A&P under pressure; BP up slightly pre-earnings; Anadarko firms on new find; TXU stays active

By Stephanie N. Rotondo

Portland, Ore., July 26 - Distressed bonds started out the week on a good note, traders reported Monday, as the market remained strong and volume was above typical Monday dealings.

"It was actually particularly busy, given it was a Monday," a trader said, noting that the secondary market saw total volume of about $1.3 billion.

But while the market was largely firmer, that did little to help Great Atlantic & Pacific Tea Co., Inc. The supermarket operator posted less-than-stellar earnings on Friday, which resulted in double-digit losses. Though losses were more in the single digits come Monday, sources said the debt continued to be under pressure.

Meanwhile, BP plc bonds ticked up, though modestly. A trader remarked that volume in the credit was less than has been typical recently and the gains were well under a point.

Rumor has it that the company is ousting its current chief executive - which the trader opined was responsible for the meager gains - and BP is scheduled to release its quarterly results on Tuesday. Though the oil and gas giant has said it has ample funds to pay for its Gulf of Mexico clean-up effort, there is still chatter that the company could be forced into bankruptcy.

Also in the oil arena, Anadarko Petroleum Corp. debt experienced a surge after the company announced it had found oil off the coast of Ghana. Anadarko is also expected to release earnings in the near term.

Rounding out the energy-heavy trading day, Energy Future Holdings Corp.'s notes remained active and even managed to post slight gains. Still, one trader believes there are still some questions in the market regarding the actual value of the bonds.

A&P debt under pressure

Great Atlantic & Pacific Tea Co. - the company in charge of the A&P and Pathmark supermarkets - saw its bonds continuing to drift lower following last week's poor earnings release.

"It was really crazy," a trader said of the bonds. "Quotes got wider and wider."

The trader added that the bonds were still ratcheting down, seeing the 11 3/8% notes due 2015 at 61 bid, 63 offered, the 6¾% convertible notes due 2012 at 41 bid, 42 offered and the 5 1/8% convertible notes due 2011 at 62 bid, 64 offered.

"They were 20 points higher three days ago," he noted.

On Friday, the Montvale, N.J.-based company reported a net loss of $122.6 million, or $4.83 per share, for the fiscal first-quarter ended June 19, on revenue of $2.54 billion. That compared with a net loss of $65.2 million, or $3.64 per share, on sales of $2.79 billion in the first quarter of 2009.

Analysts had been only expecting a loss of about 70 cents per share on revenue of $2.6 billion.

In addition to the poor results, the company also announced an abrupt leadership change, with Sam Martin, up until now the chief operating officer at Office Max, taking over as president and chief executive officer. He replaces Ron Marshall, who had only been hired as president and CEO at the end of January. Marshall was cryptically described in the A&P press release announcing Martin's hiring as having "left the company."

But the press release also quoted Christian Haub, executive chairman, whose comments could be taken to mean that A&P was unpleased with Marshall's performance.

"Although we are clearly disappointed with our performance in the first quarter, we are confident that we now have the right leadership in place to drive this operational and revenue-driven turnaround effort and make A&P a great company again," he said in the release.

As previously reported, a market source remarked that company executives said on the conference call that they were "planning an asset sale and they would work with the banks" to augment their liquidity. He said A&P has ample funds available to take care of the maturing 5 1/8% notes next year, but also warned that "they're bleeding cash."

BP up slightly pre-earnings

In other earnings-related news, oil producer BP saw its debt "definitely up pretty strong," a trader said, as the company readied to release its quarterly results on Tuesday.

However, the trader noted that gains were slight - at best, half a point - and that overall volume in the credit was significantly lacking that seen in recent history.

"It was one of those lighter days for BP," he said, adding that less than $100 million of the company's various issues traded.

The trader placed the 8¼% notes due 2022 around 106, the 3.125% notes due 2012 around 98 and the 3 5/8% notes due 2014 around 941/2.

He opined that the modest increase in the debt was "more a function of the new CEO" than earnings anticipation.

Over the weekend, news reports began speculating that BP was in talks with its CEO, Tony Hayward, regarding his resignation. Come Monday, many news outlets were reporting that Hayworth was expected to step down by October and that he would be headed to Russia to head one of BP's subsidiaries there.

The reports also indicated that Robert Dudley, who has been in charge of BP's Gulf of Mexico clean-up effort, will takeover. If that happens, Dudley will become the first American in the role of CEO at BP.

But the upcoming earnings could explain the lighter trading volume in the bonds, as investors might want to see how the Gulf disaster has affected the bottom line before making any investment decisions.

Anadarko firms on new find

Elsewhere in the oil arena, Anadarko Petroleum's bonds were up "much more strongly" than BP's debt, a trader said.

The trader said the bonds firmed 1 to 1½ points on the day, compared to BP's quarter-point to half-point gains.

Another trader called the 6.45% notes due 2036 up a point around 891/4, while the 5.95% notes due 2016 closed 1¼ points stronger around 95 bid, 96 offered.

The first trader attributed the gains to news that Anadarko had struck oil near Ghana.

Houston-based Anadarko will release its second-quarter results on Aug. 4. The company owns a stake in the BP-operated well that exploded April 20.

Also, ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 "traded a bunch," according to a trader.

The trader quoted the bonds at 73¼ bid, 73¾ offered, up half a point.

"A good amount [of the notes] is starting to change hands again and creeping up," he said.

TXU remains active

In the broader energy realm, Energy Future Holdings - more commonly referred to as TXU Corp., its former moniker - continues to be active, one trader said.

However, he noted that the action was "still strange," as he was "not convinced they should be trading" at current levels.

The Dallas-based company's debt inched up "a little bit," he added. The 11¼%/12% toggle notes due 2017 closed around 68 1/4, while the 10 7/8% notes due 2017 ended "up and down" around 75. The 6.55% notes due 2034 meantime finished the day around 42.

"It continues to be a busy name where nobody is convinced of where [the bonds] are really suppose to be," he said.

As previously reported, the company is conducting an exchange offer for the 10 7/8% notes and the toggle notes.

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