Rite Aid moves up after earnings release; downgrades pressure Nebraska Book; Blockbuster dips

By Stephanie N. Rotondo

Portland, Ore., April 7 - Distressed debt was moderately busy during Thursday trading, even as the Masters Tournament took away focus.

Rite Aid Corp. moved higher during the session, though trading volume was less than had previously been expected. The company reported earnings Thursday, showing slightly better sales than the previous year.

Meanwhile, Nebraska Book Co. Inc.'s debt closed unchanged to softer, depending on whom you asked. The move came on the heels of a rating downgrade from Moody's Investors Service on Thursday, which followed a rating change from Standard & Poor's earlier in the week.

And, Blockbuster Inc.'s subordinated paper was seen drifting lower. The company recently sold itself at auction and the winning bidder received approval to go ahead with the purchase on Thursday.

Rite Aid up post-earnings

Rite Aid released its fourth-quarter and fiscal year results Thursday and despite posting a $205.7 million, or 24 cents per share, loss for the quarter, the bonds were "generally up half a point," a trader said.

He quoted the 7½% notes due 2017 at par bid, par ½ offered, the 9 3/8% and 8 5/8% notes due 2015 at 92 bid, 92½ offered and the 10 3/8% notes due 2016 at 108½ bid, 109½ offered.

However, he noted that trading in the credit was not as busy as he had expected, with just $40 million to $50 million of the complex turning over.

"I think it was because it was kind of a vanilla release," he said. "They are not in any imminent danger. It was more of a sleeper."

Another trader called the 8 5/8% notes a point better around 92½ and the 7½% notes a quarter-point stronger around par 1/4.

For the fourth quarter, the Camp Hill, Pa.-based drugstore chain reported revenues of $6.5 billion, as same-store sales trends improved. Still, revenues were about the same as the previous year.

Net loss was slightly lower year over year, down from $208.4 million, or 24 cents per share, the year before.

For the fiscal year, revenues fell just a tad to $25.2 billion from $25.7 billion. The company said the declines were due in part to less stores being open than in the previous filing period.

Net loss was also wider at $555.4 billion, versus $506.7 billion the year before.

Rite Aid also provided an outlook for fiscal 2012. The company said that "based on current same store sales trends, a challenging reimbursement rate environment and the impact of continued investments Rite Aid plans to make in its customer loyalty program and other initiatives to grow sales," total sales are expected to be between $25.7 billion and $26.1 billion, with same store sales forecast to increase 0.5% to 2% over the course of the year.

Net loss is expected to be between $370 million and $560 million or 42 cents to 64 cents per share.

NBC steady to softer

Nebraska Book Co. debt was unchanged to weaker following yet another rating downgrade.

One trader said the 10% notes due 2011 were unchanged at 102¼ bid, 102¾ offered. The 8 5/8% notes due 2012, however, were deemed a point lower at 85½ bid, 86½ offered.

Another trader pegged the 8 5/8% notes at 85 bid, 86 offered, "kind of right where they have been."

On Thursday, Moody's Investors Service lowered its rating on the Lincoln, Neb.-based textbook reseller, along with the ratings of the parent company, NBC Acquisition Corp.

Among the rating changes, NBC's probability-of-default rating was dropped to Caa3 from Caa2, while Nebraska Book's 8 5/8% notes were lowered to Caa3 from Caa2.

The outlook is negative.

Moody's said its action was based on a rising default risk for the company and the likelihood of a restructuring that could be deemed a distressed exchange.

The rating changes from Moody's followed in Standard & poor's footsteps. S&P had altered its ratings on the company and its parent on Tuesday, also citing vulnerability to default.

S&P gave the companies a CCC rating, down from B-.

In early March, Nebraska Book said it was in process of putting together a restructuring plan with the help of Rothschild and Kirkland & Ellis LLP. The company said that if it could not come to terms with creditors, it would be forced to file for bankruptcy.

Blockbuster slips as bid OK'd

A trader said Blockbuster's 9% notes due 2012 were trading between 15 cents and 25 cents on the dollar, as Dish Network Corp. received approval on its $320 million bid for the bankrupt movie rental chain.

As previously reported, Dish's offer beat out bids made by Carl Icahn, SK Telecom Co. and an investor group led by Monarch Alternative Capital LP.

The bid received more than 100 objections, but the judge overseeing proceedings elected to leave those until another time.

The sale is expected to close by April 25.

Sprint up, TXU unchanged

Among other distressed issues, Sprint Nextel Corp.'s 6 7/8% notes due 2028 traded up a point to 951/4, according to a trader.

He also saw Energy Future Holdings Corp.'s 6.55% notes due 2024 unchanged around 51.

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