Rite Aid climbs on launch of new issue, tender offer; Silver Legacy debt falls, offering nixed

By Stephanie N. Rotondo

Portland, Ore., Feb. 14 - The distressed debt arena was mixed Tuesday, as investors remained focused on "new issues and anything earnings-related," a trader said.

Even Rite Aid Corp. priced a new issue during the session. The Camp Hill, Pa.-based drugstore chain announced the sale of $481 million 9¼% notes due 2020, the proceeds from which will be used to take out the 8 5/8% notes due 2015.

Though the new issue will extend maturities out, a trader did note that it seemed "kooky" that the company would do so via a higher coupon. Still, the existing debt headed upward.

Meanwhile, a trader said that Silver Legacy Capital Corp.'s debt got pushed down as much as 15 points on the day following news that the parent company - Circus and Eldorado Joint Venture - had called off a new note offering and tender for an upcoming maturity.

Also weaker were NewPage Corp.'s first-lien notes. The bonds lost ground after the bankrupt papermaker said it was seeking to relax certain covenants under its debtor-in-possession credit facility.

Exide Technologies Inc. was another credit on the decline Tuesday. On Monday, Standard & Poor's had revised its outlook on the Milton, Ga.-based battery maker to negative, following a disappointing earnings release last week.

Rite Aid rises on new issue

Rite Aid priced a new issue on Tuesday, a $481 million issue of 9% notes due 2020.

The deal priced at par. Proceeds from the sale will be used to tender for the 8 5/8% notes due 2015.

The news gave Rite Aid's existing complex a boost, according to traders.

One trader saw the 7.7% notes due 2027 at 85, up 6 points on the day. The 9½% notes due 2017 were trading around 102 and the 8 5/8% notes at 1021/2.

Another market source called the 8 5/8% notes up 1½ points at 102¾ bid.

The new issue was rated CCC by Fitch Ratings, CCC by S&P and Caa3 by Moody's Investors Service.

For its part, S&P also placed a recovery rating of 6 on the new notes, reflecting an expectation of a negligible recovery in the event of a default. S&P also noted that the company's financial risk profile would remain "highly leveraged" due to its substantial debt burden.

Still, a trader remarked that it was "kind of kooky" that the company would take out a lower coupon with a higher coupon just to extend the maturity.

Silver Legacy debt pounded

Silver Legacy Capital's $143 million of outstanding 10 1/8% mortgage notes due March 1 - issued by Circus and Eldorado Joint Venture - dropped as much as 15 points on the day, according to a trader.

The trader said the declines were due to the company's cancellation of a $120 million second-lien notes offering. The proceeds from the sale would have been used to pay for the upcoming maturity on the 10 1/8% notes.

He saw the bonds trade down to 80.

"They probably should be trading flat," he said. "But I guess they've got two weeks to do something."

Another market source deemed the issue down only 3 points, quoting them at 87 bid, 87½ offered, down from 90 bid, 90½ offered on Monday.

Moody's downgraded the notes to Ca from Caa3 on the pulled new issue and subsequent tender offer.

The company said it was continuing talks with noteholders to restructure the looming maturity.

On Thursday, the general manager of the Silver Legacy Resort Casino in Reno sent a letter to employees assuring them the hotel was not in any danger.

"I want to assure you that our business is doing well," Gary Carano said in the letter. "We are continuing to grow as a leading property in Northern Nevada. We believe our discussions with lenders are going to help us make our company even stronger."

NewPage bonds slip

A trader said NewPage's 11 3/8% first-lien notes due 2014 were "down quite a bit" on news the company was seeking to relax certain covenants under its DIP facility.

He saw the paper going out around 63, down 3 to 4 points on the day, but up from the intraday low of 62.

Another trader pegged the issue in a 62-63 ZIP code.

The bankrupt Miamisburg, Ohio-based papermaker said Tuesday that it was looking to amend its amended and restated superpriority debtor-in-possession credit and guaranty agreement in order to reduce its minimum consolidated adjusted EBITDA requirements and to increase the notes payment reserve, among other things.

Exide paper falls again

Exide Technologies' debt was rebounding Monday, but the joy was short-lived as the notes dropped as much as 4 points come Tuesday.

A trader called the 8 5/8% notes due 2018 down 3½ points to 76.

Another trader quoted the issue at 76 bid, 77 offered, down 3 to 4 points.

On Monday, Standard & Poor's revised its outlook to negative, citing the company's "vulnerability" going forward.

On Friday, the company reported its fiscal third-quarter earnings on Friday. Profit more than doubled due to a $76.7 million French tax benefit, but revenues unexpectedly declined.

The company blamed the revenue dip on "unseasonably warm" weather.

For the quarter ended Dec. 31, net profit was $68.2 million, or 84 cents per share, versus $31.2 million, or 38 cents per share, the year before. Revenues declined 2% to $784.1 million.

Analysts polled by Thomson Reuters were expecting earnings of 20 cents per share on revenues of $847 million.

Looking forward, Exide said that continued mild weather in North America and Europe would likely impact its results, as would a slowing economy.

Dynegy declines

Dynegy Holdings LLC's debt was unchanged to slightly weaker on the day, according to traders.

One trader saw the 7¾% notes due 2019 falling half a point to 64. Another market source called the bonds down a full point at 64 bid.

But a third source said the notes were "kind of unchanged" around "64-ish."

Dynegy Holdings is the bankrupt subsidiary of Houston-based power producer Dynegy Inc.

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