Sears Holdings, Bon-Ton bonds hold strong; Clearwire modestly higher on new spectrum contract

By Stephanie N. Rotondo

Portland, Ore., March 15 - Distressed debt investors were temporarily distracted Thursday by the goings on of March Madness, a trader reported.

He noted that between the games and new issues flooding the high-yield arena, the distressed market was subdued.

Retailers were continuing to gain momentum, however. Sears Holdings Corp. was ending stronger, despite news the company was closing more stores in addition to the 120 closures announced in December.

Also better were Bon-Ton Stores Inc.'s bonds. The paper has been inching up recently, despite reporting a decline in quarterly profit last week. The gains have been attributed to the belief that cash flows are improving and that, as such, the company will be able to whittle away at its debt obligations before they mature in 2014.

Elsewhere, Clearwire Corp. was unchanged to higher on news the company had inked a capacity contract with Leap Wireless International Inc. Trading in the credit was thin, however.

And, Rotech Healthcare Inc.'s debt took a massive dive Thursday, following the release of dismal earnings. Still, the paper was among the day's most actively traded securities.

Sears rises despite closures

A trader said Sears Holdings' 6 5/8% notes due 2018 were "better" seeing the notes at 88 bid, 88½ offered.

Another source quoted the debt at 87¾ bid, 88¾ offered, up from 87 bid, 88 offered on Wednesday.

The Hoffman Estates, Ill.-based retailer said in a regulatory filing on Wednesday that it was shuttering another 62 stores, in addition to the 120 store closures announced in December. Sears will close 43 of its Hometown Stores, 10 of its hardware stores and all nine of its Great Indoors stores, according to a 10-K.

Bon-Ton gains continue

Bon-Ton's 10¼% notes due 2014 were firm again, a trader said.

"They continue to move up," he said, pegging the notes between 83½ and 84.

Another market source saw the issue trending upward as well, placing the notes around 84, down from 82 bid, 83 offered.

The York, Pa.-based retailer has seen some strength in its debt of late, as investors have reacted positively to the company's assertions that cash flow will improve in fiscal 2012, estimating it at $60 million to $70 million. The company has also managed to pare down its debt recently, which certainly helps.

"We believe the new CEO's focus will be on implanting strategic initiatives, improving operating performance an refinancing the senior notes, probably in early fiscal 2013," wrote Gimme Credit LLC analyst Evan Mann in an afternoon report. "While the possibility of a restructuring or distressed debt exchange cannot be ruled out, we believe the [notes] offer considerable upside for more risk tolerant investors."

Clearwire gets a minor boost

Bellevue, Wash.-based Clearwire got a boon Thursday, as the wireless network provider announced it had signed Leap wireless as its second wholesale customer - its first being majority stakeholder Sprint Nextel Corp.

Clearwire has been attempting to find new network partners in an effort to supplement its income. MetroPCS Communications Inc. is also said to be considering looking to Clearwire for spectrum.

On the news, a trader saw the 12% second-lien notes due 2017 inching up to 93 bid, 94 offered. However, he deemed the 12% first-lien notes due 2015 unchanged around 101.

Rotech takes a dive

A trader saw Rotech Healthcare's 10½% notes due 2018 fall to 63 bid, 64 offered, after starting the day at 67 bid, 68 offered - and trading Wednesday in the mid-70s, "so they're definitely down 11 or 12 points. They fell pretty hard."

He noted that the bonds had traded as high as 77 bid, 79 offered a week ago.

"There was not a lot of volume [recently], but that's where they had been in February - and here we are today."

A market source saw the Orlando, Fla.-based medical products and services provider's bonds drop to 64¼ bid, down several points, with volume topping $12 million, putting the bonds among the most actively traded high yield issues.

Another trader saw those unsecured bonds down at least 10 points on the session, and said that its secured 10¾% notes, which had recently been above par, were trading Thursday at 97 bid, 98 offered, calling it at least a 5-point drop.

He said that the company had reported poor fourth-quarter numbers late in the day Wednesday, battering its bonds down several points at that time, and continuing the carnage on Thursday.

The bonds moved lower in tandem with the company's over-the-counter-traded shares, which plunged by 41 cents, or 24.12%, to end at $1.29. Volume of 362,000 shares was more than seven times the norm.

The stock swooned after the company posted a loss of 33 cents per share in the fourth quarter ended Dec. 31 - more than double the 15 cents per share loss seen in the year-earlier quarter, and more than four times the 8 cents per share of red ink that Wall Street had been looking for.

Market steady, but subdued

In the rest of the distressed space, a trader said there was "not a ton of activity" in Clear Channel Communications Inc.'s debt, but called the 9% notes due 2021 better around 911/2.

The trader also saw Hawker Beechcraft Acquisition Co. Inc.'s 8½% notes due 2015 rising a bit to 14 bid, 15 offered. Another market source pegged the 8 7/8% notes due 2015 at 14 bid, 15 offered as well.

Paul Deckelman contributed to this article

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