Distressed market gains amid lightened liquidity; Caesars plans all-stock merger, bonds up

By Stephanie N. Rotondo

Phoenix, Dec. 22 – There was a firm feel to the distressed debt market on Monday, even as liquidity was scarce.

“It was a quiet one,” a trader said. “And it’s only going to get quieter” as the Christmas and New Year holidays approach.

There was some activity, however, in Caesars Entertainment Corp., as the parent company said it planned to merge with its Caesars Acquisition Co. unit.

The all-stock deal will help the parent company maintain its cash holdings as it prepares to place its Caesars Entertainment Operating Co. unit into bankruptcy by January 15.

Last week, the company said it had reached a deal with senior bondholders approving the restructuring plan that would place the subsidiary into Chapter 11 protections. Upon emergence, the opco will be a two-pronged real estate investment trust, with one side owning the properties and one side managing them.

A trader said the 10% second-lien notes due 2018 were up a touch on the news.

Away from Caesars, oil and gas names continued to trade around, but the day’s generally positive tone helped most credits gain ground – even as oil prices declined yet again.

Cliffs Natural Resources Inc.’s bonds were mostly down on the day as Australia cut its iron ore price estimate for 2015.

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