Lower Treasuries, shaky equities weigh on distressed market; NewPage bonds slump on guidance

By Stephanie N. Rotondo

Portland, Ore., Dec. 8 - It was "definitely kind of mixed," a distressed debt trader said of Wednesday's marketplace.

"A number of things still feel OK," he added, but noted that more "yield-sensitive names" were feeling the burn. He speculated that a decline in Treasury bonds and a wobbly stock market were the cause.

Revised guidance, however, was the cause of a 4- to 6-point drop in NewPage Corp.'s bonds. The company released the new forecast on Wednesday and also announced a mill closure.

On the other hand, McClatchy Co. got a boost as the company's top executives told attendants of an industry conference that advertising revenue was on the rebound. The newspaper publisher's debt climbed as much as 4 points in trading.

NewPage debt drops

NewPage debt was down "a fair amount," according to a trader, as the company announced it had revised its fourth quarter guidance.

The trader called the 10% notes due 2012 down 4 to 5 points at 581/2. The 11 3/8% notes due 2014 dipped about a point to 91½ bid, 92 offered.

Another trader said the bonds were "down a lot," the 10% notes around 58 versus levels around 62 previously. He noted that the bonds dipped to a low of 56 "before recovering" back to the 58 mark.

The 11 3/8% note also closed off of their intraday lows, he said, pegging the bonds at 92. The paper had hit a low of 91 on Wednesday and had previously closed around 94.

And yet another trader said that the company's 10% notes plunged by 8 points in the early going, down to 56 bid from the lower 60s - the level to which those bonds had risen on Tuesday, when they gained about 3 points on the day, though on no fresh news that might explain the gain.

After hitting that low, he said that the bonds moved back up to around 58 bid, 59 offered - still down around 5 or 6 points from Tuesday's closing levels.

He also saw its 11 3/8% senior secured notes due 2014 drop as low as 91½ bid, 92½ offered, before ending at 92 bid, 92½ offered, a little below its recent levels, but said that "it was the 10s that got beat up."

The Miamisburg, Ohio-based papermaker said Wednesday it had revised guidance for the fourth quarter. It is expecting to report adjusted EBITDA of $125 million to $135 million and net loss to be between $275 million and $315 million.

In the fourth quarter of 2009, EBITDA came to $88 million and net loss was $55 million.

Back in September, as NewPage announced its second-quarter results, the company had said EBITDA would be up dramatically, forecasting $55 million to $65 million more than third quarter EBITDA. When the third quarter numbers came out on Nov. 4, EBITDA was reported at $106 million, compared with $140 million the year before.

Additionally, NewPage also announced the closure of its Whiting Mill in Wisconsin. The mill is expected to shutter in February 2011 and will cost about 360 jobs.

Elsewhere in the paper sector, one of the traders said that while sector peer Catalyst Paper Corp. was also lower, "no way was there as much activity as in NewPage."

He saw the Richmond, B.C.-based paper company's 7 3/8% notes due 2014 down half a point at 69 bid, 70 offered, although he said there was "very little activity there." He saw "a little more" in the way of dealings in its 11% notes due 2016, which ended around 94 bid, also down a half.

McClathy paper pops

Though NewPage was on the losing side of the spectrum, newspaper publisher McClatchy was on the winning side as company executives gave a rosy outlook for 2011.

A trader called the 5¾% notes due 2017 up 4 points at 731/2, while the 11½% notes due 2017 inched up a point to 107 3/4.

Another trader said the 11½% notes were "very active," and better at 107½ bid, 107¾ offered.

The 5¾% notes were deemed 3 points higher at 73 bid, 73½ offered.

At another shop, a trader saw sharp gains, with its 5¾% notes due 2017 "up a few points today" around 73 bid, 73½ offered, figuring a rise of more than 3 points.

"I saw it quoted a lot," he said. "There was a lot of volume in this name today," estimated that "tens of millions of it were trading" across the several issues in the capital structure.

He also saw the 6 7/8% bonds due 2029 around 60 bid, also up at least 3 points on the session, though on "not as much trading, though" as the 5 3/4s.

McClatchy's 11½% secured notes were seen up half a point at 107¾ bid, on what the trader called "decent volume."

At the UBS Annual Global Media & Communications Conference on Wednesday, McClathy's top management said it saw improved advertising revenues over the past few months and that it expected those trends to continue.

In October and November, ad revenue dipped 5.8%. But those declines were better than the 6.4% decrease seen in the third quarter and an 8.2% drop in the second quarter.

Classified advertising in particular has experienced a boom, the company noted, with employment ads growing 2.1% since May.

Also, McClatchy said it expected to repay all of its outstanding bank term debt by the end of 2010, leaving total debt at $1.78 billion.

"This leaves us with a very manageable maturity schedule with only $18 million of bonds maturing in mid-2011 and then none until 2014," said Pat Talamantes, chief financial officer of the Sacramento-based company, in a statement.

"We expect our leverage ratio to be about 4.6 times cash flow at year-end, down from 5.3 times at the end of 2009."

Broad market mixed

Among other distressed names, Clear Channel Communications Inc.'s bonds were "unchanged to off a touch," a trader said, seeing the 11% notes due 2016 at 78 and the 10¾% notes due 2016 at 791/2.

The 5½% notes due 2014 meantime closed at 73 bid, 75 offered.

At another desk, a trader said OPTI Canada Inc.'s bonds - the 8¼% and 7 7/8% notes due 2014 - were "a little lower again" at 70 bid, 71 offered.

Paul Deckelman contributed to this article

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