Bon-Ton reports narrower loss, bonds pop; Hovnanian debt unfazed by improved quarterly results

By Stephanie N. Rotondo

Portland, Ore., March 7 - Some distressed bonds issues were gaining momentum Wednesday, even as the market remained focused on new high yield issues.

"It was a quiet day waiting for [new issues] to price, then it heated up in the last 20 minutes, as everyone is flipping," a trader said.

Bon-Ton Stores Inc.'s debt was "cranking," according to a trader. The bonds were up as much as 5 points on the day after the company released its fourth-quarter results.

In other earnings news, Hovnanian Enterprises Inc. also reported Wednesday. Despite a narrower loss, the homebuilder's bonds were barely changed.

Hawker Beechcraft Acquisition Co. LLC paper was on the quiet side and unchanged during midweek trading but its bank debt was declining. A trader said the losses were due to news out Tuesday regarding the company's hiring of restructuring advisors.

Bon-Ton climbs up

Bon-Ton Stores' 10¼% notes due 2014 were "cranking," a trader said, seeing the bonds up 5 points on the day.

He placed the notes around the 72 mark.

Another trader said the debt was "very active," also seeing it end around the 72 level.

A third source called the debt up 4 to 5 points around 73.

The York, Pa.-based retailer said in its earnings release Wednesday that fourth-quarter profit dropped 8.1% due to weaker same-store sales and margins. For the quarter ending Jan. 28, profit was $78.2 million, or $4.00 per share. That compared to $85 million, or $4.41 per share, the year before.

Same-store sales fell 2.6% in the quarter and gross margin declined to 34.6% from 37% previously.

Total sales were $983 million, a 2.7% decrease from the year before.

Bon-Ton also provided 2012 guidance, forecasting earnings of 15 cents to 75 cents per share, with same-store sales gaining 1% to 2%.

On the positive side, the company did buy back $46 million of its bonds and ended February with $453 million of excess borrowing capacity.

Hovnanian steady with numbers

A trader said Hovnanian Enterprises' 10 5/8% notes due 2016 were "probably sideways" following the Red Bank, N.J.-based homebuilder's earnings release.

He quoted the issue at 88 bid, 88½ offered.

Another trader said the notes were up slightly at 89.

For its first fiscal quarter, Hovnanian reported a narrower loss of $18.3 million, or 17 cents per share. That compared to a loss of $64.1 million, or 82 cents per share, the year before.

The improved loss came as net contracts improved 27% year over year.

Also, revenues were $269.6 million, up 6.7%. Gross margin, however, slid to 16.5% from 16.9%.

Analysts had been expecting a loss of 47 cents per share on revenue of $288 million, according to a poll taken by Thomson Reuters.

Hovnanian ended the quarter with $201.7 million in cash and equivalents, including $35.7 million of restricted cash.

Hawker debt dips

Hawker Beechcraft's strip of bank debt dropped on Wednesday to 72 bid, 74 offered from 73 bid, 75 offered with concerns that the company may be heading toward a restructuring, according to sources.

"Story out yesterday that the company has hired Alvarez & Marsal to assist with restructuring. Also, bonds began trading flat yesterday. All news points towards a restructuring in the near future," a buy side source remarked.

The company's 8½% and 8 7/8% bonds were quoted at 12 bid, 15 offered, and its 9¾% bonds were quoted at 2 bid, 5 offered during the session, a trader added.

In the bonds, a trader saw the 8 7/8% and 8½% notes due 2015 trading flat around 13 and the 9¾% notes due 2017 around "6 or so," also flat.

Another trader said the senior notes were "still in the low-teens," while the subs were around 5.

Hawker Beechcraft is a Wichita, Kan., maker of business, general aviation, training and special mission aircraft.

Broad market heads higher

Among other goings-on in the market, a trader said ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were a point higher at 681/2.

Also in the energy space, Edison International Inc.'s paper "bounced back" after getting beat down on Tuesday, the trader said. He saw the 7½% notes due 2013 gain a deuce, finishing around 791/4, while the 7¾% notes due 2016 moved up a point to 641/4.

The 7% notes due 2017 were also a point better around 60.

At another desk, a trader said AMR Corp.'s unsecured notes were climbing up to 35 on news the company was looking to freeze pensions, rather than stop funding them altogether.

And, PMI Group Inc. paper was "creeping up slowly" to "23-ish," he said.

"There's buyers of that," he said.

Sara Rosenberg contributed to this article

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