Dex One bonds pop on SuperMedia merger news; ATP Oil debt active again, steady; Best Buy sinks

By Stephanie N. Rotondo

Phoenix, Aug. 21 - With the exception of an outlier or two, the distressed debt market was in a holding pattern on Tuesday.

"There wasn't a lot of movement," a trader said. "Volume was a hair low, but it didn't seem like a quiet day."

Though most of the market was only up or down a touch, Dex One Corp.'s debt jumped on news the company intended to merge with rival SuperMedia Inc. The bonds gained as much as 10 points on the day.

Meanwhile, ATP Oil & Gas Corp. continued to be an actively traded name, but the bonds were only barely moved. One trader called the notes unchanged, while another said the paper was going out at its lows of the day.

Dex pops on merger

Cary, N.C.-based phonebook publisher Dex One will merge with rival SuperMedia in a deal valued at $100 million.

The goal of the combination is to cut costs and save money in a declining industry.

The news sent Dex's 12% PIK notes due 2017 soaring, traders reported.

One trader said the issue was "up 10 points from the last trade a month ago" at 381/2.

Another trader said, "The paper was up a good bit, definitely pretty strong." He saw the notes move up to the high-30s from the mid-20s.

SuperMedia's term loan also got a sizable lift on Tuesday.

The term loan was quoted at 68½ bid, 70½ offered, up from 60 bid, 62 offered, the trader said.

Dex One's subsidiaries Dex West, Dex East and R.H. Donnelley Inc. also saw improvements in secondary levels with the merger news, other traders remarked.

The Dex West term loan was quoted by one trader at 64 bid, 66 offered, up from around 61 bid, 63 offered, by a second trader at 63 bid, 65 offered, by a third trader at 64 bid, and by a fourth trader at 63 bid, 64 offered, up from 60 bid, 62 offered.

The Dex East term loan was seen by a trader at 61¼ bid, 63¼ offered, up from 56 bid, 58 offered, while a different trader was quoting it at 61 bid, and a third trader was quoting it at 60 bid, 62 offered, up from 55½ bid, 57½ offered.

And, the R.H. Donnelley term loan was quoted by two traders at 57 bid, 59 offered, up from 51 bid, 53 offered, and by a third trader at 54 bid, 56 offered, up from 51 bid, 53 offered.

Under the terms of the merger, shareholders of both companies will have their shares exchanged for stock in a new company, dubbed Dex Media. Dex shareholders will receive about 60% of the new equity, with SuperMedia equity holders getting the remaining 40%.

By combining the two companies, the new organization expects to realize annual cost savings of $150 million to $175 million by 2015, due in part to job cuts.

The deal is expected to close in the fourth quarter.

The two entities have a shared history: In 2009, both filed for Chapter 11 protections, exiting in 2010. But times have remained tough, as advertising dollars drift away from Yellow Pages to the internet. In the first half of this year, SuperMedia alone has seen revenues decline 17%, while Dex has suffered a 12% dip.

SuperMedia is based in Dallas.

ATP busy, holding in

ATP Oil & Gas' 11 7/8% notes due 2015 continued to be active Tuesday, but generally held in.

One trader said the issue was unchanged at 311/4.

But another trader said the issue was "probably going out a little weaker, at the lows of the day."

He said paper was offered at 31.

Another source pointed out that volume was much less than Monday's session, with only about $29 million bonds changing hands.

Volume on Monday was closer to $60 million.

The Houston-based offshore oil exploration company said late Friday that it had finally filed for bankruptcy, something the market had been waiting for at least a week. The company has struggled to hit production targets, which ATP blamed on the April 20, 2010 Deepwater Horizon oil rig explosion and the ensuing moratorium on drilling in the Gulf of Mexico.

ATP had priced the 11 7/8% notes on April 19, 2010 at par. Following the disaster, the bonds lost half or more of their value.

Best Buy facing tough terrain

A trader said Best Buy Co. Inc. was "a name that is falling into our universe," citing news that the company had suspended its profit outlook and common stock buybacks.

The trader said the company's bonds were quoted down a fair bit initially, though the debt managed to recoup a little bit of the losses by the end of business.

He pegged the 5½% notes due 2021 at around 90 at the close.

Like many retailers, Best Buy has struggled during the economic downturn. As consumers move toward online or discount shopping, the results have not been favorable.

For the quarter ending Aug. 4, net profit was $12 million, or 4 cents per share, versus $128 million, or 34 cents per share, the year before.

Revenues dropped 3% to $10.55 billion.

Furthermore, a recent probe into former chief executive Brian Dunn left the company without a top dog when Dunn left the company.

Mike Mikan is acting as the interim CEO. On Monday, Hubert Joly, a veteran of the travel and hospitality industry, was named the new CEO.

Broad market mixed

Among other distressed names, a trader said Travelport LLC's 9% notes due 2016 were up 3½ points at 72, while the 11 7/8% notes due 2016 gained "a couple" to end around 39.

Another trader said a Bid-Wanted-In-Competition (BWIC) on about $10 million of Travelport's holdco A loan surfaced in the morning, with market players being asked to get their bids in by 11 a.m. ET on Wednesday.

The A loan was being quoted between 30 bid, 40 offered, the trader added.

A trader saw Supervalu Inc.'s 7.45% notes due 2029 falling a point to 581/2.

Verso Paper Corp.'s 11 3/8% notes due 2016 closed up a point at 541/4.

Clear Channel Communications Inc.'s 11% notes due 2016 were also higher, rising half a point to 623/4.

Sara Rosenberg contributed to this article

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