Catalyst Paper notes close unchanged; NewPage steady on thin trading; Nebraska Book bonds fall

By Stephanie N. Rotondo

Portland, Ore., April 11 - Distressed debt traders said Monday that investors remained focused on the plethora of new issues flooding the market.

"There's almost nothing to tell" of the goings-on in the distressed space, one trader remarked.

Another trader said "I don't know how much room there was in distressed, for all of the stuff I hear going on in high yield," which captured the fancy of investors, including the slide in Community Health Systems Inc. and Tenet Healthcare Corp.'s bonds on the news of the latter's lawsuit against the former, or the jump in Level 3 Communications Inc.'s bonds and those of Global Crossing Ltd. on news of Level 3's planned acquisition of Global Crossing."

Even Catalyst Paper Corp., which has been becoming more and more active recently, was on the quiet side and its bonds unchanged, according to market sources. Also in the sector, NewPage Corp. paper was holding in there, in thin trading.

In other recently topical credits, Nebraska Book Co. Inc.'s debt was seen weakening. One trader said a series of recent downgrades "could be weighing on it."

Catalyst ends unchanged

Catalyst Paper's debt saw "a little bit of action," according to a trader, though he noted that the bonds were "right where it's been, within a quarter-point."

He pegged the 7 3/8% notes due 2014 around 731/2.

Another trader also deemed the debt unchanged at 73 bid, 74 offered.

As previously reported, trading in Catalyst has been ramping up recently - Monday's lackluster trading day excluded - though there hasn't been any fresh news. However, Gimme Credit LLC analyst Kim Noland put out a report on Friday, in which she said that there was still restructuring risk.

"Catalyst just implemented some price increases on certain of its specialty grades," she wrote in the report. "Operating results are at a low ebb due to slack demand and an appreciating Canadian dollar, however, and it remains to be seen whether a nascent economic recovery can translate into significantly improved cash flow for the company."

Noland also remarked that she expected the Richmond, B.C.-based papermaker to break even for the year.

NewPage holds in

Elsewhere in the realm of paper, NewPage's 10% notes due 2012 were unchanged around 631/2, while its 11 3/8% notes due 2014 were also steady around 101 1/8, according to a trader.

"This is one of those that has gotten kind of boring," the trader said, referring to the days when NewPage was consistently an actively traded credit, with or without news.

NewPage is a Miamisburg, Ohio-based papermaker.

NBC softens

A trader said there was "some softening" in Nebraska Book Co.'s subordinated paper.

He saw the 8 5/8% notes due 2012 slipping to 83 bid, 84 offered, down from 86 bid, 87 offered a week ago.

Another trader said the bonds were "being quoted a lot lower," though he noted that trading was thin.

He said markets were in the low- to mid-80s.

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.

DirectBuy dips

DirectBuy Holdings Inc.'s 12% notes due 2017 were seen finishing Monday around 75½ bid having traded all day in a context of 75 bid, 76½ offered. That was down 1½ points from around the 77 where the Merrillville, Ind.-based members-only showroom and home-design center's bonds had finished on Friday.

He said that because the $335 million deal - which had priced in late January at 97 bid to yield 12.721% but has since fallen from there - was a 144 transaction, "we really can't tell how many were traded, but it does look like there's some trading in it, a couple of spots."

Paul Deckelman contributed to this article

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