SuperValu topical; American Stores-linked debt strengthens; Best Buy unfazed by guidance

By Stephanie N. Rotondo

Phoenix, Jan. 11 - The bond market was "moving up" on Friday, according to a trader, and that dribbled into the distressed debt space.

Still, the most topical names of the day were not necessarily benefitting from the generally positive tone.

SuperValu Inc. continued to be active after Thursday's news the company had reached a deal with an investor group led by Cerberus Capital Management LP to sell five of its chains for $3.3 billion. The bonds had risen dramatically on the news in the previous session but were coming off the top a bit on Friday.

However, a trader said there was "something going on" with the company's American Stores Co.-linked securities, as those issues were "ripping."

Meanwhile, Best Buy Co. was "much ado about nothing," according to a trader, even as the company said holiday sales were decent. The company also updated its free cash flow guidance to the downside.

And, ATP Oil & Gas Corp. was dubbed the "big gorilla" of the week, as the company's bonds have fallen deeper into single-digit territory.

SuperValu stays on top

Some of SuperValu's debt was coming off of Thursday's highs a tad, following the run up tied to news about a Cerberus Capital-led group buying five chains from the struggling grocery store operator.

A trader said the 8% notes due 2016 were "at the top of the heap again," with at least $25 million in trades. He called the issue unchanged at 993/4. He also saw the 8% notes due 2031 at 661/4, down nearly a point.

The trader noted that the 8% notes due 2026 - an American Stores-linked issue - gained about 6 points to end at par 3/4.

Another trader remarked that 'something is going on with American Stores' bonds. I don't know what's going on with that particular flavor, but they're ripping."

For instance, the 2026 maturity opened at 97, according to the trader. Then it traded up to par and then up to 108.

The paper had closed Thursday at 94½ bid, 95 offered.

The second trader meantime also pegged the 2016 securities at 99¼ bid, 99¾ offered, unchanged.

On Thursday, SuperValu said that the Cerberus group would buy up five of its chains. In addition, Cerberus will lead a tender offer for up to 30% of the remaining company's stock at $4.00 per share.

Best Buy closes mixed

Among other struggling retail outlets, Best Buy announced on Friday that its holiday sales had helped it stem a nearly year-long sales decline.

However, the company also reduced its free cash flow guidance for the year due to inventory being paid for sooner than later.

But a trader said the news was "much ado about nothing," adding that there was "limited trading" in the company's debt.

The trader deemed the 7¾% notes due 2013 down a touch at 101 bid, 102 offered versus 101½ bid, 102¼ offered the day before. The 5½% notes due 2021 were up, however, at 891/2.

"I saw some people looking for those bonds today," he said of the latter issue.

For the nine weeks ended Jan. 5, Best Buy's same-store sales were unchanged, according to a statement released by the company.

As for the new cash flow guidance, the company is expecting to see flows of about $500 million, down from previous guidance of $850 million to $1.05 billion.

ATP week's 'big gorilla'

ATP Oil & Gas' 11 7/8% notes due 2015 won the "big gorilla" award for the week, at least in one trader's eyes.

The trader said the bonds fell deeper into single-digit territory on Friday, slipping a half-point to 7¾ bid, 8 offered.

Another trader said the debt "continued to feel a little bit on the heavier side," placing the notes around 8.

The first trader said he had heard the company was being required by the bankruptcy court overseeing its case to put up another bond in order to satisfy the Environmental Protection Agency.

Earlier in the week, the oil and gas exploration company sought court approval to auction off certain shelf drilling leases, as required by its debtor-in-possession lenders.

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