Beazer unaffected by downgrades; Sprint hurt by research note; Six Flags: No news is good news?

By Stephanie N. Rotondo

Portland, Ore., Sept. 4 - Distressed bond traders kept their eye on the stock market during Thursday's session as the Dow Jones Industrial Average fell more than 300 points.

"The market always has an eye on the stock market," said one trader. "It's distracting."

Given the losses in the stocks, "everything was a little anemic unless there was a specific reason not to be," said another.

Multiple downgrades did little to upset Beazer Homes USA Inc.'s bonds, traders reported. A trader said there was very little volume in the name, but companies associated with building materials ended the day better.

A research report from Standard & Poor's put pressure on Sprint Nextel Corp.'s debt, a trader said. In the report, an analyst claimed that the wireless company continues to face obstacles, such as a shrinking subscriber base. That resulted in an at least a 1-point loss for the company's bonds.

As in the previous session, Six Flags Inc.'s paper edged up 1 to 2 points. But, also like Wednesday, there was no news that might have explained the move - aside from another serious injury at one of the company's parks.

New retail data was released during trading, which showed continued declines in sales. However, Dollar General Corp.'s bonds remained on an upward path following positive financial results on Wednesday. Rite-Aid Corp.'s bonds were also deemed better, while stores like Bon-Ton Stores Inc. and Burlington Coat Factory Warehouse Corp. remained at their lows.

Beazer unaffected by downgrades

Homebuilder Beazer Homes received a downgrade and a revised outlook during Thursday's session, but that had little impact on the company's bonds.

One trader seemed surprised that news did little to move the debt, pegging the 8 3/8% notes due 2012 at 75.

"It didn't look like there was any trading," he said.

Another trader said he saw very little in the way of "home stuff" Thursday.

Moody's Investors Service changed it outlook on the homebuilder to negative, citing expectations that the current weak economic environment will continue to affect the company's credit metrics. Moody's also downgraded the Atlanta-based company's bonds to B3 from B2.

Fitch Ratings also cut its grade on Beazer, including the senior notes to CCC+ from B- and the subordinated debt to CCC- from CCC.

Fitch said the downgrade was due to the belief that the housing sector at large will continue to see declines into 2009.

Meanwhile, building products-related companies had a more positive tone, a trader said.

"I've been seeing the sector popping," he said. "I'm not sure why unless it is short covering."

The trader said Nortek Inc.'s 10% notes due 2013 ended at 95 bid, 95.75 offered, "up a good point from yesterday." Ply-Gem Industries Inc.'s 9% notes due 2012 closed at 57.25, while Associated Materials Inc.'s 0% notes edged up to 70 from 67.5.

Research note hurts Sprint

Sprint's debt took a marginal hit after an S&P research note hit the market.

A trader called the 6% notes due 2016 down at 90 bid, 90.5 offered versus 91.5 bid Wednesday and closer to 92 last week.

Another trader also saw the 6% notes at 90.5 and quoted the 8¾% notes due 2032 at 97 bid, 97.5 offered.

"That's a funny one," he said of the wireless provider. "It is BBB, but it definitely trades in [the distressed] universe."

According to credit analyst Allyn Arden, the Overland Park, Kan.-based company will see its credit measures decline over the next year as competition grows and subscribers are lost.

In his research note, Arden said that the company was affected by the subprime meltdown but has tried to combat that by implementing stricter credit checks. However, the iDEN network acquired with Nextel in 2005 continues to lose customers.

S&P might revise its current outlook on the company to negative, Arden noted, if margin pressures are not alleviated.

"The substantial amount of rated debt outstanding has prompted numerous investor inquiries on the company's current and long-term business prospects as well as its financial profile," Arden wrote in a research note. "Standard & Poor's views the Nextel segment as being the weaker part of the overall business given its significant subscriber losses and declining [average revenue per subscriber]."

Six Flags: No news is good news?

Amusement park operator Six Flags' bonds climbed 1 to 2 points, but there was no news to prompt the move, traders said.

A trader quoted the 9 5/8% notes due 2014 at 60.5 bid, 61.5 offered, the 9¾% notes due 2013 at 63 and the 8 7/8% notes due 2010 at 61.25.

"They were up a point at the open, then gained another point," he said of the 8 7/8% notes. During the previous session, the bonds traded at 58.75, he added.

"But I don't think there was a lot of volume in the bonds," he said.

However, another trader called the debt "relatively" busy, placing the 9¾% notes at 63 and the 9 5/8% notes at 60.5 bid, 61.5 offered, up from opening levels of 59 bid, 60 offered.

Another market source called the 9 5/8% notes 1.5 points better at 60 bid.

The company's bonds had gained during trading on Wednesday, also on no news.

Six Flags is a New York City-based operator of amusement parks.

Retailers mixed after sales data

Among retailers, a trader said Dollar General's bonds were "active at the highs," with its 11 7/8% notes due 2017 trading at "99 and change."

The bonds had gained in the previous session on "really good" numbers, he said. Before the quarterly report, the bonds had been at 94 bid, 95 offered.

"Discount retailers is the only sector that has outperformed in retailers," he said.

Meanwhile, both Bon-Ton Stores and Burlington Coat Factory were "trading at their lows," with Bon-Ton's 10¼% notes due 2014 in the mid-40s and Burlington's 11 1/8% notes due 2015 at 74.

Elsewhere, a trader said "a bunch" of Rite-Aid paper traded, ending slightly better than Wednesday.

The trader pegged the 9½% notes due 2017 at 65, the 9 3/8% notes due 2015 at 65.5 bid, 66 offered and the 7½% notes due 2017 at 83.5 bid, 84 offered.

The mixed session for the sector came as monthly retail sales reports started to come out. According to the International Council of Shopping Centers-UBS sales index, sales gained 1.7% during the back-to-school season, below the 2% forecast. The monthly reading was also below the 2.3% average since the beginning of the fiscal year.

Broad market tidbits

Isle of Capri Casinos' 7% notes due 2014 remained in the 74 context after posting "good news" - i.e., good numbers - on Wednesday.

Ford Motor Co.'s debt traded actively, a trader said, and ended slightly better. He quoted the longer issues, such as the 6.05% notes due 2014, at 51 bid, 51.5 offered and the 5.8% notes due 2009 at 98.5 bid, 99 offered.

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