Blockbuster bonds continue gains, NewPage heads higher, Six Flags cautions on DIP need

By Paul Deckelman and Sara Rosenberg

New York, March 5 - Blockbuster Inc.'s bonds were up by at least a point on Friday, extending the roughly 4 point gains the bonds recorded in Thursday's trading, apparently on the strength of bullish comments about Blockbuster's prospects from its chief executive officer. A trader, however, raised the possibility that at least some of the upside in Blockbuster was due to dealer short-covering rather than strictly fundamental developments.

NewPage Corp. bonds continued their recent firming trend, helped by the news earlier in the week that the U.S. government had imposed penalty tariffs on coated paper coming from China and Indonesia due to what it said were improper manufacturing subsidies from their respective governments.

Visteon Corp.'s bonds continued to settle in around the mid-80s, after an effort to take them higher fizzled. The bonds had been riding momentum from a big surge that took place at the end of last week and the beginning of the week just completed following the release of favorable fourth-quarter and full-year results

Six Flags Inc.'s bonds were seen unchanged to slightly lower, while its term loan held firm, as the financial markets reacted to the company's caution that it may need debtor-in-possession financing if its bankruptcy case drags on past mid-April. Meanwhile, the company released quarterly numbers, and lawyers for opposing bondholder groups made ready for arguments at Monday's confirmation hearing for the company's controversial reorganization plan.

More bounce for Blockbuster

Blockbuster's bonds "seemed like they improved a little bit" on Friday, a trader said, adding to the robust gains which the Dallas-based movie-rental company's bonds had notched on Thursday, in line with a big jump in its penny-stock shares, after its chief executive officer expressed confidence in the troubled company's prospects.

He said Blockbuster's 9% senior subordinated notes due 2012 "did keep going up a point" on Friday to finish at 25½ bid, 26 offered, in active trading, while its 11¾% senior secured notes due 2014 were also a point ahead at the 76-76½ level.

Another trader noted that Blockbuster is "the name that continues to bounce off its lows. It's very strong." He saw the bonds trade as high as 26½ bid on Friday, "up a lot."

He opined that "you don't know if this is legitimate demand or short-covering, because the dealers are trading again."

He added that:"it's the same situation with RMIX," referring to U.S. Concrete Inc. He noted that the Houston-based cement company's 8 3/8% senior subordinated notes due 2014 "have really bounced back, very strongly, even though they're trading flat," or without their accrued interest. The bond's 58-59 levels are "up a pretty good jump the last couple of weeks."

Before its Feb. 19 announcement that it was exploring various alternatives to strengthen its balance sheet and had obtained waiver through April 30 of a default for any non-payment of interest on its notes, they were trading in a 53-54 range, which the trader called "a nice jump, on a percentage basis."

On Thursday, Blockbuster's 9s had zoomed more than 4 points in brisk trading after CEO James Keyes said during a CNBC interview 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."

That shot the company's New York Stock Exchange-traded shares - now languishing deep in penny-stock territory - up by nearly 33%, on more than six-times normal volume. The shares were marginally lower on Friday, on considerably less volume.

Visteon trades in the 80s

A trader said of Visteon's bonds that he "did not see much of them today." He said there was absolutely "no activity" in the company's 8¼% notes scheduled to come due on Aug.1, which most recently been pegged in the mid-80s. He saw the 7% notes due 2014 trading around 81 bid, 82 offered on "some trading, but not much." Later on, he said the bonds - after getting as good as the 85 level - ended in an 83-84 context, "so they're quoted down a couple of points, on not much trading." The 7s had also been in the mid 80s the previous several sessions.

The bankrupt Van Buren Township automotive components company's bonds had jumped the previous Friday after its release of favorable earnings data, and those gains had extended into this past Monday and Tuesday, fueled as well by generalized investor feeling that things might be looking up for such major Visteon customers as its former corporate parent and still-biggest customer, Ford Motor Co. and General Motors Corp. - especially after Barron's magazine ran a piece last weekend very bullish on GM, and after Ford, and to a lesser extent GM, had reported strong February sales gains versus a year earlier. All of that helped to lift Visteon's two series of bonds as high as a 90ish level heading into mid-week - but then the rally ran out of gas, and the bonds spent the rest of the week settling into the low-to-mid 80s.

Also in the automotive parking lot, a trader called GM's benchmark 8 3/8% bonds due 2033 up 5/8 point on Friday at 32¼ bid, 33¼ offered, while GM domestic arch-rival Ford's 7.45% bonds due 2031 were up by a point at 90½ bid, 91½ offered.

Another trader said the GM benchmarks "tended to hang in that low 30s range for most of the day, on decent volume." The bonds ended at 32 bid, 33 offered, which he called probably unchanged.

