NewPage numbers worry investors, subs drop by 12 points; Yankee Candle reports, bonds steady

By Stephanie N. Rotondo

Portland, Ore., May 12 - Thursday was all about NewPage Corp., distressed debt traders reported.

The focus came as the company released its first-quarter results and the numbers called into question what the company's refinancing options might be. Given such, the subordinated issues dropped as much as 12 points on the day, though the senior paper hung in there.

Elsewhere, DirectBuy Holdings Inc.'s bonds continued to lose ground, though trading was not as active as it had been in the previous session. Investors are currently attempting to figure out what the bonds might be worth if a class-action settlement is approved - and if it's not.

NewPage numbers hurt notes

NewPage dominated the distressed debt market after the company released its first-quarter earnings and investors worried that there would not be enough to go around in the event of a bankruptcy.

"Based on the numbers, there is not enough cash flow" to refinance the 10% second-lien notes due 2012, a trader said. The Miamisburg, Ohio-based coated papermaker has until Jan. 31, 2012 to repay or refinance the debt or else its 11 3/8% senior notes due 2014 will be accelerated, moving the maturity up to March 2013 from December 2014.

The trader said there was "lots of trading" in the 10% notes, "just pages and pages of it." He said the paper fell 11 points to end around 46, down from 57 bid, 58 offered.

The floating rate notes due 2012 were also down "at least 10 points" to around 43. But the 11 3/8% notes were down only a point to 99 bid, 99½ offered.

"I think they are covered," he said of the senior notes.

Another trader called the 10% notes 10 to 12 points weaker at 46. He said the 11 3/8% notes were trading around 99, "roughly the right level.

"They are not the fulcrum security," he said as explanation to why the seniors were not as moved as the subs.

A third source said the subordinated paper was on a "rollercoaster" for much of the session. He said they traded down to the 40s first thing, only to trade back up into the 50s and then back down again to close around 45.

"So down 12 points," he said.

For the first quarter, NewPage reported net sales of $904 million, up from $817 million the year before. The company attributed the increase to higher prices and higher sales volumes.

Adjusted EBITDA was $85 million, versus $15 million for the first quarter of 2010. Net loss narrowed to $88 million from $175 million.

At the end of the quarter, NewPage had $170 million of liquidity, consisting of $9 million in cash and equivalents and $161 million available under its revolving credit facility.

Yankee holds in

In other earnings news, a trader said Yankee Candle Co. Inc.'s 8½% notes due 2015 were "not much changed at all, for the past two weeks," despite the Thursday earnings release.

He quoted the 8½% notes at 104½ bid, 104 5/8 offered and also saw the 10¼% notes due 2016 at 103½ bid, 104½ offered.

For the quarter, the South Deerfield, Mass.-based candle maker saw sales increase 2.2% to $144.1 million. Net loss was also better at $5.3 million, versus $8.5 million the year before.

DirectBuy weakens further

A trader said DirectBuy Holdings' 12% notes due 2017 were "a little lower" as the market tries to figure out what the outcome of a recent class-action settlement hearing would be.

He quoted the bonds at 45 bid, 47 offered.

Another trader placed the issue at 46½ bid, 47½ offered, down from 54 bid, 56 offered earlier in the week.

The Merrillville, Ind.-based company is currently dealing with a class-action lawsuit that alleges improper sales practices. The company had offered a settlement - two free months of membership - to the plaintiffs, but at least 39 state attorneys general and a consumer advocacy group have objected to it.

An arbitrage judge approved the settlement in December, but the case then moved up due to the objections. The hearing was held Tuesday and a final decision is expected within weeks.

Edison still busy

Edison International Inc.'s 7% notes due 2017 remained "kind of busy," a trader reported.

He called the notes up half a point around 81.

But another trader said the debt was unchanged at 80 bid, 80½ offered.

Edison is a Rosemead, Calif.-based power producer.

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