Solo Cup debt declines, short covering suspected; Harrah's turns negative; Rite Aid notes slip

By Stephanie N. Rotondo

Portland, Ore., April 12 - Distressed debt was "taking a cue from the equities," a trader said Tuesday, resulting in an overall weakened marketplace.

"There was definitely some things in our market that were a little bit weaker," he said.

Another trader said that for a second consecutive session, very active trading in Community Health Systems Inc. bonds - though not quite on a par with Monday's $200 million traded - "seems to take away from the distressed boys, because it's been pretty quiet."

He added that overall, "stocks going down didn't help much today."

And, many credits were softer without any news out to act as catalyst. Solo Cup Co., for example, was trending downward, with no news. One trader, however, speculated that short covering might be playing a role.

Caesars Entertainment Corp. was also on the losing side during Tuesday trading, as was Rite Aid Corp.

Solo Cup active, weaker

Solo Cup's 8½% notes due 2014 were trading "a little lower," a trader said.

He saw the bonds closing with an 88 handle.

Another trader quoted the paper at 87½ bid, 88½ offered, down fro 90½ bid.

"They did a presentation, said they were doing better and people got pumped up and ran them up 5 points," the second trader said. "Maybe now people are short covering."

There was no fresh news out on the Lake Forest, Ill.-based packaging company.

Harrah's turns negative

Also weaker were Caesars Entertainment's 10% notes due 2018.

Like Solo Cup, there was no news out to cause the declines.

A trader called the 10% notes due 2018 "down a couple points" at 91 bid, 91½ offered.

Another source deemed the debt a point weaker around 911/2.

Caesars, or Harrah's as it is more commonly referred to, is a Las Vegas-based casino operator.

Rite Aid debt falls

A trader said Rite Aid paper was about a point weaker on the day, though there has been no news out since the company's earnings release last week.

He saw the 9½% notes due 2017 falling a point to 891/2, while the 8 5/8% notes dropped almost a point to end around 911/4.

Another market source pegged the 8 5/8% notes at 91¼ bid.

Last week, the Camp Hill, Pa.-based drugstore chain reported its fourth quarter and full year earnings, showing a $205.7 million, or 24 cents per share, loss for the quarter and a $555.4 billion loss for the year.

Sales for the quarter were on par year over year at $6.5 billion. 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.

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.

Supervalu on the radar

A distressed-debt trader said that SuperValu Inc.'s bonds are "something I'm starting to see more of."

He said that the company's 8% bonds due 2031 - originally issued by Albertsons, which was later acquired by Eden Prairie, Minn.-based SuperValu - were quoted at 82 bid, 83 offered, "but I just don't see much trading in it." He said that the bonds have been trading in that low-80s range for a while, while "the shorter ones are down near par."

SuperValu is scheduled to report its fiscal 2011 fourth-quarter and full-year earnings on Thursday as the markets open. Wall Street is looking for earnings of around 35 cents per share on $8.75 billion - although SuperValu undershot estimates in each of the previous two quarters.

Broad market softens

Elsewhere in distressed debt, DirectBuy Holdings Inc.'s 12% notes due 2017 were "quoted lower," a trader said, seeing an offer of 75.

Another trader called Dynegy Inc.'s 7¾% notes due 2019 a point softer around 78.

And, NewPage Corp.'s 10% notes due 2012 fell a point to 621/2.

Paul Deckelman contributed to this article

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