He also said that the Ford long bonds "didn't have much volume to them," leaving them unchanged around 89. However, he said that "the shorter end of the curve was better - up a little bit, and activity seemed to be more on the offering side of the markets than not." For instance, he said that Dearborn, Mich. -based carmaker Ford's 7% notes due 2013 were at 100¾ bid, 101½ offered, which he called up a point, on "a lot of volume in those shorter names."

NewPage adds to gains

In the paper and packaging sector, a trader said that NewPage's 10% senior secured second-lien notes due 2012 were up about 3 points at around 64 bid, and "pretty active," while its 11 3/8% senior secureds due 2014 were a point better at 98½ bid, 99 offered, on what he called "decent activity."

The Miamisburg, Ohio-based coated-paper company's bonds had risen smartly during the week, on the news that the U.S. Commerce Department - responding to a request by NewPage and several other paper manufacturers - had found that imports of coated paper from China and Indonesia had been unfairly subsidized by the governments of those country, and imposed stiff duties on them to dilute that advantage.

The trader meantime saw Smurfit- Stone Container Corp.'s bonds, like its Jefferson Smurfit 8¼% notes due 2012, up "maybe a point" at 85 bid, 86 offered.

MBIA momentum continues

A trader said that MBIA Inc.'s 14% surplus notes due 2033 "traded down a point or two, but now they're back up" to around the 60ish level they had held for much of the week, finally going home at 61 bid, 62 offered, which he called up a point.

Earlier in the week, the Armonk, N.Y.-based bond insurer's paper was seen having firmed by more than 10 points, up to around 60, after it posted a sharply narrowed fourth-quarter loss versus a year ago, and actually swung into the black on a full-year basis in 2009, versus its multi-billion-dollar loss in 2008.

The company reported after the close of trading on Monday that during the fourth quarter it lost $242 million, or $1.16 per share - less than one quarter of the red ink totaling $1.2 billion, or $5.21 per share, a year earlier, although the per-share loss did come in slightly above average Wall Street expectations in the $1.10-$1.11 per share range. Fourth-quarter revenue was $652.7 million versus a year-ago loss of $1.59 billion, although that huge loss was chiefly attributable to a $1.67 billion deficit on insured derivatives.

For the full year, MBIA was back in the black, with earnings of $623.2 million, or $2.99 per share, versus a loss of $2.7 billion, or $12.11 per share in 2008.

Investors like Lehman

Elsewhere among the financials, a trader said that Lehman Brothers Holdings was "a little better than [Thursday]," trading around 24½ bid, 25 offered.

At another desk, a participant saw brisk activity in several of the defunct New York-based investment bank's issues, with its 5 5/8% notes due 2013 some 1½ points better at just under the 25 mark, while its 5¼% notes due 2012 did even better, gaining more than 2 points on the day to move above 24 bid. Lehman's 6% notes due 2012 were up more than a point to around the 24 level.

Six Flags warns DIP may be needed

A trader said that Six Flags Inc.'s bonds were holding around the mid-20s but added that he "did not really see any activity" in the bankrupt New York-based theme park operator's paper.

However, a market source at another desk saw the company's 8 7/8% notes that were to have come due this past Feb. 1 down about ½ point at 25 bid, 26 offered, noting the company's announcement that it may need to get debtor-in-possession financing if the company's Chapter 11 proceedings are not wrapped up by mid-April. Six Flags, which filed for protection from its creditors last June, has been funding itself through operations without a DIP so far.

Prospects for a quick exit from bankruptcy have been clouded by a dispute between the company's senior secured bondholders and its other bondholders over a company-proposed plan which would give the secured bondholders virtually all of the restructured company's stock. The two groups are expected to square off on Monday when confirmation hearings on the company's plan are scheduled to begin at the U.S. Bankruptcy Court in Wilmington, Del.

In the bank debt market, meantime, Six Flags' exit term loan was heard by traders to have held firm, even as the company released fourth-quarter earnings results. One trader quoted the term loan at 99¼ bid, 99¾ offered, while a second trader had it at 99 bid, 99¾ offered, with both putting the paper at unchanged on the day.

For the quarter ended Dec. 31, Six Flags reported a net loss of $194 million, or $2.51 per share, versus a net loss of $79 million, or $1.46 per share, in the previous year.

Loss from continuing operations in the quarter was $125.9 million, compared to $203.6 million in the fourth quarter of 2008.

Total revenue for the quarter was $101.8 million, down 14% from $118.1 million in the prior year.

In addition, adjusted EBITDA for the quarter decreased by $16.5 million to an $11.3 million loss compared to positive $5.2 million in the 2008 quarter.

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