Distressed bonds remain firm as holiday, new issues mute volume; NewPage rises with the market

By Stephanie N. Rotondo

Portland, Ore., Sept. 9 - There continued to be firmness in the distressed debt arena on Thursday, but market sources noted that investors remained focused on new issues.

However, traders also noted that the Jewish New Year had resulted in less people occupying their desks, which meant volume was on the lighter side.

NewPage Corp. attempted to regain some of the ground lost in the previous two sessions. The company's bonds firmed in line with the market, traders said.

Rite Aid Corp. was also stronger in response to the generally positive tone.

There was no fresh news out on either company.

Neither was their news to explain why Edison Mission Energy, a subsidiary of Edison International Inc., was on the rise. But the energy sector overall has been climbing recently and there are those who believe the gains have to do with BP plc's Gulf of Mexico plight.

NewPage takes a turn

NewPage remained a market mainstay and the papermaker's debt once again changed course, looking to regain some its recent losses.

A trader said the 11 3/8% notes due 2014 finished almost a point higher around 891/2. The 10% notes due 2012, however, were "pretty much unchanged" around 44.

Another source pegged the 11 3/8% notes at 89¼ and the 10% notes at 45.

On Sept. 1, the Miamisburg, Ohio-based company released better-than-expected guidance for the upcoming third and fourth quarters. The news resulted in a multi-point rally that spanned several days.

But this week, the notes started out on the decline, and a few players opined that it was simply a matter of the debt gaining too much, too fast.

Elsewhere in the pulp and paper sector, Verso Paper Inc.'s 11 3/8% notes due 2016 were unchanged to nominally better around 87.

Rite Aid climbs higher

Camp Hill, Pa.-based Rite Aid saw its corporate debt gaining ground, traders reported.

One trader deemed the notes up a half to three-quarters, seeing the 9 3/8% notes due 2015 at 831/4- a level echoed at another desk as well - and the 10 3/8% notes due 2016 at 1041/2.

On Friday, Rite Aid posted its monthly sales report for the five weeks ending Aug. 28. The report showed a 1% decline in same store sales from year-ago levels.

Total drugstore sales dropped 2.2% to $3.34 billion, which compared with $2.39 billion the year before.

For the quarter, which also ended Aug. 28, same store sales dipped 1.5%, with total sales falling 2.5% to $6.14 billion from $6.3 billion.

Edison gets a boost

A trader said Edison Mission Energy's 7% notes due 2017 were "very active," but was not clear why.

The trader said the bonds had gained a point to end around 72.

The improvement in the paper could be due to a recent surge in energy-related bonds. Popular opinion is that news regarding BP plc's costs associated with the Gulf of Mexico disaster - and the belief that those costs will be contained - has renewed investor interest in anything in the energy sphere.

Broad market improves

In the rest of the marketplace, Clear Channel Communications Inc.'s 11% notes due 2016 were "a bit better," a trader said.

He said the bonds were trading around 75.

Another trader agreed with that level, calling it up a point.

There was no news out on the San Antonio-based multimedia company.

The first trader also saw General Motors Corp.'s 8 3/8% notes due 2033 "initially trade down, but they recovered to finish unchanged."

The bonds were quoted at 31¼ bid, 32¼ offered by another market source, who said the debt had inched up half a point.

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