NewPage continues to dominate, bonds end mixed; Dex debt heads upward; DirectBuy bonds rally

By Stephanie N. Rotondo

Portland, Ore., May 19 - Distressed credits continued to lose the spotlight to a plethora of new issues out over the course of the last week, traders reported Thursday.

"There's just too much new issue," a trader said. He noted that total secondary trading was at about $2 billion and estimated that at least half of that were new issues.

"People are just totally inundated with new issues," he said. "There's enough other stuff to be doing that guys just aren't too fussed."

The trader also remarked that "inconsistent" economic data was not helping the distressed arena either.

Given the lack of interest in distressed debt, what was trading in that space was the same as has been trading all week: NewPage Corp., Dex One Corp. and DirectBuy Holdings Inc.

There was no fresh news out on any of those companies. Moreover, companies that did have fresh news - such as Sbarro Inc. and Harry & David Holdings Inc. - saw virtually no action of any kind.

NewPage still busy, gyrates

A trader said "another $100 million-plus" of Newpage's bonds turned over, giving the Miamisburg, Ohio-based coated papermaker the award for the most actively traded credit for an entire week.

The trader noted that the 12% notes due 2013 was the "good performer" of the day, moving up to 15¾ from levels around 13.

The 10% notes due 2012, however, fell a point to 441/2, while the 11 3/8% notes due 2014 were "right where they were" at 96¾ bid, 97¼ offered.

Another trader said the 10% notes dipped half a point, but also to that 44½ mark. He said the 12% notes were "actually up a couple points" at 151/4.

"They were active, he said of the latter issue.

A third source said the 10% notes "traded up this morning," hitting a high around 48, only to come back to end around 45.

"So that one was on a little bit of a rollercoaster ride," he said. When asked why the bonds gyrated so much, he speculated that "people were thinking there might be some shorts."

Last Thursday, NewPage papermaker reported net sales of $904 million, up from $817 million the year before. The company attributed the increase to higher prices and higher sales volumes.

Adjusted EBITDA was $85 million, versus $15 million for the first quarter of 2010. Net loss narrowed to $88 million from $175 million.

At the end of the quarter, NewPage had $170 million of liquidity, consisting of $9 million in cash and equivalents and $161 million available under its revolving credit facility.

Though the numbers were in some ways better than 2010 comparables, they were well below analysts' estimates and weak cash flow called the company's refinancing options into question.

NewPage must repurchase or refinance the 10% notes by Jan. 31, 2012 to repay or refinance the debt or else its 11 3/8% senior notes due 2014 will be accelerated, moving the maturity up to March 2013 from December 2014.

Dex heads upward

Dex One's 12% notes due 2017 were "a smidge better," a trader said, though there was no news out on the Cary, N.C.-based phonebook publisher.

The trader quoted the bonds at 49 bid, 50 offered.

Another trader called the paper up 1½ points at 491/2.

DirectBuy rebounds

Like Dex, DirectBuy Holdings' 12% notes due 2017 ended "a little bit better," according to a trader.

"They rebounded a little bit," he said, pegging the paper at 41 bid, 42 offered.

Another trader said the notes saw "a little bit of activity" as the debt "bounced off of its lows" to finish at 39 bid, 40 offered.

That compared with 36 bid, 47 offered the day before.

"Certainly not on anything, just a couple people sticking their toes in," he opined.

The Merrillville, Ind.-based home improvement club has been dealing with a class-action lawsuit that alleges improper sales practices. Last week, a U.S. District Court judge in Connecticut held a hearing to approve a settlement, which faced objections from 39 state attorneys general and a consumer advocacy group.

On Monday, the judge rejected the settlement, deeming it too "meager."

"The court cannot conclude that this settlement falls within the range of reasonableness," the decision said.

Under the terms of the settlement, affected customers would receive a free two-month membership, valued at a total of $55 million.

Burger King, OPTI steady

Elsewhere in the land of distressed, Burger King Holdings Inc.'s 0% senior discount notes due 2019 were unchanged around 58, according to a trader.

Another trader said OPTI Canada Inc. was also unchanged, its 7 7/8% and 8¼% notes due 2014 at 46 bid, 47 offered.

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