First Data debt hurt by CFO exit; Blockbuster notes slip; GM ends weaker; Smurfit-Stone softens

By Stephanie N. Rotondo

Portland, Ore., May 25 - The distressed debt market gyrated throughout Tuesday trading, as the equity market took another negative turn.

One trader said distressed credits were "generally speaking, down 1 to 3 [points] across the board," but that some names rallied a bit before the end of business.

"By the end of the day, a lot of stuff came back, but there was not trading," he said, adding that activity seemed to be more when things were weaker.

But another trader said it "never got particularly ugly," and that there was a "boatload of trading." He said that overall volume in the secondary world was just under $2 billion.

First Data Corp. was once again the nom du jour, as the company's bonds again reversed direction and lost as much as 6 points on the day. The declines came as the company announced some leadership changes, including the departure of its chief financial officer.

Blockbuster Inc. was also weaker, according to traders. The company is in the middle of a proxy fight - and that is on top of attempting to recapitalize its balance sheet.

Even benchmark distressed names like General Motors Corp. and Smurfit-Stone Container Corp. were softer day over day. Still, in the case of GM, sources noted that price movements were not as volatile as some others.

First Data debt lower

A management shakeup sent First Data's debt - which had recouped some of its losses from last week during Monday's session - back down, and the bonds lost as much as 6 points on the day.

According to one market source, the 9 7/8% notes due 2015 fell as much as 6 points during the day, but managed to come back just a tad to end at 78¼ bid.

At another desk, a trader said First Data bonds "got crushed," seeing the bonds down "like 5 points." He pegged the 9 7/8% notes at 78 and the 10.55% notes due 2015 around 73.

Another trader saw the 10.55% notes take a "4- to 5-point swing" on the news that "those guys [the company's exiting managers] resigned or got pushed out, depending on whom you listen to." He said the paper fell below 70 briefly, but ended the day with a 73 handle, with about $100 million changing hands. He added that, including all of the company's bonds, a couple $100 million of the debt traded.

And, yet another trader saw the 10.55% notes finishing at 73 bid, 74 offered, "so down from 77 [bid], 78 [offered] last night."

First Data's term loan debt also lost some ground in the secondary market, according to traders.

The term loan B-1 was quoted by one trader at 83½ bid, 84 offered, down from 84 bid, 84½ offered, by a second trader at 83 3/8 bid, 83 7/8 offered, down from 84¼ bid, 84¾ offered, and by a third trader at 83½ bid, 84 offered, down from 84 3/8 bid, 84 7/8 offered.

The term loan B-2 was quoted by the first trader at 83½ bid, 84 offered, down from 84 bid, 84½ offered, by the second trader at 83¼ bid, 83¾ offered, down from 84 1/8 bid, 84 5/8 offered, and by the third trader at 83 3/8 bid, 83 7/8 offered, down from 84¼ bid, 84¾ offered.

And the term loan B-3 was quoted by the first trader at 83¼ bid, 83¾ offered, down from 83¾ bid, 84¼ offered, by the second trader at 83¼ bid, 83¾ offered, down from 84 1/8 bid, 84 5/8 offered, and by the third trader at 83 3/8 bid, 83 7/8 offered, down from 84¼ bid, 84¾ offered.

Early Tuesday morning, First Data announced that Pat Shannon, chief financial officer, had decided to resign his post. Shannon agreed to stay on during a transition period. His last day will be June 30.

Ray Winborne, controller, has been promoted to acting chief financial officer.

Shannon's departure was not the only one announced, either. Bob DeRodes, executive vice president of global operations and technology, is leaving the company too. Replacing him is chief technology officer, Kevin Kern.

Grace Chen Trent, executive vice president of communications also resigned from the company, effective June 30.

Chatter in the market is that KKR & Co., the owner of First Data, might be looking to alter the company's leadership in an effort to have more control. Earlier this month, the Atlanta-based credit card payment processor reported a net loss of $240 million for the first quarter.

Calls to the company seeking comment on the leadership changes were not returned Tuesday.

