Supervalu rallies as Cerberus talks go on; Clear Channel rises despite Moody's doomsday report

By Stephanie N. Rotondo

Phoenix, Dec. 3 - The first trading session of December was lackluster in terms of volume, but still generally firm, distressed debt traders reported Monday.

Supervalu Inc. paper was rallying on news that Cerberus Capital Management LP was still in talks with the grocery store operator, despite a financing snag that was reported last week. The private equity firm has said it still wants the company, even if only a piece of it.

Meanwhile, Clear Channel Communications Inc.'s debt headed higher as well. The gains came as Moody's Investors Service released a report on the company, giving three different scenarios in regard to how the multimedia giant could handle a massive looming maturity in 2016.

On the other hand, Verso Paper Corp. and NewPage Corp. saw their bonds sliding, albeit in thin trading. Verso was dealt another downgrade during the session and NewPage was reacting to a monthly operating report that was released late Friday.

Supervalu rises on Cerberus chatter

Cerberus Capital is not yet ready to give up its hopes of purchasing Supervalu, which gave the struggling company's debt a boost on Monday.

"They've been rallying back," a trader said, after declining in the previous week on news that Cerberus was having trouble lining up financing.

The trader called the bonds up anywhere from 2 to 3 points on the day, seeing the 7¾% notes due 2026 at 581/2, the 8% notes due 2016 at 941/2, the 7¼% notes due 2014 at 97½ and the 7.45% notes due 2029 at 59.

Another trader pegged the 7¼% notes at 97, which he said was "up a couple points."

A third market source called the 8% notes up nearly 3 points at 94¾ bid.

Last week, it was reported that Cerberus had hit a snag as it spoke with lenders to line up financing for a total buyout of Supervalu. The deal was talked around $5 billion. But lenders were weary of providing so much cash for the Eden Prairie, Minn.-based company, given its shrinking revenues.

However, on Monday, Cerberus was reportedly keeping negotiations with both lenders and Supervalu going, shifting its focus to a buyout of the Albertsons stores.

Other firms have expressed interest in the other pieces of Supervalu, which includes chains such as Jewel and Osco.

Supervalu is also said to have another option, as it has created a turnaround plan that could keep the company in one piece.

Clear Channel gains

Clear Channel Communications' bonds moved into higher territory Monday.

One trader saw the 11% notes due 2016 putting on a point to end around 733/4.

Another trader called the 10¾% notes due 2016 a point better around 74.

The price increase came as Moody's published a report on the San Antonio-based multimedia company, in which is offered three scenarios as to how Clear Channel could deal with an over $10 billion maturity coming in 2016.

Until 2016, Clear Channel's maturity profile is "manageable," according to Scott Van den Bosch's report. The vice president and senior analyst said that even in a "base case" scenario, "ability to avoid restructuring will be challenging as debt levels will exceed our expected asset value.

"The possibility of a restructuring or a distressed exchange remains high," Van den Bosch wrote. "Efforts to avoid a restructuring and refinance or extend its debt load will likely depend on the receptivity of the financial markets and moderate underlying interest rates."

But even if the company is able to achieve the "upside scenario," problems remain.

"Even if the company is able to refinance or extend the maturity of its balance sheet, the company would be very poorly positioned going forward to withstand another economic downturn without additional equity, a debt for equity exchange, or a material deleveraging asset sale," Van den Bosch wrote.

Paper companies fall

Papermakers Verso Paper and NewPage were weakening Monday and both were driven by news.

First off, Verso's 11 3/8% notes due 2016 dropped a deuce to 311/2, according to a trader. The decline came as Moody's downgraded the Memphis, Tenn.-based company to B3 from B2.

Standard & Poor's had cut its ratings on Verso the week before.

Secondly, NewPage was drifting following the company's monthly operating report, which was filed late Friday.

"NewPage got beat up," a trader said, seeing the 11 3/8% notes due 2014 fall 4 to 5 points to 441/2.

Another trader said the paper was trading around 45. The bonds had been trading around 48 on Friday, though he noted there was a late-day print at 441/2, just after the monthly operating report was filed. In October to

The Miamisburg, Ohio-based company managed to narrow its net loss $11.17 million from $29.51 million in September. However, its cash burn was quite large.

Cash and equivalents were at $8.53 million as of Oct. 31, down from $15.20 million at the end of September.

OSG weakens

Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 were "down a little bit," a trader said, trading in a 40 to 40½ context.

That compared to 40½ bid, 41 offered on Friday.

Another trader also placed the debt at 401/2.

There was no fresh news out on the bankrupt New York-based oil tanker company.

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