GM weaker despite improved sales; Rite Aid declines; NewPage seniors fall; Anadarko debt firms

By Stephanie N. Rotondo

Portland, Ore., July 1 - Distressed debt began the third quarter dimly, as traders deemed the market "generally a little weaker" on Thursday.

Even General Motors Corp. couldn't beat the softer trend after its June sales results showed another double-digit improvement year over year. Traders called the carmaker's bonds unchanged to lower by end of business.

Rite Aid Corp. also announced its June sales figures. But unlike GM, its sales remained depressed from year-ago comparables, thus allowing for an at least 1-point loss in the debt.

Following the release of a study about Chinese subsidies and its effect on U.S. papermakers, NewPage Corp.'s senior notes fell in trading. The study could help the company in certain trade cases it filed relating to that issue.

Anadarko Petroleum Corp.'s bonds bucked the day's overall trend, inching up about a point.

Market sources have lamented a lack of any real activity. Part of that could be due to a weaker broad market stoking investor fears about the country's economic recovery. However, part of it could be the summer doldrums, given the upcoming holiday.

The bond market is not scheduled to close early on Friday in honor of Independence Day, though it will be closed Monday.

"It's not an early close, but I'm sure it will be [anyway]," quipped one trader.

GM weaker despite sales

General Motors' paper closed the day unchanged to weaker following the release of its June sales report.

A trader said the 8 3/8% notes due 2033 were "active" around 311/2.

"I think that's kind of unchanged," he said. "That's about where they have been for the last couple days."

Another trader said the notes were "maybe down a half" at 31¼ bid, 31½ offered.

The Detroit-based automaker posted its sixth-consecutive month of double-digit sales increases, seeing total U.S. sales gain 36% year over year. Year to date, sales have improved by 32% from 2009 levels.

The company said the continued sales gains were due in part to its "continuing success" in launching new vehicles, as well as "some recovery in the markets for pickups and full-size SUVs."

"As companies continue to invest in their businesses, we expect this segment to continue to recover," said Don Johnson, vice president of U.S. sales operations, in a statement. "We think the release of some pent up demand in the pickup market is an indication that a fundamental part of the U.S. economy is gradually strengthening."

Rite Aid sales, bonds decline

Camp Hill, Pa.-based Rite Aid also released its latest sales results, which showed a 2.5% decline in June same-store sales. As a result, traders saw the company's bonds falling about a point on the day.

A trader said the 9½% notes due 2017 were 1¼ points softer at 781/4. Another trader quoted the issue at 78¼ bid, 78½ offered, down "about a point."

At another desk, a source saw the 8 5/8% notes due 2015 slipping nearly a point to 81¾ bid.

For the four weeks ending June 26, Rite Aid reported total sales of $1.91 billion, a 3.3% decline year over year. Prescription revenue accounted for 67.4% of the total sales.

Year to date, same-store sales have fallen 1.4% compared to 2009 comparables. Total sales meantime dropped 2.4% to $8.28 billion from $8.48 billion the year before.

So far this year, prescription sales have made up 68.1% of total revenues.

NewPage seniors fall

NewPage's 11 3/8% notes due 2014 were seen drifting down about 2 points in Thursday trading, though its 10% notes due 2012 were relatively unchanged, traders reported.

Sources from two different desks both called the 11 3/8% notes down a deuce at 88 and pegged the 10% notes at 54.

On Wednesday, a study published by the Economic Policy Institute stated that Chinese subsidies were hurting U.S. papermakers. In response, NewPage - along with Appleton Coated LLC and Sappi Fine Paper North America - commended the Washington, D.C.-based think tank.

"This study backs up the facts that underlie the trade case that was filed by our companies and the United Steelworkers union last September," the group said in a prepared statement released late Wednesday. "That case alleged that Chinese and Indonesian paper producers benefitted from subsidies and were dumping their products in the U.S. market. At each stage of the government's review of the cases, the concerns were validated and relief has been authorized."

"EPI's study strengthens our case and shows that China's actions are part of a larger strategy to grow their industry regardless of the cost to others," added Mike Marziale, senior vice president of marketing, strategy and general management, in the statement. "China is a non-market economy that simply doesn't play by the rules. All we're seeking is the restoration of a level playing field where we're allowed to compete and continue to invest in plant, equipment and people."

NewPage is a Miamisburg, Ohio-based manufacturer of coated paper.

Anadarko debt firms

Anadarko Petroleum was "the only thing that's really trading," a market source said.

The source said the Houston-based oil and gas company's bonds were "all up half a point to a point" on the day, placing the 5.95% notes due 2016 at 86½ and the 6.20% notes due 2040 at 80.

The 5.95% notes "continue to be the benchmark active bond," another source said. He also deemed the debt up a half- to a full-point, seeing the 5.95% notes at 86½ bid, 87 offered.

Anadarko has been dominating trading for some time now, as the market waits to see if the company will be held liable for costs associated with the Deepwater Horizon rig explosion in the Gulf of Mexico, in which Anadarko holds a 25% interest. Under the terms of its joint operating agreement with sector peer BP plc, Anadarko is liable for a quarter of any costs, unless BP is found to be negligent.

Broad market slips

Among other distressed issues, MGM Mirage's 7½% notes due 2016 closed 1½ points weaker at 77 3/8, a trader said.

Another trader saw First Data Corp.'s 9 7/8% notes due 2015 heading "down a little bit, about a point maybe" to 75 bid, 75½ offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.