Caesars bonds gyrate on asset sale news, Q4 results; NII still smarting from liquidity warning

By Stephanie N. Rotondo

Phoenix, March 3 - It was a day of news for the distressed debt market.

Caesars Entertainment Corp. announced early in the day that it was selling off $2.2 billion of assets to an affiliate. In connection with that announcement, the company also reported preliminary fourth quarter results. The numbers showed a wider loss on lower revenues.

Meanwhile, NII Holdings Inc.'s debt continued to reel from the company's earnings announcement on Friday. Bonds were off another 1 to 2½ points on the day as investors remained concerned about the company's liquidity warning.

Some companies, however, had news out but there was little to no reaction in the bonds.

Sorenson Communications Inc., for instance, reportedly filed for bankruptcy late Sunday. Several sources said that there was no trading going on in the company's debt.

"The market knew that this was coming," one trader said.

Caesars announces asset sale

Caesars Entertainment's debt took a hit on news the company was selling off assets to an affiliate.

The Las Vegas-based casino operator also posted preliminary quarterly results that were not as good as the market was hoping for.

A trader saw the 10% notes due 2018 at 471/4, which he said was off "almost a point." The 10¾% notes due 2016 were down half a point at 861/2.

Another trader said the 10% notes "initially traded lower," but that they recovered some to end in a 47½ to 48 context.

That was up from the day's low around 46, he said.

Caesars is selling four of its hotels to its affiliate Caesars Acquisition Co. Though the hotels are valued at about $2.2 billion, Caesars Entertainment will receive just $1.8 billion from the sale.

Proceeds will likely be used to pay down bank debt.

On the news, Moody's Investors Service placed the company on watch for a potential downgrade. The rating agency said that with the company's high debt load, it will have to drastically reduce debt in order to compensate for the lost income from the properties.

In addition to announcing the sale, Caesars also provided a preliminary look at its fourth-quarter results.

The company is expecting revenues of $2.05 billion to $2.11 billion for the last quarter of 2013, down from the $2.13 billion analysts polled by Bloomberg were expecting on average.

Net loss would be somewhere between $1.7 billion and $1.82 billion for the period, compared with a loss of $480.3 million a year earlier.

NIHD remains weak

Investors continued to react badly to NII Holdings' earnings release from Friday.

One trader saw the 10% notes due 2016 falling over a point to 43 1/8, while the 7 5/8% notes due 2021 dropped nearly 2½ points to 35 1/8. The 8 7/8% notes due 2019 were off 1¼ points to 411/4.

Another trader said the debt "continued to trade lower," seeing the 10% notes in a 42 to 43 context and the 8 7/8% notes in the low-40s.

In its earnings release on Friday, the Reston, Va.-based provider of Nextel mobile phone service in Latin America said it lost 247,000 subscribers in the fourth quarter alone. Net loss was $745.8 million, or $4.33 per share.

The company ended the year with $5.8 billion in debt and $2.4 billion in cash and equivalents.

Though company management remained optimistic about the way forward, liquidity issues were raising concerns.

"These concerns regarding the company's liquidity, in combination with the potential impact if the company cannot satisfy certain financial covenants under its existing operating company debt obligations in 2014, raise questions about the company's ability to continue as a going concern," NII said in the earnings release.

Come Monday, Standard & Poor's downgraded the company's credit rating to CCC from CCC+.

The outlook is negative.

Forest Oil dribbles down

Forest Oil Corp.'s debt remained under pressure as S&P dropped the oil company to B- from B+.

The outlook is negative.

A trader said the 7¼% notes due 2019 lost 1½ points, ending around 85. The 7½% notes due 2020 declined 1¼ points to 843/4.

The bonds were trading in the low- to mid-90s early last week, ahead of the company's earnings release on Wednesday.

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