WaMu debt dips; Smurfit notes slip below par; retail, gaming decline; broad market ends weaker

By Stephanie N. Rotondo

Portland, Ore., May 5 - The distressed debt market was once again weaker on Wednesday, as a combination of profit taking and position jockeying took hold, a trader said.

"Today was crazy," the trader said. "Lots of stuff trading. The lower levels brought people out."

The trader added that there was "a lot of volume," which he speculated was part profit taking and partly "some people just trying to get out."

Washington Mutual Inc.'s debt traded off early in the session, according to a trader. But the bonds managed to end just around a point weaker, even as news regarding a liquidation request hit the wires.

With the rest of the market down 1 to 2 points generally, Smurfit-Stone Container Corp. suffered in sympathy. The company's notes dropped more than the average, however, as traders estimated the bonds lost as much as 3 points on the day.

The depressed marketplace also weighed on consumer-related names. Gaming credits like Harrah's Entertainment Inc. and retailers such as Rite Aid Corp. were seen down anywhere from 2 to 3 points by end of business.

WaMu debt dips

Washington Mutual's bonds traded down early in the midweek session, though one market player opined that news regarding a request to liquidate the company had little to do with the loss.

A trader saw the bank seniors - such as the 5.55% notes due 2010 - going out around 461/2.

"So no real reaction to the news," he said, pointing to the request made by a group of noteholders. "They traded down earlier in the day before the news."

Another trader quoted the bonds at 46½ bid, 47½ offered, which he said was "down much," maybe a point.

"Everybody is trying to get involved [in the name], specifically to get the subs all organized," another trader said.

In a court filing made Tuesday, attorneys representing bondholders holding about $2.3 billion in debt asked the bankruptcy judge to convert the current Chapter 11 case into a Chapter 7 liquidation - or else place the company in the hands of a trustee.

The attorneys are claiming that the Seattle-based company's assets are declining due to "a virtual army of expensive but unsupervised professionals," and that shareholders are simply delaying matters with their attempts to gain some form of recovery.

Additionally, the attorneys claim that the Federal Deposit Insurance Corp. "is threatening to abandon the settlement it previously agreed on the record to support," citing the global settlement of claims that was to lay the framework for a reorganization plan.

Also going on the financial space, First Data Corp.'s 9 5/8% notes due 2017 slipped 2 points to around 881/2, on $40 million to $50 million traded, a market source said.

Smurfit notes slip below par

Smurfit-Stone Container debt closed the day "down considerably," a trader said.

The trader said a "huge hunk" of the 8% notes due 2017 traded down to 97 1/2, which he called off by about 3 points.

"They had gotten ahead of themselves in the other direction," he said, referring to the bonds' recent climb over par. "So it's not that surprising."

Another trader saw the 8¼% notes due 2012 at 961/2, "down about 2," he said.

At another desk, a trader pegged both issues at 96½ bid, 97 offered, a loss of "about 3 points."

Closing arguments in the Chicago-based paper-packaging manufacturer's bankruptcy case were heard Tuesday, according to news reports. Post-trial briefs are due by May 12, with replies due by May 18.

Elsewhere in the paper and pulp sector, a trader said the entire sector was down, with NewPage Corp.'s 10% notes due 2012 ending around 68½ bid, 69 offered, with the last trade around 69, which he called down a point or so, on "not a lot of trading" in the Miamisburg, Ohio-based coated-paper manufacturer's bonds.

At another desk, a market source said the NewPage notes had moved down to the 67 level, calling that a 4-point loss on the session

The first trader also saw Catalyst Paper Corp.'s bonds lower, with the Richmond, B.C.-based paper maker's 11% senior secured notes due 2016 around 95 bid, down a point.

Retail, gaming decline

Market pressure hurt consumer-related sectors such as retail and gaming, according to traders.

A trader said "$50-odd million" of Harrah's Entertainment's 10% notes due 2018 changed hands around 85, down about 1 ½ points from the day before. He noted that - like many other names in the distressed realm - the notes had gotten even lower during Wednesday trading, but managed to come back a little bit before the end of business.

The trader also saw Isle of Capri Casinos, Inc.' 7% notes due 2014 trading down 2½ to 3 points to around 90, with about $25 million in turnover.

In the retail arena, Rite Aid's 9½% notes due 2017 fell as much as 3 points on the day, the trader said, before coming back to close down just 1½ points around 851/4. He added that about $50 million to $60 million of the notes traded.

Another trader called the Rite Aid paper "the most active," also down 1½ points around that 85 mark.

The second trader also saw Blockbuster Inc.'s 9% notes due 2012 slipping 2 points to around 20.

"They're on life support," he said.

Broad market weaker

In the rest of the distressed debt market, Energy Future Holdings' 10 7/8% notes due 2017 were "a solid 2 to 2½ points" weaker, around 761/2, according to a trader. Somewhere between $30 million and $40 million of the bonds changed hands.

Clear Channel Communications Inc.'s 11% notes due 2016 were "really active," another trader said. However, the notes ended 3 points softer around 75.

On the upside, Sorenson Communications Inc.'s 10½% notes due 2015 were seen rebounding to 63 bid, 64 offered. The bonds had lost about 4 points on Tuesday, in addition to the 20 or so lost on Monday.

Paul Deckelman contributed to this article

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