Rite Aid trades up; TXU gains despite swing to loss; Kodak drifting lower; Horizon Lines slips

By Stephanie N. Rotondo

Portland, Ore., April 29 - Distressed debt ended the week with a firmer tone and Rite Aid Corp. followed suit, closing Friday's session higher in more-active-than-usual trading.

However, there was no news out to cause the gains in Rite Aid.

Meanwhile, earnings season continued to cause gyrations in the market. Energy Future Holdings Corp. put out its first-quarter numbers. Despite a swing to a loss, the bonds ended stronger.

Eastman Kodak Co. released its earnings on Thursday and a trader said the lower-than-expected net loss was pressuring the company's debt.

Poor earnings, according to market sources, were also pressuring Horizon Lines Inc.'s paper.

Rite Aid active, better

A trader said Rite Aid was the "bond du jour," as the bonds closed up "pretty significantly."

He saw the 9 3/8% notes due 2015 at 931/2, the 9½% notes due 2017 at 92½ bid, 93 offered and the 8 5/8% notes due 2015 at 93¾ bid, 94 offered.

He called all of the issues up about a point and said that about $70 million to $80 million - or more - of the three issues turned over.

Another trader said the Camp Hill, Pa.-based drugstore chain's debt was "better," deeming the 9½% notes a point higher at 92½ bid, 93 offered.

On Wednesday, Rite Aid released its same-store sales report for April, showing a 0.5% improvement for the four weeks ending April 23.

Total sales fell 0.4% to $1.95 billion from $1.96 billion. Prescription revenue accounted for 68.3% of that figure.

Year to date, same-store sales were up 0.2%.

Both the monthly and yearly sales increases were due to gains in the pharmacy section.

Total sales for the year was down 0.7% at $3.9 billion, compared with $3.93 billion the year before.

Prescriptions made up 68.8% of total sales.

TXU boosted by earnings

Energy Future Holdings - or TXU as it is better known - saw its bonds firming on the back of the company's earnings release, traders said.

One trader said the 10¼% notes due 2015 were a point better around "65-ish."

Another trader saw the 11½% notes due 2020 gaining nearly half a point to close at 102¼ bid, 102¾ offered.

For the first quarter, TXU swung to a loss due to a February freeze that caused power plant failures. Net loss was $362 million, compared with a $355 million net profit in 2010.

Sales were also down at $1.67 billion, a 16% decline.

Kodak 'drifting lower'

Eastman Kodak paper "seemed like it was drifting lower," a trader said.

The trader quoted the paper at 101½ bid, 102 offered, down from levels around 103½ before the Rochester, N.Y.-based company's Thursday earnings release.

Another trader called the notes down over a point at 101½ bid, 102½ offered.

On Thursday, the camera products maker posted a loss of $304 million, or $1.13 per share. That compared with a profit of $240 million, or 74 cents per share, the year before.

Analysts polled by Thomson Reuters had expected a loss of 61 cents per share.

Revenues dipped 31% to $1.32 billion, also falling short of expectations.

The bigger-than-expected loss was blamed on higher raw material prices - particularly silver - as well as less money made via licensing.

Horizon falls on numbers

Horizon Lines' debt was "pretty active," a trader said, as investors digested multiple news items out on the container shipping company.

The trader said the 4 ¼% convertible notes due 2012 fell to 84½ bid, 85½ offered from 88½ bid, 88¾ offered on Thursday. However, he noted that the bonds had been trading in an 84-85 context on Wednesday as well.

Another market source placed the converts around the 85 mark, down from 87 bid, 89 offered.

On Thursday, Horizon announced its Department of Justice-issued fine related to a price-fixing charge had been cut from $45 million to $15 million. The reduction "gives them a little more breathing room," a market source said, as the company is now no longer in default.

On Friday, the company announced its first-quarter results, reporting a net loss of $33.3 million, or $1.08 per share.

That compared with a loss of $11.7 million, or 38 cents per share, the year before.

Sales, however, were higher at $285.4 million.

The company said it was looking to refinance itself in the wake of the lowered DOJ fine to "better position Horizon Lines for long-term success."

"That's been out there for a little bit," a source said of a potential restructuring. "I would assume we'll see some sort of debt-for-equity swap."

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