Distressed debt stays strong to close week; Caesars holders give go-ahead on restructuring plan

By Stephanie N. Rotondo

Phoenix, Dec. 19 – There was “continued strength” in the distressed debt market on Friday, though he added that the space was “not all that active.”

Another trader agreed that the market seemed “frozen up,” given the week’s volatility.

“I think people are just hoping that we hang on to these gains,” he said.

Traders gave mixed reviews of how Caesars Entertainment Corp.’s debt did in trading, as it was reported that the company had come to terms with bondholders on its restructuring plan.

The casino operator had previously inked a deal with senior lenders, but had not gotten the senior bondholders to sign on.

Meanwhile, Nortel Networks Corp.’s bonds gave back some of the gains seen in the previous session. Those gains came after a U.S. bankruptcy judge ruled that debtholders at the company’s U.S. unit could receive $1 billion in interest.

Caesars gets bondholder OK

Caesars has reportedly gotten its senior bondholders to approve of a restructuring plan that will put the company’s largest unit into bankruptcy by mid-January.

But traders had mixed messages on how the company’s debt reacted.

One trader saw the bonds trading mostly lower, the 10% notes due 2018 off half a point at 17½ and the 12¾% notes due 2018 down a point at 17½.

He also saw the 10¾% notes due 2016 rising over a point to 14¼.

Another market source pegged the 10% notes at 17¼ bid, up almost a point on the day.

With senior bondholders and lenders locked up, the Las Vegas-based company will now have to place its Caesars Entertainment Operating Co. into bankruptcy by mid-January. While under Chapter 11 protections, the unit will put into place a plan that will turn it into a two-pronged real estate investment trust – one side owns the properties and the other manages them.

However, Caesars still has to get a certain amount of first-lien bondholders and other senior creditors to agree to the deal.

The opco missed a payment on its 10% second-lien notes on Monday, putting the unit into a 30-day grace period before a default is declared.

Nortel lightens up

Nortel Networks’ debt was “a little bit lower,” a trader said Friday, as the “initial optimism” on the latest court ruling faded away.

“I think there’s a thought that [the case] will continue to drag on,” he said.

He saw the 10 1/8% notes that came due in 2013 slipping to 111 bid, 111¼ offered.

Despite the Canadian telecommunications company’s objections, U.S. bankruptcy Court judge Kevin Gross approved a deal that would give debtholders of the company’s U.S. unit $1 billion in interest on the approximately $4 billion of debt they hold.

The bondholders called the deal a compromise on their claims, which would have given them up to $1.6 billion in interest.

Nortel is still looking to the courts to decide how to divvy up over $7.3 billion in the company’s liquidation.

© 2015 Prospect News.
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