Nebraska Book parent debt slides; Harry & David falls post-downgrade; Compton Petroleum slips

By Stephanie N. Rotondo

Portland, Ore., March 7 - Volume in the secondary space was about $1.4 billion on Monday, which a trader said "wasn't crazy, but a decent Monday."

Still, distressed issues were mostly softer, according to sources.

NBC Acquisition Corp. debt took a massive dive in Monday trading, though with no fresh news out. The company has reportedly hired financial advisers and is in restructuring talks with creditors.

Harry & David Operations Corp. also took a hit, falling about 3 points on the day. Though traders cited the general weakness in the market as the reason for the slide, the company was also downgraded.

Meanwhile, Compton Petroleum Finance Corp. was also coming under pressure. There was no news out on the company to act as catalyst, but the bonds have been on the decline for the last few weeks, a trader said.

Nebraska Book debt slides

NBC Acquisition, the parent company of Nebraska Book Co., saw its 11% variable-rate notes due 2013 dropping significantly in Monday trading.

A trader said the bonds traded around 25.

"It hasn't traded in round-lots for awhile," he said. But "paper had been quoted in the 40s.

"So that's way down," he said.

Another trader also saw the bonds ending around 5.

"They were in the 40s and 50s [previously]," the second trader said. "So that's a pretty precipitous fall."

The trader said that while "they don't trade that often, I think it's just recognition that the senior seniors are covered, but the bottom of the cap structure could easily get zeroed out."

Last week, Bloomberg - citing "people familiar with the talks" - reported that Nebraska Book had hired Rothschild and Kirkland & Ellis LLP on a restructuring that could potentially include a bankruptcy filing.

The Lincoln, Neb.-based textbook retailer has about $450 million of debt coming due through December 2012. Of that, about $200 million of notes mature this December.

Goldman Sachs Group Inc. and Cerberus Management LP are the company's two largest creditors. According to the Bloomberg report, Goldman and Cerberus are leading restructuring negotiations.

Harry & David drops

The general negative tone of the market was blamed for losses in Harry & David Operations' 9% notes due 2013.

A trader said the bonds fell a couple points to end around 36. Another trader quoted them at 36¼ bid, 36¾ offered, down from 38¾ bid, 39 offered on Thursday.

"So that's a good 3 points down," he said.

On Monday, the Medford, Ore.-based gourmet foods retailer received a rating downgrade from Standard & poor's. The rating agency dropped the corporate credit rating to D from CC, the $175 million of senior fixed rate notes and the $70 million of senior floating-rate notes to D from C.

The action was based on the company missing its March 1 coupon payment.

Compton busy, falling

A trader said Compton Petroleum Finance bonds were "busy" and weaker, as "lots of people were just tweaking and fiddling."

He saw the 10% notes due 2017 slipping to 74, compared with levels in the 80s two to three weeks ago.

Another source quoted the bonds down 4 points on the session at 74 bid.

The Calgary, Alta.-based energy company's bonds and shares have slid badly since it announced poor 2010 year-end financial results and reserves data on Feb. 24.

The day before, its bonds had been trading as high as 84 bid, but they had fallen to around 78 at the end of last week, and continued to slide further Monday.

The company's Toronto Stock Exchange-traded shares meanwhile fell to 35 Canadian cents on Monday, down 2 Canadian cents, or 5.80% on the day; since Feb. 23, they have slid 10 Canadian cents per share.

The bonds and shares started dropping after the company revealed a net loss of C$330.85 million, including a C$367 million write-down of assets due to the lower natural gas prices.

Meanwhile, the company said that its total proved reserves dwindled by 40% versus year-end 2009, while their value shrank by 48% year-over-year.

Compton also warned that its proved plus probable reserves were down 48% from a year earlier, with the value of such reserves down 56% from the previous year.

OPTI up, GM down

Market mainstays like OPTI Canada Inc. and General Motors Corp. ended the first trading session of the week in mixed fashion.

OPTI bonds were "stronger," a trader said, on a "decent amount" traded. The 7 7/8% and 8¼% subordinated notes due 2014 traded up to 55½ bid, 56 offered.

GM meantime "continued to drift with the stock," another trader said. He placed the benchmark 8 3/8% notes due 2033 at 30½ bid, 31 offered.

GM's stock (NYSE: GM) fell 69 cents, or 2.13% to $31.70.

Another trader said that NewPage Corp.'s 10% notes due 2012 gained 1 point to 70 bid, 70½ offered, seeing "some activity" in the Miamisburg, Ohio-based coated-paper manufacturer's bonds.

Paul Deckelman contributed to this article

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