Supervalu paper pops post-earnings; Nokia up despite wider loss; Overseas Shipholding rebounds

By Stephanie N. Rotondo

Phoenix, Oct. 18 - Distressed bonds were moving higher Thursday, according to market sources.

"Just about every name leaped up," one trader noted.

Supervalu Inc. was the bond du jour after the company reported its second quarter results. Though the company swung to a loss versus the previous year, the numbers were still somewhat better than expected, giving the bonds a hefty boost.

Nokia Corp. also had earnings out on Thursday and those bonds were also stronger, though less so than Supervalu. The debt gained despite a wider loss for the quarter and continued concerns about the company's ability to retake market share from rivals such as Apple and Samsung.

Meanwhile, after dropping a good bit in the last few days, Overseas Shipholding Group Inc.'s debt was attempting to pull out of the recent decline. A trader said there was no fresh news out to act as catalyst, pointing instead to the overall firm tone of the market.

Supervalu bonds jump

A trader said Supervalu's 8% notes due 2016 were "up a bunch" following the release of the company's second quarter results.

He saw the issue trade as high as 88½ during the session.

Another trader called the issue up 4 points on the day, also seeing them trade with an 88 handle. He also noted that at least $26 million of the debt changed hands.

"That's the most volume for that particular bond in some time," he said.

A third market source pegged the paper at 88 bid, up 3¾ points.

The Minneapolis-based grocery store operator reported a net loss of $111 million, or 52 cents per share, on net sales of $8.04 billion.

That compared to a profit of $60 million, or 26 cents per share, on sales of $8.4 billion, the year before.

Excluding certain one-time charges, Supervalu would have posted flat earnings.

Analysts polled by Thomson Reuters had been expecting a profit of 13 cents per share, on sales of $8.01 billion.

In terms of its debt, the company said it was expecting to reduce its overall leverage by $400 million to $450 million by the end of the fiscal year.

However, a trader pointed out that gross margins were at 21.4% of sales and that SG&A expenses were at 21%, leaving the total at basically zero.

"For a grocery store, that's not good," he said.

The company also said that it was continuing talks with potential buyers, but gave few details beyond that.

Nokia up despite wider loss

Finnish telephone maker Nokia also reported earnings Thursday, which showed an increased loss.

Despite the wider loss, the company's debt was higher, though marginally so.

One trader said the 5 3/8% notes due 2019 rose as much as half a point to 831/2. The 6 5/8% notes due 2039 were also half a point better at 783/4.

Another trader said the 2019 paper got "a little more active," placing the issue at 831/2.

For its third quarter, Nokia posted a net loss of $1.27 billion, as revenues dropped 19% to $9.45 billion.

Sales of its current Lumia smartphones declined to 2.9 million shipped, versus 4 million the year before.

That could be a harbinger of things to come for the company, which is slated to release its new version of the Lumia cellphones in the coming weeks. It has been said that Lumia sales must be stellar this holiday season in order to beat out Apple's iPhone - which has already been released.

Additionally, the company again did not give details on exactly when and where the new Lumias will be launched or what carriers will have them, only that the release will come in "selective" markets during the fourth quarter.

But sales of other Nokia phones, including its Nokia Siemens Networks phones, were higher, helping to slightly offset the declines in the smartphone arena.

Overseas Shipholding rebounds

Overseas Shipholding Group managed to regain some ground lost during the week, a trader said.

"They kind of pulled back" from their slide, he said, pegging the 8 1/8% notes due 2018 at 44, up 2 points.

But another trader had them even higher at 48 bid, 50 offered.

The debt had traded down to levels around 40 on Wednesday, spurred by rumors regarding its ongoing talks with its lenders to fill a $100 million gap in its $1.5 billion fully drawn revolving credit facility.

OSG has been in talks since August with lenders, which include DnB NOR Bank, Swedbank AB, Citibank NA, HSBC Bank plc and Credit Agricole Corporate and Investment Bank. The time is ticking on reaching a deal, as the facility in question matures in just four months.

It has also been reported that the company has hired Proskauer as restructuring counsel.

It has been no picnic for the oil transporting company, which has posted 13 consecutive quarterly losses. Shipping rates for have also been hit hard, further dampening the bottom line.

Hawker loan loses altitude

News that a sale to Superior Aviation Beijing Co. had fallen through didn't do much to move Hawker Beechcraft Acquisition Co.'s bonds on Thursday.

However, a trader said the company's bank debt dropped to 58 from 65 following the news.

The Wichita, Kan.-based aircraft manufacturer and reseller announced Thursday that the sale to Superior had collapsed, but that it had received a $50 million nonrefundable deposit at the outset. The company will use those funds to allow it to emerge from Chapter 11 protections as a standalone company in the first quarter of 2013.

The company will be renamed Beechcraft Corp. upon its bankruptcy exit. Hawker filed for bankruptcy in May.

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