Kodak draws on credit facility, bonds plummet; Rite Aid debt mixed, active; Caesars bonds fall

By Stephanie N. Rotondo

Portland, Ore., Sept. 26 - Distressed debt got a slow start to the week Monday and a trader said that it "still seems like things are weak."

The notable mover of the day was Eastman Kodak Co., whose bonds fell as much as 25 points on the day on news the company had drawn down its credit facility. By itself, the draw might have been a non-event, but many have been questioning Kodak's attempts to turn itself around and the drawdown only heightened those concerns.

Meanwhile, Rite Aid Corp. was mixed in active trading. The company released its second fiscal quarter results last week, showing an improved quarter and better guidance.

Also falling were Caesars Entertainment Corp.'s bonds, though there was no fresh news out to explain the losses.

Credit draw hurts Kodak

A trader said Eastman Kodak's bonds "got slaughtered" Monday after the company said it had drawn $160 million from its revolving credit facility.

He called the 9¾% notes due 2018 down about 8 points at 74 bid, 75 offered, while the 7¼% notes due 2013 lost "20-some points" to end in the low- to mid-60s.

Another trader placed the 9¾% notes at 74 bid, 76 offered, down 5 to 6 points.

"They were wrapped around 80," he said.

The 7¼% notes meantime dropped "like 25 points" to end around 62.

A third market source deemed the 7¼% notes down 23 points at 61½ bid.

The 7% convertible notes due 2017 were also "down a lot," a trader said.

He placed the issue around 47.5, down from levels near 60 about a week ago, he said.

"I've seen this name for years now," said another market source that noted that he did not follow the name closely. He remarked that the company has been trying to turn itself around and "enter the digital world" for the last decade or so.

"It just doesn't seem to work," he said.

Around midday, another trader saw the converts trading at 48 versus a stock price of $1.80.

Kodak's stock fell $0.64, or 26.89%, to $1.74.

Kodak is currently working on licensing out its patent in order to increase cash flows. In an e-mail sent to Bloomberg, a company spokesperson attempted to make light of the credit facility draw.

The revolver "has been a part of Kodak's cash- management tool kit for quite some time," wrote Christopher Veronda, a spokesman for Kodak, in an e-mailed statement. "The purpose of the revolving credit facility is to bridge timing differences between cash outflows and inflows, which is a common practice at many corporations."

Kodak is based in Rochester, N.Y.

Rite Aid mixed

Rite Aid paper was mixed during the first trading day of the week, according to traders.

One trader said the 9½% notes due 2017 were trading busily, slipping a point to finish around 84.

Another market source called the 8 5/8% notes due 2018 up nearly a point to 89¼ bid.

On Thursday, the Camp Hill, Pa.-based drugstore chain reported a second fiscal quarter net loss of $92.3 million, or $0.11 per share. Analysts, on average, were expecting a loss of $0.18 per share.

A year ago, net loss was $197 million, $0.23 per diluted share.

Revenues were $6.3 billion. Adjusted EBITDA was $184.3 million, compared with $181.2 million the year before.

For the 13-week period, same-store sales gained 2.2% year over year. That consisted of a 2.5% increase in front-end sales and a 2% gain in pharmacy sales.

Rite Aid also updated its guidance for fiscal 2012. In its earnings release, the company said it was expecting sales between $25.8 billion and $26.1 billion. Net loss was estimated at $345 million to $495 million, down from $370 million and $560 million previously.

Caesars bonds slip

Traders said Caesars' 10% notes due 2018 were continuing to be active and weaker amid an overall softening marketplace.

A trader pegged the issue at 623/4, down 1½ points.

Another trader quoted the notes at 62 bid, 63 offered.

"Out of the gate they were trading around 65," he said. "Then they just sort of wore down as the ay went on."

There was no fresh news out on the Las Vegas-based casino operator, but discretionary sectors such as gaming tend to get hit when times are tough. Additionally, the 10% notes are a liquid issue, thus its consistently top traded status.

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