NewPage notes head higher in active trading; DirectBuy gets S&P rating, debt closes unchanged

By Stephanie N. Rotondo

Portland, Ore., April 25 - NewPage Corp. remained the topical distressed credit on Monday, with one trader noting that the name was "one of the few active things."

The bonds continued to trend upward, as the marketplace attempts to figure out what a potential restructuring might look like. The company said last week it had hired advisers to help develop a plan.

Elsewhere, DirectBuy Holdings Inc.'s debt was holding steady and trading was thin, according to traders. Standard & Poor's assigned a rating to the bonds - which hit the market in February - and said the outlook was negative.

Overall, the market was deemed unchanged to weaker, depending on where you looked. Traders also noted that the closed European market and the recent Easter holidays meant some desks were still empty.

NewPage inches up

NewPage's bonds continued to be actively traded, as investors reacted to recent news of a management exit and hiring of restructuring advisers.

One trader said NewPage's 10% notes due 2012 were "one of the few active things" of the day, calling the notes "up a little bit more" at 591/2.

Another trader also deemed the debt unchanged at 59½ bid, 60 offered.

A third trader said the 0% notes due 2012 were also unchanged around 53.

The Miamisburg, Ohio-based coated papermaker recently announced that its chief financial officer, David Prystash, had decided to leave the company to pursue other opportunities. In the wake of that news, the company then said that it had hired Lazard Ltd. as a financial adviser to help come up with a restructuring plan.

In a note to clients, Gimme Credit LLC analyst Kim Noland said that while NewPage's fundamentals have showed improvement, "it remains very overleveraged and it's clear that Cerberus' [NewPage's owner] equity may be in jeopardy with the second-lien notes trading under 60% of par.

"Well-known distressed investors have reportedly accumulated sizeable holdings, which could indicate a bond exchange of principal haircut on those notes in exchange for equity," she wrote.

DirectBuy rated B

DirectBuy Holdings' bonds were treading water in the mid-50s, traders said, as Standard & Poor's gave the company - and the debt - a B rating.

One trader said he saw a 53 bid for the 12% notes due 2017, noting that they had been in the 70s before last week.

Another trader said the debt was still in the mid-50s, 55-58ish.

S&P said the outlook was negative, given that the home furnishings club was recently slapped with a 36-state class action lawsuit alleging improper sales practices. Plaintiffs in that case have already rejected a settlement that would have allowed for $55 million in free memberships.

The rating agency said that if the outcome of a May settlement hearing is adverse, the Merrittville, Ind.-based company's credit profile could decline.

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