Distressed debt traders see week's run-up halt on Thursday; Rite Aid muted despite good sales

By Stephanie N. Rotondo

Portland, Ore., Sept. 1 - The run-up that distressed bonds had seen earlier in the week came to a halt on Thursday, as a trader said there was "not really any follow-through."

"It's the first day of the month," another trader said, explaining the lack of volume and price movement. He also noted that a holiday weekend was fast approaching.

Though Rite Aid Corp. was active in the previous session ahead of Thursday's same-store sales report, there was practically no action in the bonds after the report came out, traders said. What was trading did move up, but only modestly.

Dynegy Inc. was also on the quiet side, but firmer. The power producer's stock received an upgrade Thursday, as analysts lauded the company's restructuring efforts.

Market mainstay Caesars Entertainment Corp. saw its debt give back some gains, but traders noted that volume in that credit was even on the subdued side.

Rite Aid subdued on sales

A trader said it was "much ado about nothing" for Rite Aid bonds after the company released its monthly same-store sales report.

The trader said the 10 3/8% notes due 2016 moved up to 1053/4. Another market source pegged the 8 5/8% notes due 2015 at 91 bid, up half a point.

For the month of August, the Camp Hill, Pa.-based drugstore chain saw its sales improve, the third consecutive monthly gain.

Sales were up 2.5% to $2.4 billion.

August is also the end of the company's fiscal quarter. For the quarter, sales were up 1.8% to $6.25 billion.

Rite Aid said Hurricane Irene gave sales a boost.

Elsewhere in the world of retail, Bon-Ton Stores Inc.'s 10¼% notes due 2014 were "off a couple," a trader said, on the back of weak same-store sales.

He quoted the issue at 89 bid, 90 offered.

For the four weeks ending Aug. 27, Bon-Ton saw same-store sales decline 4.7%. Total sales dropped 5.4% to $177.1 million.

Dynegy up a bit

Dynegy's bonds were "up slightly," according to a trader, though he noted that he "didn't see a lot of activity in it."

He pegged the 8 3/8% notes due 2016 around 67 versus 66¾ previously.

Another market source saw the 7¾% notes due 2019 gain half a point to 611/4.

On Thursday, Macquarie Equities Research analyst Angie Storozynski upgraded Dynegy's stock to neutral from underweight. The upgrade was due to new management and their "highly aggressive" cost-cutting initiatives.

Dynegy is a Houston-based power producer.

Caesars slips

Caesars' 10% notes due 2018 lost a bit of ground in Thursday trading.

A trader said there were a "handful of trades" in the notes, which fell to 78 from 79.

Another market source deemed the issue 1½ points weaker at 77½ bid.

There was no fresh news out on the Las Vegas-based casino operator.

Paper sector mixed

A trader said that NewPage Corp.'s bonds were about unchanged on the day. He saw the Miamisburg, Ohio-based coated-paper manufacturer's 11 3/8% first-lien senior secured notes due 2014 at 86¾ bids, 87½ offered, which he said was unchanged to maybe a half-point better, on "decent volume."

He saw NewPage sector peer Catalyst Paper Corp.'s 11% senior secured notes due 2016 right around 69 bid, 71 offered. "There were some trades" in the Richmond, B.C.-based papermaker's notes. He said that Catalyst actually "has been inching up" from levels around 65 seen a few days ago, estimating that the bonds gained 1 point to 1½ points on Thursday, with "some trading in those."

At another desk, Catalyst's 7 3/8% notes due 2014 were seen having fallen by 1¼ points on the day, ending at 271/4.

Paul Deckelman contributed to this article

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.