Caesars, NewPage stay strong; analysts expect hurricane to help Rite Aid; Sprint gains ground

By Stephanie N. Rotondo

Portland, Ore., Aug. 31 - It was "another up day" for distressed debt, a trader said Wednesday.

"Bonds are flying again," he said. "Everybody was grasping for everything they could get their hands on."

He added that it was one of those "high tide lifting all boats" scenarios.

"There's no new issuance to slow secondary down," he said. "So it will be more of the same until something makes it turn."

"It could be a combination of month-end and the equities have been pretty strong too," said another trader.

The generally positive tone of the market has helped mainstay names like Caesars Entertainment Corp. and NewPage Corp. head into higher territory, despite a lack of news to act as catalyst. Even Rite Aid Corp. joined the party as its bonds moved up during the session as well.

Sprint Nextel Corp. debt saw "pretty good trading," according to a trader. The bonds moved up a good bit as the Department of Justice said it was aiming to block a merger between AT&T Inc. and T-Mobile USA.

In the financial realm, Lehman Brothers Holdings Inc.'s paper gained about a point following the approval of the company's disclosure statement on Tuesday. Other financials such as Capmark Financial Group Inc. and Ambac Financial Group Inc. were also better.

On the negative side, a trader said Dex Media Inc.'s bonds fell about 3 points on the day. He speculated the declines were due to an upcoming coupon payment.

Caesars, NewPage climb higher

Caesars Entertainment's 10% notes due 2018 had "a ton of trades" on Wednesday, according to a trader.

He pegged the issue around 79, up from 77.

Another trader also placed the notes around the 79 mark, deeming that "up a couple."

In other market mainstays, NewPage's 11 3/8% first-lien notes due 2014 continued to head upward.

A trader said the issue was up "almost a point" to end around the 88 mark. Another trader also placed them at that level.

A third trader quoted the notes at 87½ bid, 88 offered.

Rite Aid improves

Rite Aid bonds were trading "a little better," according to a trader.

He saw the 9½% notes due 2017 at 88 and the 8 5/8% notes due 2015 around 91.

A second trader said the 8 5/8% notes were up modestly, trading with a 91 handle.

Credit Suisse analysts are expecting that Rite Aid's monthly same-store sales report - which will come out Thursday - will be higher due in part to Hurricane Irene.

"We believe the recent improvement in front-end sales trends continued in August, especially given the impact of Hurricane Irene," analysts Edward J. Kelly and Rajat Suri said in an article posted on Barron's.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Sprint buoyed by DOJ suit

Sprint Nextel paper gained ground as the Department of Justice filed a civil antitrust lawsuit against rival AT&T in an effort to block its merger with T-Mobile.

A trader said the 8¾% notes due 2032 saw "pretty good trading," closing nearly 3 points higher at 103.

Another market source pegged the 6% notes due 2016 at 97 bid, a gain of about 2½ points on the day.

Sprint, based in Overland Park, Kan., has been the leading objector to the AT&T/T-Mobile merger, which would combine the second- and fourth-largest wireless carriers. The DOJ suit alleges that the combination would result in less competition and drive up prices.

"You could say that it is anti-competitive, but I really don't know," said one trader. "Prices are already being cut right to the bone."

Lehman, financials gain

A trader said Lehman Brothers' bonds traded up a point to close around "251/2-ish."

All of the defunct investment firm's bonds tend to trade in line with one another.

The price movement came after a judge approved the company's disclosure statement on Tuesday.

"It's been a long one," the trader said of the bankruptcy case, which began on Sept. 15, 2008.

With approval now secured, Lehman's creditors now are set to vote on the plan, which would pay out an estimated $65 billion - about one-fifth the total amount actually owed.

Among other financials, Capmark's paper - which also tends to trade on top of one another - ended a point better at 56½ bid, 57 offered.

Also, Ambac Financial's subordinated paper, such as the 9½% notes due 2021, inched up a point to "14 and change," according to a trader.

Dex the day's loser

Dex Media's 12% PIK notes due 2017 were one of the day's few losers, dropping 3 points to around 36, according to a trader.

While the rest of the market was largely higher, the trader opined that the losses were based on concerns about an upcoming coupon in September.

"I think people are wondering if they are not going to be able to pay it in cash," he said.

Dex is a Cary, N.C.-based phonebook publisher.

Broad market strong

Among other distressed issues, Hovnanian Enterprises Inc.'s 10 5/8% notes due 2016 saw "a lot of trades," a trader said.

He called the notes up "about a point" at 891/2.

"That's very solid activity for them," he said.

Another trader said OPTI Canada Inc.'s subordinated paper - the 7 7/8% and 8¼% notes due 2014 - drifted up slightly to close around 63.

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