Distressed debt gets sidelined by new issues; Harry & David gets midweek boost; Kodak holds on

By Stephanie N. Rotondo

Portland, Ore., Feb. 9 - The distressed market saw new issue focus ramp up again on Wednesday, leaving little room for distressed debt plays, traders reported.

"It was a huge day," a trader said, seeing over $2 billion of trading in the secondary space. Most of the trading, however, was "off the back of the plethora of new issues."

Though the market was generally weaker, Harry & David Holdings Inc. got a boost late in the day, ending up "significantly," a trader said. The company announced its quarterly earnings on Tuesday.

Meanwhile, Eastman Kodak Co. bonds were holding their ground. A trader said trading in the name was a bit heavier than usual.

As investors prepared for a new issue, Clear Channel Communications Inc. paper got weighed down. One market source noted that by pushing the levels downward, investors might get better pricing on the proposed new issue.

Harry & David get boost

Harry & David Holdings' debt was lifted by the end of the midweek trading session, according to traders.

One trader said he saw the 9% notes due 2013 opening around 361/2, but by the end of business, they were closing near 401/2.

"So that's up significantly," he said.

Another trader also said the bonds were trading early on in the mid-30s and closed around 40.

The gains came after the company reported its second fiscal quarter results on Tuesday. For the 13 weeks ending Dec. 25, net sales dipped 1.8% to $262.1 million from $267 million the year before.

Net income was $13.8 million, versus $31.7 million in the same quarter of fiscal 2010.

As of Dec. 25, the Medford, Ore.-based specialty foods retailer had a cash balance of $66.9 million and accounts payable of $57.9 million.

As previously reported, the second quarter results were such that the company fell out of compliance with its revolving credit facility.

"Based on the company's current working capital and anticipated working capital requirements, the company will not be able to finance continuing operations, including servicing its payment obligations under its senior notes, without securing new capital and restructuring its obligations," Harry & David said in the earnings release.

The company said it would hold talks with creditors "in an effort to recapitalize."

Kodak holding its ground

A trader saw Eastman Kodak paper trading a bit more than usual, with "over $10 million" changing hands.

Still, the 7¼% notes due 2013 were "right where it was, maybe up an eighth," ending around 97.

Other sources also placed the notes around the 97 mark and one said that compared with 96¼ bid, 96¾ offered on Tuesday.

The Rochester, N.Y.-based company's debt has been hanging around that level in recent sessions. The bonds had previously come under fire after the company released disappointing quarterly results. Since then, however, the notes have climbed back up and Kodak's management has attempted to assuage investors by claiming the company will be profitable by 2012.

Clear Channel pressured

Investors were preparing for Clear Channel Communications' new issue, which resulted in weakness in some of the bonds, a trader said.

He said the 11% notes due 2016 were "pretty active" and "down a couple points" at 96 bid, 96½ offered.

He noted that there was likely some jockeying for position going on as the San Antonio-based multimedia company readied to sell $750 million of senior secured notes due 2021 via a private placement. By pushing the existing debt lower, he said, investors could also "get more favorable pricing" on the new issue.

At another desk, a trader said that Clear Channel bonds "have been bouncing around - but they gave up some of their points" racked up since the company announced the new issue.

He said the company's 10¾% notes due 2016 were going home "down a bit" after trading in a range of around 96-97. He said the bonds had "touched par" on Tuesday, but were down 3 points to around 97¼ bid Wednesday on "a lot of trading - there's a lot of trading when they're down a lot of points."

He saw Clear Channel's 11% PIK toggle notes ending at 96 bid, 96½ offered, which he said was "the same thing - down 2½ points, on a lotta volume."

A market source at another desk saw the 10 3/4s down 3¼ points on the day, pegging the bonds at 96¾ bid, while also seeing the 11s down 2½ points at 96.

Proceeds from the notes offering will be used to repay debt. Fitch Ratings has placed a CCC/RR4 rating on the proposed notes.

OPTI unchanged pre-earnings

OPTI Canada Inc.'s 8¼% notes due 2014 "were holding their own," a trader said, seeing those bonds at bid levels between 53 and 53½ with "some trading," but unchanged levels.

However, with the troubled Calgary, Alta.-based oil-sands energy company scheduled to report its fourth-quarter and year-end financial results on Thursday, followed by a conference call with company executives, OPTI's already beaten-down equity fell sharply again on the Toronto Stock Exchange; its shares lost 4 cents (Canadian), or 10.61%, to end at 30 cents per share (Canadian).

Nexen, Inc., which owns 65% of the Long Lake, Alta. joint-venture project that OPTI owns the remaining 35% of, has also scheduled a Thursday conference call to give an operations update on the project, which has been slower than expected in ramping up to its target levels for converting bitumen found in the oil sands into usable crude oil.

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.