Tribune trading picks up; GMAC, ResCap steady despite downgrade; Linens dips, Dollar gains

By Stephanie N. Rotondo

Portland, Ore., June 17 - Tribune Co.'s bonds saw a spike in trading activity Tuesday, a trader said, attributed to a Bloomberg article published early in the day.

In the report, several analysts discussed the predicament newspaper publishers across the board are in as advertising revenues continue to decline. Tribune was seen as one of the top companies facing a potential bankruptcy, likely by the end of the year.

However, even as volume increased, Tribune's bonds ended the session unchanged.

GMAC LLC's rating was cut by Moody's Investors Service Tuesday, given its increased exposure to offspring Residential Capital LLC. ResCap might also see its rating dropped yet again, Moody's said. But despite that, the debt of both companies managed to hold its ground.

In the retail sector, Linens n'Things Inc.'s paper - which has been quiet lately - was a little more active, though the bonds fell about a point. Meanwhile, Dollar General Corp.'s bonds gained on the back of first-quarter numbers.

Among Canadian companies, a merging of several divisions - seen as a cost-cutting measure - was credited for boosting Quebecor World Inc.'s bonds. Elsewhere, Ainsworth Lumber announced its recapitalization plan, but the company's debt did not trade.

Trading picks up in Tribune

A Bloomberg report resulted in what one trader called "very active" trading in Tribune's bonds.

Still, the trader said the 5¼% notes due 2015 ended unchanged around 45. Another trader also saw the bonds at that level, calling them "up a little from last weeks levels."

In the article published early Tuesday, several analysts voiced their opinion on the weakening company, and some predicted a bankruptcy filing by the end of the year.

Throughout the media sector, but especially in newspapers, advertising revenue has dropped off. As a result, companies have taken to reducing costs and attempting to unload or pay down debt. For example, Tribune publisher Sam Zell said earlier this month that he would cut 500 pages a week from the publication. Zell has also tried to unload some of its assets, including the sale last month of Newsday. The company is also looking at selling the Chicago Cubs.

GMAC, ResCap paper steady

A trader saw Detroit-based GMAC "trading a bunch," despite a ratings cut from Moody's.

The trader said there was "a lot of trading" in the 5 5/8% notes due 2009 at 96 7/8 bid, 91.25 offered. Another trader, however, said he saw little action in the name but pegged the benchmark 8% notes due 2031 at 75.5, up 1 point.

Moody's downgraded the finance company to B3 from B2, attributed to GMAC's increasing stake in Bloomington, Minn.-based Residential Capital. Moody's also said that ResCap could be the next to fall under the knife.

As such, a trader quoted ResCap's 6 3/8% notes due 2010 at 53.5 bid, 54 offered, unchanged.

Since the subprime mortgage meltdown, ResCap's operating performance has deteriorated significantly. In early June, ResCap was once again bailed out by GMAC, as the company faced yet another liquidity crisis amid looming debt maturities. GMAC's interest in the money-losing endeavor has increase to 85% since the end of last year.

"We believe ResCap's debt levels remain inconsistent with its long-term earnings potential," the ratings agency said, "Given the continuing operating uncertainties at ResCap, the increase in exposure weakens GMAC's stand-alone credit profile."

Elsewhere in the sector, a trader said Thornburg Mortgage Inc.'s 8% notes due 2013 traded at 73.5, "lower from where it was prior to its earnings."

Late last week, Thornburg reported a $3.31 billion loss for the first quarter, compared to a profit of $75 million the previous year.

Linens dips, Dollar gains

Linens n'Things floating-rate notes due 2014 lost some ground, a trader said, placing the debt down a point at 37.

But another trader called the notes unchanged at 37 bid, 38 offered, noting that trading was "more active" in the name.

The trader also saw Dollar General's bonds gain 1 to 1.5 points on the back of its numbers, calling the discount retailer the day's "outlier." The trader quoted the 10 5/8% notes due 2015 "north of par" and the 11 7/8% notes due 2017 at 96.

Dollar General posted a same-store sales increase of 5.4% for the first quarter. Total sales came in at $2.4 billion. However, the company said that net income fell $29 million to $5.9 million.

In other consumer-related names, Rafaella Apparel Group Inc.'s 11¼% notes due 2011 closed the session at 59.5. Spectrum Brands Inc.'s bonds were called "a little more active and probably a touch better," its 11% notes due 2013 at 90.5.

Fedders Inc.'s 9 7/8% notes due 2014 traded at 1.

Quebecor bonds better

Quebecor's bonds gained about a point after the company announced some structural changes within the company.

A trader pegged the 4 7/8% notes due 2008 at 45 and the 9¾% notes due 2015 at 55.5 bid, 56 offered.

Another trader saw the bonds - which had fallen 5 points on the day Monday - bouncing back Tuesday, with its 4 7/8% notes and 6 1/8% notes due 2013 each up 2 points to 44 bid, while its 9¾% notes and 8¾% notes due 2016 rebounded by 1 point each to 55.

The Montreal-based commercial printer announced Tuesday it would merge its magazine, book and directory divisions. The news came just one day after the company said it would create a new marketing group to cover the U.S. retail insert, Sunday magazine and direct-mail divisions.

In a related sector, Ainsworth Lumber announced a debt-for-equity swap, following in the footsteps of sector peer Tembec Inc. According to a trader, 75% of bondholders have already agreed to the recapitalization plan. He noted that the bonds "never trade, even in the best of times. 75% of them have been locked up for some time."

AbitibiBowater Inc.'s 8.85% bonds due 2030 gained 1 point to 41 bid. At another desk, its 6½% notes due 2013 were down more than half a point at 66.

Broad market slips

Harrah's Operating's 10¾% notes due 2016 "traded a ton," a trader said, at 85.375 bid, 85.75 offered.

After a series of downgrades, Six Flags Inc.'s 9 5/8% notes due 2014 traded lower, the trader continued. He saw the bonds trade into a 64 bid early on in the session, before sliding further to close at 63.5 bid, 64 offered.

A trader saw Visteon Corp.'s new 12¼% notes due 2016 at 88 bid, 89 offered. Another trader saw them even lower, at 86.75 bid, 87.75 offered. The notes emerged with a Monday trade date as part of the company's previously announced exchange offer for a portion of its 8¼% notes due 2010, at a greatly discounted 91.621 in order to yield 14½%. Visteon's existing 7% notes due 2014 were slightly lower on the day at the 64 bid level.

Paul Deckelman contributed to this article.

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