Solo Cup gets boost on 'decent' earnings; Rite Aid debt grinds higher; NewPage gains traction

By Stephanie N. Rotondo

Portland, Ore., May 11 - While the stock market took a dive Wednesday, a distressed debt trader said the bond market "did reasonably well.

"Volumes were good given that the stock market sold off," he added. However, most of the action was "mostly billions of dollars in new issues."

Solo Cup Co.'s debt was active on the back of "decent numbers," according to a market source. Traders deemed the bonds up at least a point on the day.

Meanwhile, Rite Aid Corp.'s bonds were "grinding higher," a trader said, though with no news to act as catalyst.

Also ending on a positive note was NewPage Corp., though, like Rite Aid, there was no fresh news out.

On the down side, DirectBuy Holdings Inc.'s notes fell as much as 7 points during the midweek session. A court hearing on the company's class-action settlement began Tuesday afternoon.

Rounding out the softer side were Dynegy Inc. and Eastman Kodak Co.

Solo up on earnings

A trader said Solo Cup's 10½% notes due 2013 were active following the release of the company's "decent numbers."

He said about $20 million to $25 million of the paper changed hands in the "105 range."

Another trader said the 10½% notes were up a quarter- to a half-point at 1041/2, while the 8½% notes due 2014 gained "about a point" to end around 92.

A third trader said the 8½% notes have "kind of been cruising up," seeing the notes also around the 92 mark.

"They were in the upper-80s last week," he noted.

The third trader placed the 10½% notes around the 105 level.

For the 13 weeks ending March 27, the Lake Forest, Ill.-based company posted a net loss of $25.3 million, compared with a loss of $16.5 million the year before. Net sales, however, were higher at $371.1 million, versus $344.9 million.

Still, cash and equivalents declined to $16.4 million from $21.5 million.

"Our results of operations for the 13 weeks ended March 27 continued to be affected by economic and industry conditions," the company said in its 10-K filed Tuesday.

"Weak economic conditions continued to reduce the discretionary income of consumers and negatively affect demand for single-use products used to serve food and beverages...Lower consumer discretionary spending translated into a smaller consumer market, as did a shift from national brands to private label products, which are traditionally offered at lower prices."

The company also noted that price increases in raw materials are also weighing down the balance sheet.

Rite Aid gains steam

Rite Aid's debt was "grinding higher," a trader said, and in active trading.

The trader said that "at least" $25 million of the 9½% notes due 2017 turned over, up a point at 94 bid, 94¼ offered.

Another trader also called the paper up "about a point" at 9 ¼ bid, 94½ offered.

That compared with 93 bid, 93¼ offered on Tuesday, he said.

A third source saw the 9½% notes moving up over a point to end at 941/2, while yet another source called the 8 5/8% notes due 2015 nearly a point higher at 95 bid.

There was no fresh news out on the Camp Hill, Pa.-based drugstore chain.

NewPage pushes up

NewPage's 10% subordinated notes due 2012 were also "up just a little bit," according to a trader.

He said about $20 million to $25 million of the notes traded at 57¾ bid, 58 offered.

Another trader said the notes were up half a point in "pretty active trading" around 58.

But a third trader called the issue "pretty much unchanged" around 571/2.

Like Rite Aid, there was no fresh news out on the Miamisburg, Ohio-based coated papermaker.

DirectBuy dives

DirectBuy Holdings' 12% notes due 2017 fell anywhere from 5 to 7 points in midweek trading, as investors reacted to the start of the company's class-action settlement hearing.

One trader said the bonds fell 6 to 7 points to 49 bid, 50 offered, versus previous levels of 55 bid, 56 offered.

"A decent amount of paper traded," he said. "And the price tells you it's 50-50 how [the settlement hearing] turns out."

Another trader called the notes 5 points weaker at 48 bid, 49 offered.

The settlement hearing began Tuesday afternoon in Connecticut and the case garnered objections from 39 state attorney generals and a consumer advocacy group.

The class-action lawsuit centers around what the plaintiffs allege as fraudulent sales practices. The Merrillville, Ind.-based home improvement and furnishings warehouse club has offered to settle the case by giving members a free two-month membership.

A formal decision is expected within a couple of weeks.

Kodak loses focus

Eastman Kodak paper was losing ground, though a trader remarked, "I don't know that anything is trading."

He said the 7¼% notes due 2013 had traded down to 94 bid, 95 offered. "They were around 97 not that long ago," he noted.

He also saw the 9.95% notes due 2018 slipping to 95½ bid, 96 offered.

Another market source called the 7¼% notes down a deuce at 96 bid.

The Rochester, N.Y.-based company held its annual meeting in San Diego on Wednesday.

Dynegy debt weakens

Dynegy debt remained under pressure during trading, traders said.

"They had a great run, then they tailed off," a trader said, seeing the 7 ¾% notes due 2019 slipping to 76.

Another source deemed the notes down a point at 76 bid.

Houston-based Dynegy posted a net loss of $77 million, or 64 cents per share, on Monday. That compared with net income of $145 million, or $1.20 per share, the year before.

However, the loss marks the fourth straight quarterly loss.

Dynegy said the loss was based in part on lower sales. Sales declined 41% to $505 million.

Cash flow dropped 69% to $167 million and available cash and equivalents sunk to $1.2 billion.

"Dynegy's first quarter results were weak but even though results didn't meet market expectations, investors have been prepared for bad news," Kim Noland, an analyst with Gimme Credit LLC, said in a research report published Wednesday.

In March, the energy producer warned that it could fall out of compliance with its credit facilities in the second half of the year. Dynegy hired Lazard Ltd. last month to help with a restructuring effort.

The company has also spurned two takeover offers, one from Blackstone Group LP and one from billionaire investor Carl Icahn.

"Dynegy's problems are rooted in a weak economic recovery and power market, low commodity pricing and compressed dark spreads," Noland wrote. She added that a "debt exchange could transfer enterprise value from bondholders to shareholders."

Broad market mixed

Elsewhere in the realm of distressed debt, Edison international Inc.'s 7% notes due 2017 closed "probably a point higher" at 801/2, according to a trader.

Another trader saw Caesars Entertainment Corp.'s 10% notes due 2018 falling almost half a point to 95 5/8.

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