Dynegy debt declines as advisors hired; government's March sales report helps Rite Aid rise

By Stephanie N. Rotondo

Portland, Ore., April 13 - The distressed debt market was busily trading Dynegy Inc. and Rite Aid Corp. on Wednesday, traders reported.

Dynegy announced it had hired advisors to help devise a restructuring plan. The news sent the Houston-based power producer's debt down "half a point to a point, depending on the issue," according to a trader.

Meanwhile, an overall gain in retail sales helped to push up Rite Aid. A trader said that while the report was not "Rite Aid specific," it did "give the business a boost."

But away from Dynegy and Rite Aid, traders said there wasn't much else in distressed, as investors remained focused on new issues and Community Health Systems Inc.

Dynegy dips, advisors hired

A trader said trading in Dynegy was "a little bit busier" on news the company had hired advisors to help create a restructuring plan.

The trader said the 7¾% notes due 2019 were the most active of the Dynegy issues, with some $25 million to $30 million trading. He called the issue a point weaker at 771/2. The 8 3/8% notes due 2016 were also a point softer around 831/2.

Another trader said the 7¾% notes were "very active," seeing them falling half a point to 771/2.

The second trader also saw the 8 3/8% notes at 83½ and the 7½% notes due 2015 at 841/2, down a quarter-point.

A third source deemed the 7¾% notes over a point weaker at 77½ bid.

Dynegy said it had retained Lazard Frères & Co. LLC as financial advisors and White & Case LLP as legal advisors. The advisors will assist the company's finance and restructuring committee in undertaking "a comprehensive review of Dynegy's various restructuring alternatives, including [...] possible changes to the capital structure of Dynegy, including the issuance, repurchase and/or prepayment of indebtedness or equity securities and possible sales of Dynegy's assets," the company said in a press release.

The restructuring effort comes after two failed takeover attempts, one by Blackstone Group LP late last year and another by Carl Icahn in early 2011.

On Monday, Dynegy said it had appointed E. Hunter Harrison as interim president and chief executive officer, replacing David W. Biegler.

Biegler was also in those posts on an interim basis after Bruce Williamson resigned in February.

Sales gain boosts Rite Aid

A 0.4% increase in retail sales for March caused investors to push up Rite Aid debt, a trader said.

He said the bonds were "finally active" and "better for choice," seeing the 8 5/8% notes due 2015 at 911/2.

He said the paper was the most active of the Rite Aid complex, with $25 million to $30 million changing hands.

Another trader called the issue up a quarter-point at 911/2, while the 9 3/8% notes due 2015 improved by half a point closing at 911/4.

He also saw the 9½% notes due 2017 up slightly around 90.

Another market source pegged the 8 5/8% notes at 91½ bid, up a quarter-point.

The U.S. Commerce Department's retail sales report said the 0.4% gain was the ninth consecutive month of gains in the sector. However, it was the smallest such increase since last summer.

But when compared with March 2010, sales were up 7.1%.

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 fewer 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.

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