Idearc comeback continues, Claire's Stores better; auto names active; Young Broadcasting down again

By Paul Deckelman and Sara Rosenberg

New York, Aug. 6 - Idearc Inc.'s recently badly battered bonds were seen solidly better in busy trading for a second straight session on Wednesday, with traders surmising that the earnings-related downturn in the Dallas-based telephone directory publisher's bonds seen last week and on Monday had been overdone, and now players were scrambling to cover shorts.

Another recently hard-hit name which was seen firming for another session was Pembroke Pines, Fla.-based specialty retailer Claire's Stores Inc., although nobody saw any fresh news out on the company.

Bonds and bank debt of General Motors Corp. and its domestic arch-rival, Ford Motor Co., were seen trading around actively, along with bank debt for the third member of Detroit's traditional Big Three, Chrysler. The bonds were up pretty much across the board, although the bank paper was seen mixed. The automotive paper in both markets had recently been spinning its wheels amid investor angst generated by the gigantic quarterly loss and July sales drop that GM reported on Friday, with Ford and Chrysler also seeing substantial sales downturns for the month.

While those distressed names seem to be doing a little better than they had been, the same could not be said for New York-based television station group owner Young Broadcasting Inc., whose bonds have slid precipitously over the last few sessions, on no news.

Idearc upturn continues

A trader said that the Idearc 8% notes due 2016 "moved around a little," seeing the bonds going out at 42.5 bid, 43.5 offered, up from a 40-41 context on Tuesday. "Maybe some people shorted it, and now they're kind of scrambling to cover."

A second said that the bonds had gained 3 points to go home at 42.

Another trader saw the Idearc bonds trading in a 43-44 range. "I thought it was starting to be overdone when it broke [below] 50 - below 40, it certainly seemed to fit that category. But it seemed to get a little bit of a momentum trade today for sure."

A market source saw the 8s as one of the more busily traded issues of the session, with over $25 million of the bonds having changed hands by mid-afternoon - second only to Sprint Nextel Corp.'s 6% notes due 2016, whose trading volume zoomed past the $100 million mark after the company's earnings release and news of a convertibles issue. The Idearc notes were seen up nearly 2 points at 42.75 bid. At another desk, those bonds actually were pegged up 2 points to the 43 level.

The Idearc bonds had held around the 59-60 level until last Tuesday, when they tumbled 10 points down to the upper 40s, after the company reported sharply lower second-quarter earnings versus a year earlier. Except for a small reprieve last Wednesday, they continued getting beaten down day by day, finally cratering at around 39 on Monday before rebounding a little on Tuesday and now, extending that rebound into Wednesday.

Idearc sector peer R.H. Donnelley Corp.'s 8 7/8% notes due 2016 were being quoted around the 46 level.

Donnelley's wholly-owned Dex Media Inc. subsidiary's 8½% notes due 2010 and 9 7/8% notes due 2013, both issued by the Englewood, Colo.-based company's Dex Media West LLC unit, were also seen trading around the 95.5 and 77 levels, respectively.

However, one of the traders said that while the bonds of Cary, N.C.-based Donnelley and its Dex unit were getting some lift from Idearc's rebound over the last two sessions, "it wasn't with anything near the same kind of volumes, certainly not that I saw."

He said that Idearc "was bigger, more active, from the first thing this morning. The others have done a little better - but I think that [Idearc] is the [preferred] trading vehicle."

Claire's bonds better

Another distressed name which seems to see some light at the end of the tunnel - or which at least has gotten a temporary reprieve - is Claire's Stores.

A trader saw its 9¼% senior notes due 2015 better by 2 points at 44 bid, replicating Tuesday's gain.

Another trader said that the company's 10½% senior subordinated notes due 2017 "certainly were higher bid today" at 32 bid, 33 offered, which he contrasted with Tuesday's closing level at 29 bid, 30.5 offered.

None of the traders saw any fresh news out on the problem-plagued retailer.

