Quebecor races against the clock; Retailers mixed on sales report; Delphi bonds weaker

By Stephanie N. Rotondo

Portland, Ore., Jan. 15 - As is typical of the topsy-turvy marketplace these days, Tuesday brought with it a significant decline in the equity markets, which put additional pressure on the junk sector.

"It was another pretty day," a trader said with just a hint of sarcasm. "A day like today, people are just frozen."

What was not frozen was Quebecor World Inc.'s bonds. The printer's corporate debt took yet another hit as the company raced against the clock to obtain $125 million in new financing. Late Monday, the company said it accepted a "rescue plan" proposed by Quebec Inc and Tricap Partners Ltd. However, the $400 million plan still needs bank approval - and the lenders are finding it hard to swallow.

Meanwhile, the Commerce Department delivered its monthly retail sales report for December, and the decreasing numbers seemed to shock some people. At least one trader found it absurd that investors were not expecting sales numbers to be depressed.

Still, the report had mixed effects on retailers bonds. Some, like Burlington Coat Factory Warehouse Corp., were better, while others, like Michaels Stores Inc., were weaker.

For at least the last two sessions, Delphi Corp. paper has been declining. On Tuesday, more pressure was put on the debt as a group of bondholders stepped up its fight against the company's reorganization plan and the bonds fell about 2 points.

The market was preparing itself for another "interesting" day of trading Wednesday. A poor quarterly report from Intel, which was released after the market closed Tuesday, had some speculating that the news "may not be a good signal for tomorrow."

Quebecor races against clock

Quebecor's bonds took another hit despite the company's acceptance of a plan to "rescue" the commercial printer from its financial turmoil.

A trader said the company's bonds were one of the biggest movers during the session and "one of the more active names." He said the debt was down 5 to 6 points "generically," pegging the 4 7/8% notes due 2008 at 69 bid, 70 offered and the 6 1/8% notes due 2013 between 63 and 70. The trader added that it "does not seem like" investors were encouraged by the plan.

Another trader saw the bonds likewise lower and opined that the debt would likely hit 50. The trader quoted the 8¾% notes due 2016 at 55 bid, 60 offered.

At another desk, a trader saw the 6 1/8% notes fall 5 points to 63 bid, 65 offered. At one point, he said, the Quebecor bonds traded as low as 61 bid before firming a little from that nadir to end where they did.

Late Monday, Quebecor said it accepted the $400 million rescue-financing proposal from Quebecor Inc. and Tricap Partners Ltd. Under the plan, the company would receive a $200 million interim financing facility, which would then be replaced by March 31 with $400 million in senior secured notes due 2012 to the financial backers.

Furthermore, the backers would receive 75% equity in the company. The company is also looking to convert its preferred shares into common stock.

However, for the plan to move forward, Quebecor's banks must first agree to the terms of the plan. News reports have stated that the bankers have balked at the plan, as it would lower their place within the capital structure.

Though Tuesday was the deadline for the company to find alternative financing, the company has asked its banks to extend the date to Monday.

Retailers mixed on 'unexpected' sales report

The Commerce Department released its retail sales report for December, which showed a 0.4% dip. Several news outlets reported the figures to be "unexpected."

But one trader was amazed that the decline in sales came as a shock.

"Why is this a surprise?" he asked, citing same-store sales released last week that should have prepared the market for what was to come.

"That was a pretty good indicator of what was going to be coming," he said. "Everyone knew they would suck."

Still, the depressed sales figures prompted mixed results in retailers.

"It seemed like late in the day, some retailers were a little better," the trader said.

Such was the case for Burlington Coat Factory, whose 11 1/8% notes due 2014 moved up 3 points from the day's low to end at 76 bid, 77 offered.

Another trader called the bonds up 4 points, also at 76 bid, 77 offered.

Michaels Stores, however, did not fare as well. The trader said the craft store's 11 3/8% notes due 2016 got "beat up a little," closing down 1.5 to 2 points to 82.

Meanwhile, Claire's Stores Inc.'s 9¼% notes due 2015 were unchanged at 65 bid, 67 offered, while Finlay Fine Jewelry Inc.'s 8 3/8% notes due 2012 rose a point to 43 bid, 45 offered.

In the restaurant sector, a trader saw the OSI Restaurant Partners - Outback Steakhouse - 10% notes due 2015 fade to 64.5 bid, 66.5 offered from early levels at 66 bid, 68 offered. Perkins Family Restaurant's 10% notes due 2013 dropped a point to 66 bid, 67 offered.

The National Retail Federation predicted that sales in 2008 will increase at the slowest pace since 2002, at 3.5%. The group attributed the slow gain to "financial stress," such as rising gasoline prices, a worsening housing sector and higher unemployment.

Delphi dips amid bondholder fight

Delphi is facing more problems in its quest to emerge from bankruptcy, as a group of noteholders said it would vote against the company's reorganization plan and is also asking a judge to reject it.

As the Troy, Mich.-based company struggles to exit Chapter 11, Delphi's bonds have steadily declined. A trader deemed the bonds weaker for the second session in a row, its 6.55% notes that were to have matured in 2006 and its 6½% notes due 2009 around 43.

Still, "I don't think it's anything new necessarily," he said of the bondholder fight.

Another trader placed the 6.55% notes at 42 bid, 44 offered and said "nothing is trading" in the credit. Another trader saw the 6½% notes due 2013 at that same 42 bid, 44 level, "continuing to fall" on "continued weakness."

At another desk, the 2013 piece was down nearly 2 points at 42.75.

If holders of the senior notes do not support the current plan, then the plan cannot be confirmed, according to court documents. A confirmation hearing is set to begin on Thursday.

Standard Pacific loan better

Standard Pacific Corp.'s term loan B headed higher on Tuesday on the coattails of the company's bonds improving, according to a trader.

The term loan B was quoted at 68 bid, 70 offered, up from 65½ bid, 67½ offered, the trader said.

"There were better bids across the board," the trader added.

There was a rumor on Monday that the company held a bondholder call in the afternoon. According to the trader, people seem to think that the call did in fact take place but he wasn't sure about the content of the call.

Meanwhile, the Irvine, Calif.-based homebuilder's bonds slipped half a point, its 7% notes due 2014 at 60 bid, 62 offered.

Elsewhere in the sector, a trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 down a point at 70 bid, 72 offered, while Tousa Inc.'s 8¼% notes due 2011 were down 1.5 points at 41 bid, 43 offered and WCI Communities Inc.'s bonds were unchanged, its 9 1/8% notes due 2012 steady at 47 bid, 49 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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