Harry & David files for bankruptcy, bonds fall; General Maritime debt continues to come back

By Stephanie N. Rotondo

Portland, Ore., March 28 - The distressed debt market saw unusually light volume, even for a Monday, traders reported.

"It was a very, very light volume day," a trader said, with another noting that total secondary trading volume was less than $900 million.

Harry & David Holdings Inc. had the big news of the day, as the company announced it had filed for bankruptcy. Though the move was largely expected - the market had been expecting some type of restructuring ever since the company released its most recent quarterly report - the bonds traded down about 3 points.

Meanwhile, General Maritime Corp. debt continued to rally. A trader said the initial sell-off earlier this month might have been "overstated."

Harry & David dip on filing

With just days left to go in its 30-day grace period - granted due to a missed coupon payment on March 1 - Medford, Ore.-based Harry & David Holdings filed for Chapter 11 protections.

As a result, traders saw the company's 9% notes due 2013 falling about 3 points to the 22½ bid, 23½ offered level.

One trader, however, opined that the bonds "might trade back up a little bit" once the news has been digested.

The specialty foods retailer warned earlier this year that it might have to file for bankruptcy, as earnings declined amid the financial crisis and never fully rebounded.

In a press release announcing the filing, Harry & David said it had reached an agreement with investors holding 81% of its senior notes. Under the "pre-arranged" plan, the company will exchange some of its senior notes for equity. The holders who have agreed to the exchange have also agreed to backstop a $55 million rights offering.

Other noteholders and creditors will be allowed to participate and, if successful, the proposed plan would result in the full conversion of the $198 million in senior notes, "as well as a significant amount of the company's pre-petition general unsecured obligations."

Harry & David is seeking approval on a $100 million first-lien debtor-in-possession revolving credit facility from its existing secured lenders, as well as a $55 million second-lien DIP from its senior noteholders.

The company has also secured $100 million in exit financing.

GenMar still rallying

General Maritime's debt has made a heady comeback since dropping nearly 20-points earlier this month.

On Monday, a trader called the 12% notes due 2017 up "another 3 and change" at 953/4, with $20 million to $25 million trading.

"That's pretty good volume for them," he said. "They've come all the way back."

A second trader pegged the notes at 95½ bid, 96½ offered, "up a good bit."

"They are right back to where they started, probably even higher," the second trader said.

The bonds had initially traded down when the crude oil and products tanker company said it was in talks with lenders and other creditors on a possible restructuring and that it would therefore delay filing its 10-K.

GenMar, as it is commonly referred to, previously said it would file its quarterly report by March 31.

"I think the initial fear was overstated," the first trader said, explaining the bonds' several-session-long gains.

Kodak steady on ruling

A trader said that Eastman Kodak Co.'s 7¼% notes due 2013 remained around the same 99½ bid, par level to which they had moved on Friday in anticipation of what turned out to be a favorable ruling from federal regulators keeping Rochester, N.Y.-based photographic and imaging products maker Kodak's patent-infringement lawsuit against the makers of the popular Blackberry and iPhone devices alive.

A second trader saw Kodak at 99½ bid, 100½ offered. "They were really unchanged, with light volume in the name, despite the news from Friday."

However, another market source, who pegged the bonds at 99 5/8 bid, said they were up 7/8 point on the day.

Broad market mixed

Elsewhere in distressed debt land, OPTI Canada Inc.'s 7 7/8% and 8¼% notes due 2014 were "quoted lower" at 51 bid, 52 offered, a trader said. He noted, however, that there were not a lot of trades in the name.

Another trader said DirectBuy Holdings Inc.'s 12% notes due 2017 closed unchanged at 77 bid, 78 offered, on "less volume than we've seen in the last couple of sessions."

He added that the bonds remained volatile, hitting an intra-day low of 73 bid, 74 offered and a high of 79 bid, 80 offered.

At a third desk, a trader called Clear Channel Communications Inc.'s 11% notes due 2016 half a point softer at 93.

Caesars Entertainment Corp.'s 10% notes due 2018 were also off half a point around 90.

Paul Deckelman contributed to this article

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