GM continues to lead auto bonds; loans mixed

In the sales- and earnings-challenged autosphere, benchmark bonds like General Motors' 8 3/8% paper due 2033 and Ford's 7.45% securities due 2031 were seen each up at least a point or more, leading the carmaker's other bonds and those of their respective auto finance units, GMAC LLC and Ford Motor Credit Co. higher as well, as investors sought to put the big downturn the auto bonds had suffered after GM's giant second-quarter loss Friday - $15.5 billion, third-worst in company history - in the rearview mirror.

The bonds have been firming over the last few sessions and Wednesday was no different. A trader - exclaiming "wow!" - saw the 8 3/8s at 51.5 bid, 52.5 offered, while the Ford 7.45s were up some 3½ points at 52.5 bid, 53.5 offered.

Another trader only saw the GM benchmarks up 2 points at 50 bid, 52 offered, and saw GMAC's 8% bonds due 2031 also up by a deuce at 55.5 bid, 57.5 offered.

Yet another trader pegged the GM long bonds 4 points better on the day at 51 bid, while the GMAC bonds were up 1½ points at 56.5.

Among GM's other bonds, a trader saw its 7.20% notes due 2011 at 62 bid, 64 offered, versus 60 bid, 62 offered previously, and opined that it looked like "everything was up 1 to 2 points across the board." He also saw the GM 7 1/8% notes due 2013 better at 53.5 bid, 54.5 offered.

Another market source saw those latter bonds at 54.5 bid, up more than 2 points, with the 7.20s up 2 points at 62.

Among the auto-finance paper, other than the long GMACs, a market source saw the company's 6 7/8% notes due 2012 up 2 points at the 62 level, while its 7¾% notes due 2010 finished at 79 bid, up 2 points. Ford Credit's 7% notes due 2013 ended at 72, up more than 2 points.

The auto names were also active again in the bank-debt market Wednesday, although this time there was no clear direction in the sector as GM's term loan softened, Chrysler Financial's first-lien term loan strengthened and Ford's term loan was basically unchanged, according to a trader.

Detroit-based industry leader GM saw its term loan quoted at 74 bid, 75 offered, down from 74¾ bid, 75¾ offered, the trader said.

Chrysler Financial, a provider of automotive financial products and services linked to Auburn Hills, Mich.-based carmaker Chrysler, saw its first-lien term loan quoted at 80¾ bid, 81¼ offered, up from 80 3/8 bid, 81 3/8 offered.

And iconic Dearborn, Mich.-based auto giant Ford saw its term loan quoted at 77 bid, 77½ offered, compared to Tuesday's levels of 77 bid, 78 offered, the trader added.

Georgia Gulf loan trades up

Also in the bank debt arena, Georgia Gulf Corp.'s term loan was noticeably higher in trading on Wednesday on the back of the company's recent statement that it is looking to make progress on a covenant amendment or refinance its senior credit facility to obtain a structure with greater flexibility, according to a trader.

The term loan was quoted at 94½ bid, 95 offered, up from previous levels of 92 bid, 93 offered, the trader said.

Late in the day Tuesday, the Atlanta-based chemical producer issued its second-quarter results and with those results the company revealed its plans for an amendment and/or refinancing.

The company explained that covenant requirements in the credit facility are scheduled to tighten significantly through the first quarter of 2010 and that, due to less asset sales and a challenging economic outlook for the remainder of the year and into 2009, EBITDA for 2008 could be as much as 15% below 2007 EBITDA.

Georgia Gulf also said that it can now focus on the credit facility since a settlement agreement was reached regarding the alleged notice of default on its 7 1/8% notes.

As of June 30, the company was in compliance with its debt covenants.

For the second quarter, the company reported net sales of $849.8 million, down from net sales of $851.9 million for the second quarter of 2007 primarily due to difficult market conditions in the United States.

