A&P files bankruptcy, gets DIP approval; Clear Channel active, better; broad market slumps

By Stephanie N. Rotondo

Portland, Ore., Dec. 13 - The Great Atlantic & Pacific Tea Co. Inc. once again dominated distressed debt trading, as the company announced it had filed for Chapter 11 protections on Monday.

A&P also obtained approval from the U.S. Bankruptcy Court for the Southern District of New York for its $800 million debtor-in-possession financing provided by JPMorgan Chase & Co. Of the total DIP facility, a $350 million term loan will be immediately funded.

The company's debt traded up on the filing news, reversing the downward direction it had been going on Friday on chatter of a potential filing. Still, traders remarked that it was not typical, as the bonds are now - for all intents and purposes - trading near where they were prior to the bankruptcy speculation.

Meanwhile, Clear Channel Communications Inc. continued to be an active credit, though there wasn't any news out to propel activity. But that didn't stop the debt from moving up on the day.

"The volume wasn't that bad," a trader said of the day's overall performance. "It was light, but not as light as I would have thought."

"It was better than I would have thought for a Monday," added another trader. "Everything was within a point of where it was, in either direction."

A&P files, bonds rise

The Great Atlantic & Pacific Tea Co. officially filed for bankruptcy on Monday and one trader said the company's bonds were "gapping up" in response to the news.

"They had moved the bid way down and now it's going up," he said, referring to how the bonds - specifically, the 11 3/8% senior secured notes due 2015 - fell to bids closer to 79-80 on Friday on chatter a filing was coming.

But on Monday, the bids improved to around 83, while offers of 84 were seen.

"The bids filled right in to here," he said.

He added that the bids on the convertible issues - the 5 1/8% notes due 2011 and the 6¾% notes due 2012 - were also better, quoting them at 28 bid, 29 offered.

Another trader said trading in the name was "the joy" of the day, as the bonds were "up a bunch." He saw the 11 3/8% notes start the day around 81 and then climb up to around 84.

"If you consider [the points of accrued interest] it is trading exactly where it was before the news [on Friday]," he said.

Market gauges notes value

He also saw markets of 28 bid, 29 offered for the converts, which he said "seemed higher than I would have thought."

At another shop, a trader saw the converts both trading at bid levels between 29 and 31, trading flat, perhaps up a little from the levels in the upper-20s to which that paper had swooned on Friday; the 5 1/8s nosedived around 45 points on Friday from prior levels in the lower 70s, while the 6 3/4s were down around 30 points from their previous levels in the upper 50s.

Both of those issues are nominally convertible bonds - but the trader noted that with the company's New York Stock Exchange-traded shares now down in penny-stock territory - on Friday, they plunged $1.90, or 67%, to just 93 cents, their biggest drop in at least three decades, before trading was halted, and there was no trading on Monday - "you have the bond component [of the paper], but it just goes to the intrinsic value of the coupon and the maturity," since the stock it could be converted into is virtually worthless.

"So that's why those things are around 30, and the 11 3/8s are around 83-84. The market is telling us what it thinks they are worth."

A&P secures DIP loan

In addition to announcing its bankruptcy filing, the Montvale, N.J.-based supermarket operator also said it had secured the $800 million DIP facility.

"This could be bad news for bondholders, yet all the public debt is trading up," said one market source. "The world clearly makes no sense anymore."

The DIP could be bad for debtholders, as it would be placed ahead of them when it comes time for distribution. Among the company's largest creditors are Wilmington Trust Co., which holds about $260 million in secured debt and is the agent for about $633 million of unsecured debt; Bank of America, which holds about $134 million of secured debt; and McKesson Drug Co., which holds $15.1 million of unsecured debt.

Clear Channel moving up

A trader said Clear Channel Communications' 10¾% notes due 2016 were active and about a point better, though there was no news out to explain the gain.

He pegged the paper at 83½ and also saw the 5½% notes due 2012 at 773/4, which was up nearly a point.

Another trader said the 10¾% notes were the only issue to trade in any real size, while the rest traded in just "twosies and threesies." He placed the 10¾% notes at 831/4, also up a point, adding that "everything else was also up just about a point."

Clear Channel is a San Antonio-based multimedia company.

Gaming unchanged to lower

A trader said that Mohegan Tribal Gaming Authority's paper was "weaker by a couple of points today." He saw no fresh news out on the Uncasville, Conn.-based Native American casino concern, which operates the Mohegan Sun gambling resort in the Nutmeg State, "but there was some late trading there, and that bond was definitely down a couple."

He quoted its 6 1/8% notes due 2013 trading down at 79 bid, while seeing trades around the 80 bid level on the 8% senior subordinated notes due 2012. He said the trades were "not on good size, but they were still down on that [name]."

Meanwhile, Caesars Entertainment Corp. - the recently re-named Harrah's Entertainment Inc. - was pretty much unchanged, he said. With the Las Vegas-based gaming giant's 10% notes due 2018, "your go-go bond," was still holding around an 89-90 bid context.

Market takes a hit

Among other distressed debt market mainstays, Catalyst Paper Corp.'s 7 3/8% notes due 2014 were down a half-point at 71, while NewPage Corp.'s 10% notes due 2012 were also a point weaker at 57.

OPTI Canada Inc.'s debt was also "softer again," according to a trader. He called both the 7 7/8% and 8¼% notes due 2014 down a point at 68½ and 69, respectively.

And, the trader said Lehman Brothers Holdings' bonds remained in that 221/2-23½ range, with just $15 million total of the debt trading during the session.

Paul Deckelman contributed to this article

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