U.S. Concrete notes gain on filing; Realogy mixed post-earnings; Smurfit bonds active, better

By Stephanie N. Rotondo

Portland, Ore., April 29 - The distressed debt market had a busy morning on Thursday, according to traders, but things were "quieting down" in the afternoon.

Still, the market was on the firm side, even as U.S. Concrete Inc. announced it would file for bankruptcy.

The concrete maker said it had come to an agreement with bondholders on a restructuring that would give them new equity in exchange for their debt. On the news, the company's bonds headed up as much as 4 points.

Realogy Corp. announced its first-quarter results Thursday. The numbers were an improvement year-over-year and investors responded by pushing the bonds - and the bank debt - up slightly.

Continuing that positive trend was Smurfit-Stone Container Corp. The company's bonds have been moving up slowly, but steadily for the last week or so and Thursday was no exception. However, instead of inching up, the bonds jumped as much as 4 points on no news.

U.S. Concrete gains on filing

U.S. Concrete's bonds traded up on news that company had reached an agreement with bondholders, allowing the company to file for Chapter 11 protections.

A trader saw the 8 3/8% notes due 2014 trading up to 64, versus 59 bid, 60 offered on Wednesday.

Another market source pegged the issue at 63½ bid, 64½ offered, compared to levels in the high-50s previously.

The bonds have been trading flat, or without accrued interest, since early in the year.

According to the agreement inked with a "substantial majority" of bondholders - as the company put it in the press release announcing the news - U.S. Concrete will give the group new equity in exchange for their debt holdings. The debt-for-equity exchange would result in a $272 million reduction in subordinated debt.

Shareholders will also receive some form of recovery, as the agreement allows for the issuance of warrants to acquire 15% of the new equity in the reorganized company.

The Houston-based concrete producer is also seeking approval on an $80 million debtor-in-possession facility led by JP Morgan Chase & Co.

"We are very pleased that our bondholders are supportive of the steps we have taken to improve our balance sheet and, through it, the long-term health of our company," said Michael W. Harlan, president and chief executive office, in the release.

"As a result of the restructuring, we should be positioned to be a financially strong competitor in our markets. We have taken steps to minimize the impact of this process on our suppliers, customers and employees, and we intend to move forward as expeditiously as possible to complete the restructuring."

The company hopes to emerge from bankruptcy within 90 days.

Realogy mixed post-earnings

Realogy's bonds finished the day unchanged to slightly stronger as the company reported first-quarter earnings that showed a narrower net loss than the year-ago period.

A trader said the 12 3/8% notes due 2015 were "maybe up a little" at 83¼ bid, 85 offered, though the 10½% notes due 2014 were steady at 93¼ bid, 93½ offered.

At another desk, the 12 3/8% notes were deemed unchanged at 83½ bid, 84 offered and the 10½% notes instead gained ground, up a point to 93 bid, 93½ offered.

Realogy's strip of bank debt was also stronger in trading following the earnings announcement, according to a trader.

The strip was quoted at 90¾ bid, 91¾ offered, up from 90½ bid, 91 offered, the trader said.

For the first quarter, Realogy, a Parsippany, N.J.-based provider of real estate and relocation services, reported a net loss of $197 million, compared with a net loss of $259 million in the previous year.

Net revenues for the quarter were $819 million, up 18% from $697 million in the first quarter of 2009.

And, EBITDA for the period was $11 million, an improvement of $73 million year-over-year due to revenue gains, cost reductions and productivity gains.

As of March 31, the company's senior secured leverage ratio was 4.51 to 1, which is below the 5.0 to 1 maximum ratio required by the credit facility. There were no borrowings drawn on the revolver and $175 million of readily available cash.

"We saw gains in the average home sale price across our franchise and company-owned offices, and it is increasingly apparent that prices are stabilizing in many markets," said Richard A. Smith, president and CEO, in the earnings release. "The shift in the mix of business we started to see late last year continued into the first quarter of 2010, signaling a much healthier outlook for housing."

While Smith noted that there are some positive indicators, he also added that the latter half of 2010 was uncertain.

"The third and fourth quarters for housing remain somewhat uncertain as they will be driven by traditional macro factors such as job growth, consumer confidence, and from a micro-economic perspective, the dynamics of local markets," he remarked.

Still, the positive financial performance gave some market players hope, albeit a cautious hope.

Gimme Credit LLC upped its rating on the company to "stable" from "deteriorating" following the results.

"The recent reduction in first-lien debt and Apollo Management's show of support is likely to keep Realogy in compliance with its bank covenants for the next few quarters," wrote Gimme Credit analyst Evan Mann in a research note. "But beyond midyear the outlook is less certain.

"Without a significant rebound in EBITDA, Realogy won't be able to bring its double-digit total leverage down to a more sustainable level."

Smurfit remains active, better

Smurfit-Stone Container notes were once again better during the next to last trading session - but this time, the bonds gained as much as 4 points.

A trader said the 8¼% notes due 2012 were "trading up above par," quoting them at 102 bid, 102¼ offered.

That compared to levels around 97 on Wednesday.

Another market source saw the issue gaining more than 4 points to end at 101¾ bid.

Yet another source said Stone's "8-handle" bonds were "up a few points" to around 102.

As has been the case all week, there was no news out to explain why the Chicago-based paper packaging manufacturer's debt has been heading higher. But gains have been seen across the sector, with credits like NewPage Corp. also moving up.

A trader said NewPage's 10% notes due 2017 were active and better by the end of business around 701/4. However, he added that the paper had opened weaker, around 661/2, before catching the wave.

Cooper prices new issue

Cooper-Standard Automotive Inc. priced a new $450 million issue during the session, an 8½% note due 2018.

The bonds were priced at par and, upon the break, trader saw the bonds moving up to 102½ bid, 103½ offered.

Cooper-Standard is a Novi, Mich.-based automotive parts supplier.

Atrium loan enters market

Atrium Cos. Inc.'s $185 million six-year term loan (B3) hit the secondary market on Thursday, with levels quoted at 99¼ bid, no offers, according to a trader.

Pricing on the term loan is Libor plus 500 basis points with a 2% Libor floor, and it was sold at an original issue discount of 981/2.

Security on the loan is a first-priority lien on all non-ABL assets.

UBS is the lead bank on the deal that will be used to refinance existing debt in connection with the company's exit from Chapter 11.

Atrium is a Dallas-based vinyl and aluminum window company.

Sara Rosenberg contributed to this article

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