Distressed market ends week on firm note; Harry & David keeps gaining strength; NewPage active

By Stephanie N. Rotondo

Portland, Ore., Jan. 21 - Friday's trading session saw good volume in the secondary world, according to a trader, and "everything was up."

In the distressed debt realm, Harry & David Holdings Inc. continued to be a topical name, as the bonds remained stronger than they had been earlier in the week. Traders also said that trading volume in the credit was "decent."

NewPage Corp. was another active one. Traders saw those bonds closing out the day unchanged to a point or so better.

However, Great Atlantic & Pacific Tea Co. Inc. - as well as Nebraska Book Co. Inc. - remained steady. Market sources did note that trading in Nebraska Book has been picking up of late.

Harry & David remain strong

Harry & David Holdings' 9% notes due 2013 continued to gain traction in trading, rallying "a good 5 points from the day it tanked," a trader said.

He pegged the issue around 44.

Another trader said the bonds were "up a bunch more" at 44½ bid, 45½ offered, on "a decent amount trading."

The Medford, Ore.-based specialty foods retailer said in a regulatory filing on Tuesday that its preliminary second-quarter results were "significantly below its expectations." Though the results will not be finalized until February, the company is expecting to post net sales of $262 million, down from $267 million the year before.

EBITDA is forecast to be around $36 million versus $67 million for the same quarter of fiscal 2010.

As of Dec. 25, Harry & David had a cash balance of $66.9 million and accounts payable of $57.9 million. Based on its preliminary second quarter results, the company will be out of compliance with its revolving credit facility and therefore will not be able to access any funds from that facility.

"While the company believes cash on hand is sufficient to fund short-term operations, based on the company's current working capital and anticipated working capital requirements and results of operations, the company will not be able to finance continuing operations without securing new capital and restructuring its obligations," the filing said.

Harry & David has hired Rothschild Inc. as a financial adviser and intends to begin talks with stakeholders on a recapitalization plan.

NewPage unchanged to better

A trader said NewPage's 10% notes due 2012 were "up a solid point and change" at 61 bid, 62 offered.

He also saw the 11 3/8% notes due 2014 trading around 983/4, adding that "both [issues] traded in good size," with about $50 million total of bonds changing hands.

But another trader said the paper was "active, though the levels are pretty much unchanged."

He saw the 10% notes around 61 and the 11 3/8% notes at 98½ bid, 99 offered.

On Wednesday, the Miamisburg, Ohio-based coated papermaker said it had amended its $470 million revolving credit facility agreement in order to extend the maturity date.

Under the amended agreement, the credit facility will come due on either Dec. 21, 2012 or the later of March 1, 2012 or 61 days prior to the scheduled maturity date of the first-lien notes, senior secured notes, senior subordinated notes, the NewPage Holding PIK notes and any refinancing thereof, whichever occurs first.

A&P hanging in there

The Great Atlantic & Pacific Tea Co.'s 11 3/8% notes due2015 were "still" hanging around 89 bid, 90 offered, according to a trader.

Another trader echoed that market, also seeing the convertible issues - the 5 1/8% notes due 2011 and the 6 ¾% notes due 2012 - at 33½ bid, 34½ offered.

The Montvale, N.J.-based supermarket operator filed for bankruptcy on Dec. 14.

Nebraska Book more active

Nebraska Book Co.'s 8 5/8% notes due 2012 were "a little bit more active," a trader said.

However, despite the increase in action, the bonds were "about where they have been, maybe a smidge higher" around 87.

"They have been floating around a little bit lately," said another trader, also placing the notes around 87.

"It's unchanged, but it's good to see it trading," he said.

Nebraska Book is a Lincoln, Neb.-based textbook reseller.

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