Rite Aid debt softens; Tronox slips, loan changes OK'd; Smurfit-Stone hurt by market weakness

By Stephanie N. Rotondo

Portland, Ore., June 24 - The distressed debt market attempted to head for higher ground on Thursday, but its attempt was thwarted by softness in the general marketplace.

"It didn't react well to current economic data," a trader said. "Then the equity market started to trade off and we followed suit."

Generally, he added, bonds were down half a point to a point.

Rite Aid Corp.'s debt fell in line with the general market trend, just one day after the company reported its fiscal first-quarter earnings. The results were in line with expectations, but one market watcher noted that concerns remained.

Meanwhile, Tronox Worldwide LLC saw its bonds drop about 3 points, according to traders. The decline came as the company received court approval to extend its bankruptcy loan.

Smurfit-Stone Container Corp. paper continued to get knocked around with the market. But the notes bucked the trend, in a sense, as like Tronox the bonds were seen slipping at least 3 points.

And, trading in Blockbuster Inc. was nearly absent during the session, despite the company holding its annual meeting on Thursday.

Rite Aid debt softens

Rite Aid bonds continued to weaken in Thursday trading, just one day after the company reported its first-quarter results.

A trader called the bonds down half a point to a point, depending on the issue. The 9½% notes due 2017 closed at 801/4, a loss of a point, while the 9 3/8% notes due 2015 were also a point softer at 821/4. The 10 3/8% notes due 2016 were meantime half a point lighter at 101 3/8.

"Somebody is making a run" on Rite Aid paper, the trader said.

At another desk, a market source pegged the 8 5/8% notes due 2015 off nearly a point at 82 bid.

For the quarter ending May 29, the Camp Hill, Pa.-based drugstore chain reported a net loss of $73.7 million, or 9 cents per share, on revenues of $6.4 billion. Those figures compared with a net loss of $98.4 million, or 11 cents per share, on revenues of $6.5 billion the year before.

Analysts polled by Thomson Reuters were expecting the loss to come in at 14 cents per share on revenues of $6.4 billion.

Rite Aid said the 2.1% decrease in revenue was due to store closures, as well as a decline in same-store sales. Same-store sales dipped 1% total compared to year-ago levels.

Additionally, the company confirmed its fiscal 2011 guidance. Rite Aid expects to see between $25.2 billion and $25.6 billion in sales and is aiming for a net loss between $355 million and $570 million.

"While Rite Aid's guidance for fiscal 2011 operating results is not robust, at least the company didn't lower it - yet," wrote Gimme Credit LLC analyst Kim Noland in a research note published Monday. Overall, Noland saw both positives and negatives in Rite Aid's results, but she still expressed concern about the company's performance going forward.

"While investors can take comfort from Rite Aid's ample liquidity - near $1.2 billion - operating results need to improve as the 2012-2013 debt maturities grow closer," she wrote.

Tronox slips as loan changes OK'd

Tronox debt fell during the session, following news the company had won the right to amend its bankruptcy loan and avoid liquidation.

A trader said there were "a couple trades" in the 9½% notes due 2012 around 96. He said that compared with the last trades around 99¼ last week.

"It doesn't trade that often, " he said of the issue.

Another trader also deemed the paper "down a few" at 96.

Tronox can now extend the maturity of its debtor-in-possession loan to Sept. 24, given the judge's ruling. Had the judge not approved the changes, the loan would have come due on Thursday and lenders could have then forced the company into liquidation.

Tronox had previously defaulted on its initial DIP loan, which resulted in the company securing the current $425 million facility in December. The Oklahoma City-based chemical maker requested the changes to its current loan as it has not yet been able to file its disclosure statement, the company said.

The company intends to file its plan of reorganization between July 4 and July 12.

Market weakness hurts Smurfit

Smurfit-Stone Container paper remained weak as the general market softened, traders said. But while the broad market was down half a point to a point, generally speaking, Smurfit notes lost at least 3 points on the day.

A trader called the 8% notes due 2017 down "about 3 points" at 81½ bid, 82 offered. Another trader said the bonds "continue to be weak," placing the 8% notes at 831/2.

Yet another source saw the 8¼% notes due 2012 falling more than 3 points, ending at 82½ bid.

Another trader said that Smurfit-Stone's bonds "looked pretty wild today," ending around 82, which he called "a lot lower."

He said those bonds, like its 8¼% notes and its 8% notes, had traded around 85 near the end of trading on Wednesday, and then got down to around an 81-82 context Thursday. He didn't think they went much lower than 82, which was down 3 points. "Quotes were all over the place."

While Smurfit was gyrating around at lower levels, NewPage Corp. "did not follow as fast and as furious," a trader said. He saw its 10% senior secured second-lien notes due 2012 get down to 55½ bid, which he called "definitely" down by 2 or 2½ points.

Meanwhile, NewPage's 11 3/8% senior secured notes due 2014 were ending around 91 bid, which he called down 1 point to 1¼ points.

There has been no news out on the Chicago-based paper packaging manufacturer, aside from news earlier in the week regarding its expected exit from bankruptcy by the end of the month. But the debt has been on the downward slide ever since the recent market rally turned into a market slide. NewPage has also been quiet news-wise.

Blockbuster bonds quiet

Blockbuster bonds were quiet as the company held its annual meeting Thursday, as the company gave a vague update on its restructuring negotiations with bondholders.

A trader said there was "no trading" in the Dallas-based movie rental chain's debt, though he noted that "bids are better, offerings unchanged."

He said the 9% notes due 2012 were quoted at 9 bid, 11 offered, while the 11¾% notes due 2014 were seen at 67 bid, 69 offered.

"If they had traded, they would probably be down," he surmised.

The market had expected to get an update on restructuring talks with bondholders at the meeting held in Dallas on Thursday. Jim Keyes, chief executive officer, told the audience that while he had wanted to have a plan in place by the time of the meeting, there was not yet a definitive agreement.

The company has an $18.5 million interest payment on the 11¾% notes coming due on July 1.

Additionally, Blockbuster agreed to end a proxy fight with dissident shareholder Gregory S. Meyer by adding Meyer to its board. The company had previously urged shareholders to vote against the addition of Meyer.

Clear Channel dips

A trader said that Clear Channel Communications Inc.'s bonds were "down a couple of points," in apparent response to the news that its president and chief executive officer, Mark P. Mays, will step down after six years at the helm of the company. He will remain as chairman.

The trader saw Clear Channel's 10¾% notes due 2016 "down a couple" of points in a 721/2-73 neighborhood.

Another market source saw those bonds down nearly 2 points on the day, at just under 73.

Paul Deckelman contributed to this article

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