Blockbuster notes slip

Blockbuster bonds were "definitely weaker," a trader said, as another noted that the notes "got hit" during Tuesday trading.

The first trader saw $10 million to $15 million of the 9% notes due 2012 trading between 12 and 13 7/8 throughout the session. He remarked that activity was "reasonable in terms of people asking about them, but there wasn't a lot of trades."

The second trader said the 9% notes "traded down as low as 12" before moving back up to close at 13½ bid, 13½ offered. The 11¾% notes due 2014 performed similarly, trading down to around 57, but closing a bit higher at 58 bid, 59 offered.

A third trader called the 9% notes down "another 3 points" at 123/4.

"They got trouble," he said.

The Dallas-based movie rental chain is in the middle of a proxy fight with investor Gregory Meyer, who is attempting to win a seat on the board of directors. Meyer is seeking to take the seat of James Crystal.

Meyer is the founder of a movie-kiosk business. He sold the company to Coinstar - which operates RedBox - in 2007.

But Blockbuster's current board is urging shareholders to vote for its candidates, Kathleen Dore and Joseph Fitzsimmons, as they do not feel Meyer can offer anything to the company.

"We concluded that his very limited experience made it unlikely that he would offer any material contribution to our governance process," the board said in a letter to shareholders sent Monday.

Also, in an article published in The Wall Street Journal on Tuesday, Jim Keyes, chairman and chief executive officer, said recapitalization discussions with stakeholders were "going well," though he declined to give any details beyond that he hoped to have something worked out by the June 24 shareholder meeting.

Blockbuster is attempting to turn itself around, as the struggling economy has hurt its bottom line. There is a rumor in the market indicating that subordinated debtholders have proposed a plan in which they would receive 95% of equity in the company and a new $125 million senior unsecured payment-in-kind note. The noteholders would in turn exchange their current holdings and also contribute $25 million to $30 million in cash.

Rite Aid bonds fall

Also in the retail arena, Rite Aid Corp.'s 9 3/8% notes due 2015 traded between 78 and 791/2, a trader said. He added that about $40 million to $50 million of the notes turned over.

Another source saw the 8 5/8% notes due 2015 falling 3 points to 771/2.

There was no fresh news out on the Camp Hill, Pa.-based drugstore chain. However, the company was scheduled to present at the Citi Food & Drug retail Conference on Tuesday.

Elsewhere in consumer-related sectors, Harrah's Entertainment Inc.'s 10% notes due 2018 were down "almost 2" points at 76, according to a market source.

Another trader saw $40 million to $50 million of the notes trading, hitting a low of 74½ and a high of 77 - the latter being where the debt finished up the day.

"So definitely we kind of got it back a little bit," the trader said.

MGM Mirage's 6 5/8% notes due 2015 were meantime down a deuce at 751/2.

GM ends weaker

General Motors' notes did not see "the same volatility as other names," a trader said, though the Detroit automaker's bonds were definitely on the softer side.

The trader quoted the benchmark 8 3/8% notes due 2033 at 30¾ bid, 31¾ offered, with $60 million to $70 million changing hands.

Another trader placed the issue at 311/4, deeming that down a point on the day.

Yet another trader said the paper hit 29 early on in the session, but came back to end "down another point or 2" at 30½ bid, 31 offered.

In the rest of the autosphere, there were a "couple trades" in Visteon Corp.'s debt, according to a trader. He pegged the 8¼% notes due 2010 at 104 and the 7% notes due 2014 at 106, about unchanged.

Smurfit-Stone softens

A trader said there was "not as much [trading] as you would have expected" in Smurfit-Stone Container's bonds, with about $35 million to $40 million total of the 8¼% and 8 3/8% notes due 2012 trading.

He said the bonds hit a low of 80 and a high of "85-ish" before settling in right in the middle at 833/4.

Another trader said the 8 3/8% notes fell more than 3 points to around 81.

Smurfit-Stone is a Chicago-based manufacturer of paperboard and paper packaging.

Sara Rosenberg contributed to this article

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