Distressed market ends in red; Rite Aid dips ahead of numbers; Blockbuster debt closes softer

By Stephanie N. Rotondo

Portland, Ore., Sept. 22 - Distressed debt ended generally weaker on Wednesday, but activity in that space improved.

Still, a glut of new issues continued to flood the marketplace.

"Lots and lots of new issues," a trader said. "It's definitely been fun."

Away from the glut of new issues, Rite Aid Corp. was one of the day's more active credits, as the company prepared to file its quarterly report. However, the debt was seen trading down, though a trader said the market expected to see "decent" numbers.

Though it comes as no surprise, Blockbuster Inc. is reported to be readying a bankruptcy filing "within minutes," as one trader put it. The company is expected to file by the end of the week, causing the bonds to drop another couple of points.

Also, a trader saw Lehman Brothers Holdings Inc.'s paper closing out the midweek session mixed. The wonky movements came as the company said it hoped to file a plan of reorganization by the end of the year.

Rite Aid dips pre-earnings

Rite Aid's debt fell "a point across the board," according to one trader.

He said the declines in the Camp Hill, Pa.-based drugstore chain's paper was "interesting," as there was "some expectation of decent numbers" on Thursday.

The most active issue was the 7½% notes due 2017, he said. The notes fell over a point to end around 92, with some "$20-odd million" changing hands.

The 10 3/8% notes due 2016 meantime lost "a solid point" to close around 1041/2, while the 8 5/8% notes due 2015 dropped "almost 2 points" to 861/4.

Another source saw the 8 5/8% notes at 86¼ bid, down 1¾ points.

Rite Aid will release its second-quarter results before the market opens on Thursday and analysts polled by Thomson Reuters expect to see a loss of 17 cents per share on $6.19 billion in revenue.

In the second quarter of fiscal 2009, Rite Aid posted a loss of $120.4 million, or 14 cents per share, on revenues of $6.3 billion.

Blockbuster to file soon

Word that a bankruptcy filing was imminent sent Blockbuster's bonds down, traders reported.

At one shop, the 9% notes due 2012 were seen at 4½ bid, 5½ offered, down "another 1½ to 2 points." The 11¾% notes due 2014 were "a little lower too, like a point or two," at 51 bid, 53 offered.

Another trader saw the 9% notes around 51/2, which he said was down 1½ points on the day and about 3 points softer on the week. However, he pegged the 11¾% notes much lower at 48 bid, 49 offered. He said that level was 5 points weaker than those seen on Monday.

The Dallas-based movie rental chain had previously warned of a potential bankruptcy filing, as talks with creditors failed to bring about an out-of-court restructuring.

The company missed a coupon payment in July on its 11¾% notes and then on the 9% notes on Sept. 1. Blockbuster is currently operating under a forbearance agreement, which expires Sept. 30.

Lehman ends mixed

Lehman Brothers Holdings is hoping to have its reorganization plan confirmed by the end of the first quarter of 2011, according to a regulatory filing.

The bankrupt investment bank said it is continuing talks with creditors and that they are close to coming to terms.

On the news, a trader said the 5 5/8% notes due 2013 were "pretty active," though slightly lower around 23. The 6 7/8% notes due 2018 were "kind of unchanged" around 231/2.

Lehman hopes to file its plan by the end of 2010.

Elsewhere in the financial realm, a trader said that Nuveen Investments Inc.'s 10½% notes due 2015 finished "kind of unchanged" at 991/2.

And, CIT Group Inc.'s 7% notes due 2016 dropped over a point, ending at 98¼ bid.

Broad market weakens

Among other actively trading issues were Harrah's Entertainment Inc.'s 10% notes due 2018.

A trader said the bonds fell a point to close at 79.

That trader also saw General Motors Corp.'s 8 3/8% notes due 2033 dipping almost half a point to 32½ bid, 33½ offered.

NewPage Corp.'s 10% notes due 2012 inched up to levels around 52, the trader also said.

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