Rite Aid notes weaken despite narrowed loss; Capmark, NewPage debt notch down; Ambac, PMI gain

By Stephanie N. Rotondo

Portland, Ore., Sept. 22 - The financial markets suffered a major upset Thursday, as fears of a global recession grew.

That meant weakness for distressed bonds as well, though a trader noted, "In distressed land, there was not a lot of action."

"The stocks are just killing everything," he said. "A lot of names were quoted down 2 to 3 points."

Rite Aid Corp.'s debt fall at least a point on the day after the company reported its second quarter earnings. The company did, however, post a narrower loss and also updated its outlook for fiscal 2012.

In the rest of the distressed arena, many credits were moving lower with no news to act as catalyst. Capmark Financial Group Inc. and NewPage Corp. were weaker, probably in line with the broader market.

Meanwhile, Ambac Financial Group Inc.'s paper inched up slightly after the company filed a new reorganization plan. Chatter on Wednesday was that the company would either file a new plan or move to liquidate.

Still, a trader remarked that activity in the name was quite thin.

Also up in the financial/insurance arena was PMI Group Inc.

And, Dex One Corp.'s bonds dropped again as a coupon on the debt nears. The paper has been on the decline as many are concerned that the coupon won't get paid in cash - or paid at all.

Rite Aid falls after earnings

A trader deemed Rite Aid's debt down 1 to 1¼ points on the day following the company's earnings release.

The 8 5/8% notes due 2015 were down a point at 891/2, while the 9 3/8% notes due 2015 were also down that much, at 881/4. The 10 3/8% notes due 2016 were off the most, trading around 103.

For its second fiscal quarter, the Camp Hill, Pa.-based drugstore chain reported a net loss of $92.3 million, or $0.11 per share. Analysts, on average, were expecting a loss of $0.18 per share.

A year ago, net loss was $197 million, $0.23 per diluted share.

Revenues were $6.3 billion. Adjusted EBITDA was $184.3 million, compared with $181.2 million the year before.

For the 13-week period, same-store sales gained 2.2% year over year. That consisted of a 2.5% increase in front-end sales and a 2% gain in pharmacy sales.

Rite Aid also updated its guidance for fiscal 2012. In its earnings release, the company said it was expecting sales between $25.8 billion and $26.1 billion. Net loss was estimated at $345 million to $495 million, down from $370 million and $560 million previously.

Capmark, NewPage down

Capmark Financial's debt - which tends to trade on top of one another - traded "down a touch," a trader said, to 53 bid, 53½ offered.

There was no news out on the Horsham, Pa.-based financial services provider.

Likewise, there was no news out on Miamisburg, Ohio-based NewPage, but that didn't stop its 11 3/8% first-lien notes due 2014 from getting "beat up a little bit."

The trader pegged the notes around 821/2.

Ambac, PMI inch higher

Ambac Financial filed a new plan of reorganization late Wednesday. The move was not unexpected, as talk was that either a new plan would be filed or the company would simply move to liquidate its business.

Still, the news didn't do much for the bonds. A trader said there was one trade at 15 - up from the previous day's quotes - but he added that the name was "totally dead."

Also, PMI Group's 6% notes due 2016 inched up to 32 7/8, according to a trader. The trader speculated that the gains were due to "some sort of rumor that J.P. Morgan and Bank of America are getting together to talk about these robo-signing suits."

Dex debt dips

A trader said Dex One's 12% PIK notes due 2017 were falling again, slipping to 30 in Thursday trading.

The bonds have been quietly declining for some time now. Next week, there is a coupon due on the issue and many are wondering whether or not the payment will be made in cash or debt - or if it will even be made at all.

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

OPTI slips

OPTI Canada Inc.'s subordinated issues - the 7 7/8% and 8¼% notes due 2014 - dipped to 631/2, according to a trader.

Another trader quoted the note at 63 bid, 64 offered.

There was no news out on the Calgary, Alta.-based oilsands producer, but its stock (TSX-Venture: OPC) reportedly took a beating on Thursday.

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