DirectBuy bonds fall on nixed settlement; NewPage holds its ground; Dex One on a losing streak

By Stephanie N. Rotondo

Portland, Ore., May 16 - Distressed debt continued to lose the spotlight to new issues, traders reported Monday.

However, those credits with news out did get a piece of the action.

DirectBuy Holdings Inc., for example, saw its bonds losing ground late in the day. The losses were pinned on the release of its class-action lawsuit settlement hearing ruling.

While there was no fresh news out on NewPage Corp., the papermaker's debt continued to actively trade. The bonds have been active - and mostly weaker - since the company's Thursday's earnings release.

But there was no news out to explain why Dex One Corp.'s notes continued to fall. The paper has been on the decline for some time now and one trader opined that it might be due to the company's quarterly results, which were posted on May 2.

DirectBuy settlement nixed

DirectBuy Holdings' 12% notes due 2017 traded down into the low-40s late Monday on news the company's class-action settlement had been rejected.

A trader quoted the notes at 42 bid, 43 offered, while another pegged the bonds at 42 bid, 44 offered.

The Merrillville, Ind.-based home improvement club has been dealing with a class-action lawsuit that alleges improper sales practices. Last week, a U.S. District Court judge in Connecticut held a hearing to approve a settlement, which faced objections from 39 state attorneys general and a consumer advocacy group.

Under the terms of the settlement, affected customers would receive a free two-month membership.

In the court's ruling, the settlement was deemed "meager."

"The court cannot conclude that this settlement falls within the range of reasonableness," the decision said.

NewPage still active, steady

NewPage's debt continued to be active, but managed to hold its ground after two-consecutive sessions of declines resulted in a combined loss of about 18 to 20 points.

A trader placed the 10% notes due 2012 around 40, the floating-rate notes due 2012 around 39 and the 11 3/8% notes due 2014 around 961/2.

Another trader saw the 10% notes at 40½ and the 11 3/8% notes at 961/2.

"So they're firming a little," he said.

In its Thursday earning release, the Miamisburg, Ohio-based coated papermaker 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.

Though the numbers were in some ways better than 2010 comparables, they were well below analysts' estimates and weak cash flow called the company's refinancing options into question.

NewPage must repurchase or refinance the 10% notes by 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.

Dex debt suffering

Cary, N.C.-based phonebook publisher Dex One's 12% notes due 2017 continued to lose ground, though traders were at a loss to explain why.

"I've been trying to find out myself," said one distressed trader. "That one's definitely dribbling down."

He saw the paper close around 50, down "another 2 [points]."

Another trader quoted the notes at 49½ bid, 50 offered.

"I haven't seen anything specific," the second trader said. He remarked that the company had put earnings out earlier in the month and added that "the bonds have been drifting down ever since."

For the first quarter, Dex posted net income of $55 million, on net revenue of $391 million.

Adjusted EBITDA was $175 million and free cash flow was $105 million.

Broad market mixed

Also in the distressed arena, a trader said Sprint Nextel Corp.'s 6% notes du 2016 "didn't look all that different" at 101½ bid, 101¾ offered.

The trader also saw Edison international Inc.'s 7% notes due 2017 moving up to 84 bid, 85 offered from 81 bid, 82 offered previously.

At another shop, a trader said Lehman Brothers Holdings Inc.'s bonds saw "quite a bit of activity." However, he noted that the debt was unchanged at 25½ bid, 26 offered.

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