DirectBuy Holdings' bonds rally after 'falling out of bed'; Rite Aid, GM notes trending upward

By Stephanie N. Rotondo

Portland, Ore., March 24 - Distressed debt was generally firmer on the day, traders said Thursday, though they were still lamenting the overall lack of volume.

"It was a painful day," a market source said.

DirectBuy Holdings Inc. was getting a bulk of the attention during the trading session, as the bonds rallied back a bit after its recent decline. On Tuesday, bondholders reportedly learned during a conference call that the company's chief financial officer was departing, which sent the bonds down into the 70s. The debt then traded down into the 50s and 60s, but closed out Thursday back in the 70s.

Elsewhere, Rite Aid Corp. and General Motors Corp. were trading up a bit. In Rite Aid, a market analyst noted that while there has been positive news out on the drugstore chain, news out from rival Walgreens Co. only pointed to the company's bigger problems.

DirectBuy gyrates, rallies

Investors continued to watch DirectBuy Holdings, the bond that recently "fell out of bed" - as one market source put it - on news the company's chief financial officer was resigning.

"It was definitely where there was some focus," the source said. "It's always great to see an issue fall 30 points just two months after it was issued."

The Merrillville, Ind.-based company sold $335 million of the 12% notes due 2017 on Jan. 24. The bonds priced at 97, with a 12.721% yield.

The source said the notes traded in the 60s, but ended the day 70 bid, 75 offered.

"It's really wide and really tough to figure out where it is going to go next," he said. "But it feels like it has got some support."

Another source pegged the notes at 70 bid, 71 offered.

At another shop, a trader said the bonds hit a high around 76 before finishing the day around 72 bid, 74 offered.

The bonds began to plummet on Tuesday, when they traded down to the high-70s from the low-90s. The declines continued through Wednesday, when the debt closed in the mid-60s.

DirectBuy Holdings is a home improvement and furnishings club.

Rite Aid gains

Rite Aid debt was trading up, albeit marginally, during Thursday's session.

A market source pegged the 8 5/8% notes due 2015 at 91¾ bid, a gain of about a quarter-point.

Another trader placed the 9 3/8% notes due 2015 at 92 bid, 92½ offered.

Earlier this month, Rite Aid regained compliance with the New York Stock Exchange. While that was seen as largely positive, recent quarterly results from rival Walgreens Co. - along with an over $400 million acquisition of drugstore.com, which was announced Thursday - reminded some market watchers why Rite Aid is not yet out of the woods.

"The company is still challenged by poor comps," wrote Gimme Credit LLC analyst Kim Noland in a note to clients. Though February sales were better, they were not as good as many had hoped, she explained. "Although at least the data was positive, it continues to trouble us.

Noland also remarked that while the Camp Hill, Pa.-based drugstore chain had regained listing compliance, "it really can't help provide financing options to the company which has over $6 billion of debt."

GM moves up

A trader saw General Motors' benchmark bonds trending upward, seeing the 8 3/8% notes due 2033 at 30 bid, 31 offered.

The gains came despite a report put out by research firm HIS Automotive, in which the agency purports that Japan's recent earthquake-caused troubles would dampen global auto output by about 30%.

GM, for its part, has been hurt by a parts shortage, which resulted in the idling of two compact-car factories in Europe and a pickup truck plant in Shreveport, La.

GM is a Detroit-based automaker.

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