First Data debt shaken by results; Blockbuster dips, rebounds; Catalyst's new issue quiet

By Stephanie N. Rotondo

Portland, Ore., May 14 - Distressed debt started - and ended - Friday "weaker," a trader said, as "all eyes were on the equity market."

Bids started falling early on, he said, "but nobody really chased them."

First Data Corp. was one name that "definitely got the crap kicked out of it," a trader said. The company announced its first-quarter earnings during the day, which resulted in the bonds losing as much as 5 points on the day. The company's bank debt was also softer by the end of business.

In other earnings news, Blockbuster Inc. saw its debt dipping as investors reacted to the company's results released late Thursday. However, the bonds managed to regain their early losses, closing out the week about unchanged.

There was little going in Catalyst Paper Corp.'s new issue, traders reported. But traders did see a fair amount of activity in Smurfit-Stone Container Corp., which - in line with the rest of the market - traded down at least 2 points.

First Data debt shaken by results

First Data's debt dropped in Friday trading following the release of the company's first-quarter results.

In the bonds, a trader said there was "some activity" in the credit.

"It's strange to see all three of their issues trading," he noted.

The trader saw the 9 7/8% notes due 2015 opening around 87 and then falling to 85 bid, 86 offered. That compared to 89 bid, 90 offered on Thursday, he said.

The 11¼% notes due 2016 were meantime "down a good 5 points" at 76 bid, 76½ offered, versus 81 bid, 82 offered previously. And, the 10.55% notes due 2015 slipped to 81 bid, 82 offered from levels around 86 the day before.

At another desk, a trader said "more than $100 million of [First Data's] various issues" changed hands, with the bonds down 3 to 5 points, depending on the issue.

He called the 9 7/8% notes "down a solid 3 points" around 851/2, while the 10.55% notes fell 3½ points to around 81. The 11¼% notes lost the most, declining "at least 5 points" to the 76 area.

First Data bank debt weakens

In regards to the company's bank debt, the term loan B-1 was quoted by one trader at 85 5/8 bid, 86 3/8 offered, down from 87¼ bid, 88 offered, by a second trader at 86 3/8 bid, 86 7/8 offered, down from 88 bid, 88½ offered, and by a third trader at 86 1/8 bid, 86½ offered, down from 87¾ bid, 88¼ offered.

The term loan B-2 was quoted by the first trader at 85¾ bid, 86½ offered, down from 87 3/8 bid, 88 1/8 offered, by the second trader at 86¼ bid, 86¾ offered, down from 87¾ bid, 88¼ offered, and by the third trader at 86 bid, 86 3/8 offered, down from 87 5/8 bid, 88 1/8 offered.

And, the term loan B-3 was quoted by the first trader at 85¾ bid, 86½ offered, down from 87 3/8 bid, 88 1/8 offered, by the second trader at 86 1/8 bid, 86¾ offered, down from 87¾ bid, 88¼ offered, and by the third trader at 86 bid, 86 3/8 offered, down from 87 5/8 bid, 88 1/8 offered.

For the first quarter, First Data reported a net loss of $240 million, compared to a net loss of $231 million in the prior year.

Adjusted EBITDA for the quarter was $424 million, compared with $472 million for the first quarter of 2009.

Revenues for the quarter, however, were up 16% at $2.4 billion, versus $2.1 billion in the comparable period last year.

Also, as of March 31, the company had about $293 million outstanding under its revolving credit facility, compared to having nothing drawn at Dec. 31, 2009, and during the quarter, the company made $32.1 million of principal payments on its U.S. and euro term loans.

"In the first quarter, First Data focused on growth," said Joe Forehand, chairman and chief executive officer, in the earnings release. "The consistency of our strategy has positioned us well in an improving economy."

First Data is a Greenwood Village, Colo.-based provider of electronic commerce and payment services.

Blockbuster dips, rebounds

Blockbuster's bonds fell during early trading, following the late Thursday release of the company's first-quarter financials.

But traders saw the bonds inching up by the end of the day, leaving them about unchanged.

One trader pegged the 9% notes due 2012 at 18½ bid, 19¼ offered, compared to 19½ bid, 20 offered on Thursday.

Another trader noted that the paper was "all over the place" during the session but deemed them unchanged, trading between 19 and 20. He added that about "$25-odd million" of the notes turned over.

And, yet another trader said the issue was "fairly active," hitting lows around 18 before "rebounding about 2 points" to end at 19½ bid, 20 offered.

After the market closed Thursday, the Dallas-based movie rental chain posted a net loss of $65.4 million, or 33 cents per share, for the quarter ended April 4. That compared to net income of $27.7 million, or 12 cents per share, the year before.

Total revenue fell to $939.4 million from $1.09 billion in the first quarter of 2009, and same-store sales declined by 7.8%.

Blockbuster finished the quarter with $109.9 million in cash and equivalents. Free cash flow was negative $54.8 million.

According to Gimme Credit LLC analyst Kim Noland, "Blockbuster's first quarter was weak but in line with our expectations."

Claire's notes improve

Elsewhere in the retail space, Pembroke Pines, Fla.-based Claire's Stores Inc. saw its bonds gaining ground, breaking the broader market trend.

A trader called the 10½% notes due 2017 up a point to around 85.

On Thursday, Claire's announced preliminary unaudited results for its first quarter, which ended May 1.

The company expects to report net sales of $322 million, a 9.9% increase from the first quarter of 2009. Consolidated same-store sales were also better, up 7.6% year over year.

As of May 1, cash and equivalents was $220 million. The company also had $194 million available under its revolving credit facility and also noted that it paid $17 million during the quarter to retire a total of $22 million in senior notes.

Catalyst's new issue quiet

Richmond, B.C.-based Catalyst Paper priced a new issue Friday, but traders saw little action in the new debt.

Catalyst is selling $110 million of 11% class B senior secured notes due Dec. 15, 2016 in a private placement. The notes were priced at 86.

But one trader said "all I'm seeing is bids" for the new paper. He said he saw 86 bids and a few 91 offers, but no two-sided markets.

Another trader expressed shock that anyone would put out a new deal on a day such as Friday.

"Anyone with any reasonable brain doesn't put out a new issue on a day like today," he said.

Smurfit bonds slip

Also in the paper products arena, Smurfit-Stone Container notes dropped at least 2 points during trading, according to traders.

One trader said "$20-odd million" of the 8¼% notes due 2012 traded down 2½ points to around 921/2. Another placed the issue at 92 bid, 93 offered, down from 94½ bid, 95½ offered previously.

On Thursday, the judge overseeing the Chicago-based company's Canadian bankruptcy proceedings approved the company's reorganization plan, rebuffing shareholder attempts to submit a new plan. The judge opined that - despite shareholder claims that the projected value of the company was too low - the arrangement was fair.

If Smurfit receives approval from the U.S. courts, it will be free to exit Chapter 11 protections.

Broad market declines

The broad market was "down generally across the board," a trader said.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 continued to be "volatile," he said, ending 1 to 1½ points weaker at 34½ bid, 35 offered.

And, Sorenson Communications Inc.'s 10½% notes due 2015 - which had gained slightly in previous sessions - dropped to 66 bid, 68 offered from 69 bid, 70 offered.

Sara Rosenberg contributed to this article

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