike Thursday, which resulted in the idling of two of Europe's biggest papermakers - Stora Enso Oyj and UPM-Kymmene Oyj - to halt production.

Also, sector peer Appleton Papers Inc. saw its 10½% senior secured notes due 2015 - $305 million of which had priced on Jan. 29 at 98.035 to yield 11%, only to cascade down to levels below 90 in the days and weeks that followed on investor concern about its coated-paper niche industry and then rebound in recent days - "are almost back up to new-issue [level]," according to a trader. He quoted the bonds at 97 bid, 98 offered.

He noted that the Appleton, Wis.-based papermaker's bonds had gained 2 points in each of the past three sessions to bring them up to current levels.

Rite Aid sales disappoint

Rite Aid posted yet "another disappointing sales report," in the words of Gimme Credit LLC analyst Kim Noland. As a result, traders saw the Camp Hill, Pa.-based company's bonds slipping.

A trader said the 9 3/8% notes due 2015 was the most active issue under the Rite Aid umbrella, ending down at 84 bid, 85 offered. That compared to "86-ish" on Wednesday, he said.

At another desk, a source said about $9 million of the 9 3/8% notes moved, closing down about 1½ points to around 841/4.

The source also saw $4 million to $5 million of the 9½% notes due 2017 finish around 821/2, also down 1½ points on the day.

And, another trader called the 8 5/8% notes due 2015 about 2 points weaker at 84 bid.

For the five weeks ending Feb. 27, Rite Aid same store sales fell 3.2% compared to year-ago levels. Total sales dropped 4.5% to $2.43 billion from $2.54 billion.

For the quarter that also ended Feb. 27, same store sales declined 2.4% on total sales of $6.44 billion. Sales were down 3.7%.

And, for fiscal 2009, Rite Aid's same store sales slipped 0.9% on total sales of $25.57 billion. Total sales for fiscal 2008 were $26.18 billion.

"We think yet another consecutive decline of sales doesn't bode well for year end numbers, but the company did not say it would miss its guidance and our estimate is already at the low end," Noland wrote in an afternoon note to clients.

Blockbuster bonds bullish

Elsewhere in the retail space, Blockbuster's 9% notes due 2012 regained some ground, a trader said. The trader said the bonds were up a few points, trading with a 24 handle.

Another market source said that Blockbuster bonds had jumped nearly 4 points on the session, to above 24 bid, in line with a strong surge in its shares, triggered by bullish comments from the Dallas-based movie-rental company's chief executive officer during a CNBC interview.

A source at another desk pegged the bonds up 4½ points, to just under 25, on active volume of more than $20 million traded. Its New York Stock Exchange-traded shares - now languishing deep in penny-stock territory - zoomed some 32.84%, or nearly 10 cents per share, to end at 40 cents per share, on more than six-times normal volume of about 26 million shares.

Chief executive James Keyes said during the interview Thursday that Blockbuster "has a bright future" and is "in the middle of a dramatic transformation" that includes a lessening of its nearly "total reliance on DVDs" and development of a "a different form of distribution for both DVDs and digital content."

Sprint steady following downgrade

Despite a downgrade from Standard & Poor's, Sprint Nextel notes held their ground and, in some cases, even moved higher.

A trader said the 6% notes due 2016 were "up a little bit, maybe half a point" around 88. However, he deemed the 7 5/8% notes due 2011 unchanged at 102¼ bid, 102¾ offered.

Another source also saw the 6% notes improving, pegging the paper at 88½ bid.

S&P cut its corporate credit rating on Sprint - as well as the senior unsecured debt rating - to BB- from BB. The downgrade came after the company was placed on CreditWatch back in November due to weak operating performance.

But Fitch Ratings kept Sprint's issuer default rating, senior unsecured notes and senior unsecured credit facility at BB.

Both Fitch and S&P said the outlook was negative.

Sprint Nextel is an Overland Park, Kan.-based wireless telecommunications provider.

Paul Deckelman contributed to this article

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