Linens n'Things, Burlington Coat Factory debt slips; NXP bonds improve despite ratings downgrade

By Stephanie N. Rotondo

Portland, Ore., Sept. 2 - Distressed bond traders saw Linens n'Things Inc. as well as Burlington Coat Factory Warehouse Corp. securities close Tuesday's session lower as the market returned from a long holiday weekend.

Linens' declines came as the company filed its plan of reorganization. Under the plan, creditors will receive new stock in the reorganized company. However, Linens noted that some creditors might not be paid in full.

Meanwhile, Burlington filed its annual report, which showed a week fiscal year. Bond traders said the bonds fell several points from last week, while the bank debt was likewise lower.

NXP BV's bonds inched up during trading, despite a rating downgrade on Friday. The downgrade was a result of concerns surrounding the company's liquidity position.

Traders said the first day back from the weekend was a day to "get back in the swing," as one source put it. Now that the summer is essentially over - and vacation goers are back at their desks - some expressed hope that the market will step up.

Linens, Burlington debt slips

Linens n'Things' debt fell during trading after the company filed its plan of reorganization.

A trader said the floating-rate notes due 2014 slipped to 28 from the low-30s. However, he noted that the name has been quiet lately. Another trader quoted the notes at 27.75 bid, 28.25 offered.

The bankrupt retailer's plan is to reduce its debt by closing stores, slashing its workforce and handing over the remaining company to its creditors. According to the terms of the plan, unsecured creditors will have a chance to swap their $1.1 billion in debt for warrants to buy new stock in the reorganized company. However, outside of senior bank lenders, who will be paid in full, the company said it was unlikely creditors will recoup all of the money they are owed.

The plan will now go to creditors for a vote. If creditors give their consent, then the plan moves to the bankruptcy court overseeing the case for approval.

Elsewhere in the retail jungle, Burlington Coat Factory's 11 1/8% notes due 2014 were "down a couple points," according to a trader. He pegged the debt at 68.5 bid, 69 offered.

At another desk, a trader placed the issue at 68.5 bid, 69.5 offered, down from 72 bid, 73 offered last week.

The first trader said the declines came on the back of the company 10-K filed with the Securities and Exchange Commission. That was echoed by bank debt traders, who called Burlington's term loan lower at 75½ bid, 77½ offered, down from 77 bid, 78½ offered.

For fiscal-year 2008, the company reported a net loss of $49 million, compared with a net loss of $47.2 million in fiscal-year 2007.

Total revenues for the fiscal year were $3.42 billion, down from $3.44 billion last year.

Net sales for the 52-week period ended May 31 were $3.39 billion, down $10 million, or 0.3%, from $3.40 billion in the 52 weeks ended June 2, 2007.

Comparable-stores sales decreased 5.2% for the 2008 fiscal year due primarily to unseasonably warm weather in September and October, weakened consumer demand similar to what other retailers experienced and temporarily low or out of stock issues in certain limited divisions.

Gross margin as a percentage of sales increased to 38.3% from 37.6% during the period ended May 31, compared with the period ended June 2, 2007, primarily as a result of improved initial markups, which are the result of lower costs associated with better negotiating and buying efforts.

EBITDA for the 52-week period was $250.6 million, a $9.6 million decrease from $260.2 million in the fiscal year ended June 2, 2007.

The company generated $6.2 million of positive cash flow for the year ended May 31, compared with negative cash flow of $24.5 million for the year ended June 2, 2007.

Net cash provided by continuing operations of $98 million for fiscal 2008 was $2 million, up from $96 million last year.

As of May 31, Burlington had total debt outstanding of $1.5 billion, including $181.6 million outstanding under its ABL facility and $872.8 million outstanding under its term loan.

During the fiscal year, the company paid down $11.4 million of its term loan.

Meanwhile, Dollar General Corp.'s 11 7/8% notes due 2017 were called better at 95.5 bid, 95.75 offered. Michael's Stores Inc.'s debt, which had fallen last week after disappointing earnings, closed slightly better, with its 10% notes due 2014 at 75 bid, 76 offered and the variable-rate discount notes due 2016 at 36.5 bid, 37 offered.

NXP bonds gain after downgrade

NXP Semiconductor's bonds moved up slightly Monday, despite a rating downgrade on Friday.

A trader said the 9½% notes due 2015 closed at 68.5 bid, 69.5 offered, up from 68 bid, 69 offered last week. The floating-rate notes due 2013 gained half a point to end at 78 bid, 79 offered.

On Friday, Moody's Investors Service cut its rating on the chip maker, concluding a rating review that began in July. Moody's said the outlook was stable.

The downgrade came as NXP's profits seemed to dwindle and demand in the semiconductor market took a downturn. Moody's also cited $830 million cash consumption in the first half of the fiscal year.

Moody's noted the recent news of STMicroelectronics' plan to purchase NXP's 20% share in the two companies' joint venture. That, along with $1.55 billion from the creation of the joint venture, will help to increase liquidity. However, that money also had to be reinvested or used to pay down senior debt within a year.

NXP is an Eindhoven, Netherlands-based semiconductor producer.

Broad market mostly better

Yankee Acquisition Corp.'s bonds were "up a point from early last week," a trader said, with its 9¾% notes due 2017 at 63.5 bid, 64.5 offered. The 8½% notes due 2015 were "a little better too" at 77 bid, 78 offered.

Land O'Lakes Inc.'s 7.45% notes due 2028 closed at 80 bid, 85 offered.

"They had really good numbers," a trader said, adding, "They quote those really wide."

Charter Communications Inc.'s 11% notes due 2015 ended the session better, a trader said, though there was no news to prompt the move. The trader pegged the issue around 77.

At another desk, Charter's 8% notes due 2012 gained half a point to end at 96.75 bid.

A trader saw Idearc Inc.'s 8% notes due 2016 up 1 point at 46 bid. Another trader said that Idearc "seemed to have a little momentum, them and R.H. Donnelley [Corp.]" He saw the Idearc 8s up 2 points on the day at 46.25 bid, 47.25 offered, while Donnelley's 8 7/8% notes due 2017 got as high as 54 bid, but "then gave back a little" to close at 53.5 bid, 54.5 offered, still up 1.5 points.

Yet another trader saw the Donnelley bonds as "one of the biggest gainers," pegging the paper at 53.5 bid, up 0.5 point on the day, "which for R.H. Donnelley is always welcome."

A market source at another desk saw the Donnelley-owned Dex Media Inc. 8% notes due 2013 up 1.5 points at 61 bid.

Swift Transportation Co. Inc.'s 12½% notes due 2017 were a point better at 37 bid.

A trader called AbitibiBowater Inc.'s 8.85% bonds due 2030 up 2 points to 36 bid, while its 8.55% notes due 2010 were likewise better by a pair at 54.

Spectrum Brands Inc.'s 7 3/8% notes due 2015 were down 1 point at 52 bid.

Sara Rosenberg and Paul Deckelman contributed to this article.

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