PMI group bonds falter as main unit seized by regulators; Rite Aid paper tops day's active list

By Stephanie N. Rotondo

Portland, Ore., Aug. 22 - Distressed debt was mostly lower on Monday trading, though overall, a trader said the session was "lackluster."

PMI Group Inc.'s debt sank a few points on news that state regulators had taken over the company's main subsidiary. The company is now barred from writing new policies or servicing its debt.

In the discretionary space, Rite Aid Corp. was trading actively and about unchanged. Caesars Entertainment Corp. was also busy, but a bit weaker.

There was no fresh news out on either credit to drive the action.

PMI loses business, value

PMI Group was placed under governmental supervision on Monday and barred from writing new mortgage insurance policies.

A trader said there was "not really volume" in the bonds after the news, though they were being quoted lower.

There was a 20 bid for the 6% notes due 2016, he said. The 6 5/8% notes due 2036 meantime were offered at 34 and then at 30. That compared to 32 bid, 33 offered last week.

Another trader said there were a "few trades" in the 4½% convertible notes due 2020 at 22 bid, 23 offered. He called that "down a few."

The Arizona Department of Insurance stepped in after the Walnut Creek, Calif.-based company's main subsidiary - which is based in Phoenix - failed to raise enough capital to meet new state regulations. Earlier in the month, the mortgage insurer said it was more than $320 million short of requirements.

Depending on how regulators proceed, PMI could face the acceleration of up to $735 million in debt. The company has already said that it does not have the funds to pay those debts.

Rite Aid active, unchanged

A trader said Rite Aid debt topped the day's most actively traded list "for whatever reason."

"I haven't seen them at the top of the list for awhile," he noted.

He said the 8 5/8% notes due 2015 were "quite active," but largely unchanged at 88 bid, 88¾ offered.

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

Caesars' debt falls

There was also no news out on Caesars Entertainment, but the bonds were trading busily anyway.

Surprisingly, the typically active 10% notes due 2018 were "a bit muted," a trader said, calling the paper down 2 to 2½ points from opening levels at 74 bid, 74½ offered.

However, he said the 11¼% notes due 2017 were more active, trading around 1041/2.

"All the gaming guys were a bit weaker," he said.

Another market source placed the 10% notes at 75 bid, down nearly 3 points on the day.

Caesars is a Las Vegas-based casino operator.

NewPage steady, McClatchy up

A trader said there was "not much of a change" in Miamisburg, Ohio-based papermaker NewPage Corp.'s 11 3/8% notes due 2014.

He pegged the issue at 81 bid, 82 offered.

The 10% notes due 2012 were meantime "not very active" at 12½ bid.

Elsewhere, McClatchy Co.'s 11½% notes due 2017 were "quite active" and slightly better, trading between 95¾ and 973/4, a trader said.

McClatchy is a Sacramento-based media company.

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