Net income for the quarter was $27.9 million, or 80 cents per diluted share, compared to a net loss of $4.2 million, or 12 cents per diluted share, during the same quarter in the previous year. Net income for the quarter includes a pre-tax net gain from asset sales of $31.1 million, or 84 cents per diluted share, whereas the 2007 net loss includes a loss from discontinued operations of $2.3 million, or 7 cents per diluted share.

Young continues to get hung

Back among distressed bond issuers, Young Broadcasting's 10% notes due 2011 continued to take a beating, although there was no fresh news out on the TV station owner, which since the beginning of the year has been trying to sell its most valuable property, San Francisco outlet KRON-TV, so far with no success.

A trader saw those bonds languishing at 34 bid, 37 offered, noting that they were "down at least 10 points on the week."

A second trader - who like the first could not offer a ready explanation for the bonds' dizzying fall - saw them down even further, at 32 bid, 34 offered "dropping like a stone" from Tuesday levels at 40 bid, 43 offered - which themselves were well down from the mid-to-high 40s context in which those bonds had begun the week.

Yet another trader offered that Young "has been getting killed," likely on its lack of progress in selling the Bay Area TV station.

Young bought KRON for over $800 million in 1999 - but the station's value rapidly eroded when NBC pulled its network affiliation in 2002, transferring it to a rival station in the same market and leaving KRON as a little-watched independent station for some years. It is now an affiliate of the new MyNetworkTV, the smallest and least-watched of the major U.S. TV network operations.

Young is asking at least $250 million for the station, far less than it paid, but has been unable to get a solid buyer, even at that price. Some analysts had warned that the company could conceivably face bankruptcy if KRON is not sold for a sufficient sum soon.

Trump, Harrah's lower

In the gaming sector, a trader saw Trump Entertainment Resorts Inc.'s 8½% notes due 2015 gyrating around between a low of 46.25 and a high of 48, "and everything in between," going out at around 46.5 bid, 47 offered, down about "a point and change" from Tuesday's level, with "a good amount of paper changing hands."

He meantime saw Harrah's Entertainment Inc.'s 10¾% notes due 2016 around the 73.5-74 area. He said the Las Vegas-based biggest casino operator's bonds have lately been suffering "death by a thousand cuts." The 103/4s have "kind of slowly traded down from the mid-to-high 80s of a month ago." Like the Trump bonds, the Harrah's paper was also "trending towards the weaker side" on the day, down more than a point.

Among other gaming names, a market source saw Boyd Gaming Corp.'s 7¾% notes due 2012 up a point at 87.5 bid, while Station Casinos Inc.'s 6% notes due 2012 were quoted 2 points better, around the 70 level.

WCI steady after rebound

A trader saw no activity in WCI Communities Inc.'s 9 1/8% notes due 2012, with the paper still hanging around a 32-33 context. The paper had slid down to around the 30 mark on Monday, from prior levels around 39, after the Bonita Springs, Fla.-based homebuilder filed for Chapter 11 protection with the federal bankruptcy court in Wilmington, Del.

Those bonds had bounced back a little during Tuesday's session, although the trader opined that since WCI began trading flat, or without its accrued interest, upon its bankruptcy filing, Tuesday's bounce was at least partially "a recapture of the accrued interest."

Broader distressed market generally better

Elsewhere, traders saw distressed bonds mostly improved, in line with a generally better tone in the junk bond market.

Swift Transportation Co. Inc.'s 12½% notes due 2017 were seen up 3 points at 40 bid, while SemGroup LP's 8¾% notes due 2015 gained 4 points to 16.

A trader saw bond insurer MBIA Inc.'s nominally investment-grade - but actually junk-traded - 14% surplus notes due 2033 some 3 points better at 60 bid. However, he saw Residential Capital LLC's 6½% notes due 2013 unchanged at 23 bid, 25 offered.

The trader also saw no further upside in the bonds of Charter Communications Inc., which had risen on Tuesday in response to its quarterly numbers. Charter's 8 3/8% senior notes due 2014 stayed at 95.5 bid, 96.5 offered, while its 10% subordinated notes due 2014 were perhaps ½ point higher at 53.

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