Bon-Ton gets boost from sales; Harry & David may improve on numbers; MGM debt steady to softer

By Stephanie N. Rotondo

Portland, Ore., Feb. 4 - New issues took some focus away from the distressed debt market Thursday and weak equities didn't help.

Still, there was a fair amount of news out that helped to move some distressed credits around.

Bon-Ton Stores Inc. posted favorable sales for January. That news helped the company's bonds trade somewhat actively, though traders called the paper more or less unchanged.

Harry & David Holdings Inc. also reported numbers. The second-quarter results showed improved operating income, though sales were still lower. A trader saw some of the bonds trading before the financials were released after the market closed and expected that the debt would head for higher ground.

Also, MGM Mirage's debt sank some, according to some traders. Still others deemed the debt steady, though both groups called the name active. Late Wednesday, MGM was reported to be seeking an extension on its credit facility.

There was also some action in Tronox Worldwide LLC and Eastman Kodak Co., market sources reported. Kodak, for its part, released its 2010 forecast, which could have accounted for the activity.

Bon-Ton gets boost from sales

A 5.3% increase in comparable store sales for the month resulted in a moderately active day for Bon-Ton stores' bonds.

A trader said about $25 million of the 10¼% notes due 2014 changed hands right around 921/2.

"They had numbers that were better, so I think that helped a bit," he said, though he noted that the issue was only "a teeny bit better."

Another source quoted the issue at 92 bid, 92½ offered, also up just a tad.

For the four weeks ending Jan. 30, the York, Pa.-based retailer saw its total sales improve by 4.7% to $180.1 million, versus $172 million in January 2009.

However, fourth-quarter sales were down 2.8% to around $1 billion. For fiscal 2009, total sales dropped 5.4% to $2.95 billion.

"January sales finished strong with our semi-annual home sale generating solid comparable sales gains in soft home, hard home and furniture," remarked Tony Buccina, vice chairman and president of merchandising, in a press release.

"Throughout the fourth quarter our merchants successfully executed our merchandise strategy, resulting in reduced comparable store and clearance inventories and improved margins reflecting increased sales of regular-priced merchandise. Customers are indicating their approval of our new spring merchandise assortments, particularly as evidenced by early sell-through of our private brand offerings. We are encouraged by the solid finish to the fiscal year."

Additionally, Keith Plowman, chief financial officer, said that "based on the preliminary results in the fourth quarter, we expect our earnings for fiscal 2009 will be at or near the high end of our guidance range provided in our Nov. 19, 2009 press release."

Bon-Ton ended January with $358 million available under its revolving credit facility.

A conference call to discuss the fourth-quarter and full-year results has been scheduled for March 10 at 10 a.m. ET.

Elsewhere in the retail realm, Michaels Stores Inc.'s 10% notes due 2014 "saw some action," a trader said. He called the issue down "about a point" to 1001/2.

Another market source called the paper down more than a point at 100¼ bid.

Harry & David may get help from numbers

Also in the world of retail, Medford, Ore.-based Harry & David released its second-quarter results for the period ending Dec. 26.

The numbers came just after the market closed and a trader saw the 9% notes due 2013 trading around 69. However, he opined that the debt could move around some in the next session.

Another trader also pegged the notes with a 69 handle.

For the quarter, Harry & David's net sales fell 13.2% to $267 million from $307.7 million the year before. The lower sales resulted in a 10.5% decline in consolidated gross profit, which came to $131.2 million.

Still, operating income gained 38.9% to $59.6 million. Net income also improved, coming in at $31.7 million.

"Although still confronted by a challenging retail environment, we were pleased with the progress made against several strategic initiatives, which led to improved gross margins, lower SG&A expenses and a stronger cash position," said Bill Williams, president and chief executive officer, in the earnings release. "We remain focused on delivering superior customer service, while improving profitability and cash flow."

As of Dec. 26, the company had $108.5 million in cash available, compared with $95.2 million for the same quarter of the prior year.

MGM debt steady to softer

MGM Mirage's bonds were unchanged to weaker just one day after the company sought to extend its $5.55 billion credit facility.

A trader called the name "pretty active," dubbing the 5 7/8% notes due 2014 "the most active" under the MGM umbrella. He deemed the debt down a deuce at 82 bid, 83 offered.

But another trader said it was the 6¾% notes due 2012 that were the most active at 94½ bid, 95 offered. He called the about unchanged on the day.

The second trader also saw the 8½% notes due 2010 "up and down around par."

At another desk, the 6 5/8% notes due 2015 were seen dropping about 3 points to 80¾ bid.

Late Wednesday, the Las Vegas-based casino operator was reported to be seeking an amendment to its credit facility. The extension would push out the maturity of the facility to February 2014 from October 2011. The request was said to be released to lenders on Wednesday, with response due by Feb. 16.

Also, the amendment would allow for the issuance of up to $800 million in new secured notes.

Tronox notes dip

A trader said there was "a bunch of trading" in Tronox Worldwide's 9½% notes due 2012. He called that "unusual," as the credit does not trade often.

The trader said the bonds opened around 96, but fell back to 94 by the end of the day.

Another said the notes traded between 94 and 96, settling somewhere in the middle by the end of business.

Earlier in the week, it was reported that Tronox's official unsecured creditors committee had asked the bankruptcy judge overseeing the company's case to approve a $5 million settlement with Credit Suisse Group AG. The settlement is a key part of the company's reorganization plan.

Kodak bonds 'still higher'

There was "a lot of action" in Eastman Kodak's 7¼% notes due 2013, according to a trader.

The trader said the notes were "still higher" around 94, up "a good point or 2 from yesterday."

Another source said the debt improved by about 3 points to 94½ bid.

The company released its 2010 guidance Thursday, which anticipate earnings between negative $50 million and positive $50 million. Total revenue is expected to be between $7.5 billion to $7.7 billion.

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