Sands jumps on infusion news; Idearc notes active, lower; Pilgrim's bonds slip; Freescale unchanged

By Stephanie N. Rotondo

Portland, Ore., Nov. 12 - It was a heavy day in the distressed bond market Wednesday, traders reported.

One trader said the day felt "very, very heavy and seeing lots of selling." That same trader also used the term "panic selling" to describe the day.

Another trader said trading "started off slow." As some things seemed to pick up, he spent the time "watching it all fall apart, for the most part."

"There were very few things that were higher today," he added.

One name that was higher - significantly, even - was Las Vegas Sands Corp. A $2 billion-plus recapitalization plan announced Tuesday excited investors and, come Wednesday, the casino and hotel operator's bonds jumped up anywhere from 9 to 10 points on the day. The company's bank debt also improved.

Meanwhile, Idearc Inc. was among the more active issues of the session. But the bonds continued to decline, along with those of sector rival R.H. Donnelley Corp. There was no news to cause the move.

Pilgrim's Pride Corp.'s bonds continued to see losses in its debt, after Tyson Foods Inc.'s grim quarterly report earlier in the week. As the notes lose steam, some believe a bankruptcy filing is not far ahead.

Fitch Ratings downgraded Freescale Semiconductors Wednesday, but the news seemed to have little effect on the company's bonds. A trader called the debt unchanged, while others said trading was light.

There were only offers for Primus Telecommunications Group Inc.'s notes, a trader said, following the company's earnings release on Monday. The disappointing numbers gave already-concerned investors more cause to believe Chapter 11 was imminent, he added.

Sands' debt jumps

Las Vegas Sands announced a $2.14 billion recapitalization plan on Tuesday and come Wednesday, the bonds reacted positively.

A trader said the 6 3/8% notes due 2015 were "up hugely" on the news at 61 bid, 62 offered. He called that up at least 9 points.

Another trader saw the bonds "straddling 61," up from opening levels around 51.

"They were cranking on that news," he said. "They were up like 10 bucks."

The Sands, along with its subsidiary, Venetian Macau, also saw bank debt levels head higher on Wednesday, according to traders.

The Las Vegas Sands strip of delayed-draw term loan and term loan B debt was quoted at 61.5 bid, 64 offered, up 3.5 points when compared with Monday's levels, by one trader, and at 62 bid, 65 offered, up from Friday's levels of 57 bid, 58.5 offered, by a second trader.

The Venetian Macau term loan was quoted at 66.5 bid, 68.5 offered, up 3 points on the day, the first trader remarked.

Last week, Las Vegas Sands had warned that it would likely be unable to comply with its credit facility leverage ratio for the quarter ended Dec. 31, unless it achieved increased levels of adjusted EBITDA, decreased the rate of spending on development projects, obtained additional financing, the proceeds from which could be used to reduce net debt and elected to contribute up to $50 million of capital from cash on hand to its Las Vegas operations.

At that time, the company said it was working with its financial adviser to develop and implement a capital raising program that would be sufficient to address funding needs, but that if additional funds were not raised, the company would need to obtain waivers or amendments under the credit facility, and without these waivers/amendments a default would occur that would trigger cross-defaults under other financing agreements.

But come Tuesday, it seemed like the dire straits were avoided as the company announced the capital raising. The gaming operator raised the funds in an effort to avoid defaulting on some of its loans, as well as to keep a bankruptcy filing at bay.

Under the plan, the family of the company's chairman and chief executive, Sheldon Adelsen, will contribute $525 million of the proceeds, while the company also plans to sell $1.62 million in an additional 181.9 million shares of common stock at $5.50 per share. Company founder Adelsen, who owns about 65% of the casino personally and through family trusts, will kick in his portion by purchasing 5.25 million shares of preferred stock and another 87.5 million shares of common stock.

"Somehow they raised a billion dollars in equity," a bond trader said. "I don't know why anybody would buy the equity, but they are."

The rally in the corporate debt came despite a downgrade from Moody's Investors Service.

Las Vegas Sands is a Las Vegas-based developer of multi-use integrated resorts.

Idearc bonds active, lower

Idearc's bonds traded actively, market players reported, and continued to decline, though there was no news.

One trader quoted the 8% notes due 2016 lower at 13 bid, 15 offered. But another saw them even weaker at 12.75 bid, 13.75 offered, down from opening levels around 16.

The second trader said he thought he saw a news story indicating that the phonebook publisher's cash flow had improved.

"But that would have made [the bonds] better, so I don't know," he said.

Another source pegged the notes at 14.5 bid, down 2.5 points on the day.

The source also saw Dex Media Inc.'s 8% notes due 2013 down 2.5 points to 20.5 bid. Dex's parent, R.H. Donnelley, also saw its debt soften, its 6 7/8% notes due 2013 down a point at 22 bid, 22.5 offered and its 8 7/8% notes due 2016 and 2017 at 19 bid, 21 offered from 21 bid, 22 offered previously.

Pilgrim's notes continue descent

Pilgrim's Pride's debt continued to decline during the mid-week session, market sources said.

A trader called the bonds "much lower," the 7 5/8% senior notes due 2015 at 27 bid, 29 offered and the 8 3/8% subordinated notes due 2017 at 7 bid, 9 offered. That compared with levels of 11 bid, 12 offered last week.

Another trader echoed the market on the subordinated paper, but placed the seniors at 25 bid, 27 offered.

On Monday, the nation's largest poultry producer said it had hired William Snyder of CRG Partners as its chief restructuring officer. The hiring of a CRO was a condition on the company's latest waiver agreement with its lenders. Late last month, the company said it would enter the 30-day grace period on a coupon payment. At that time, the bonds began trading flat, typically an indicator that a bankruptcy filing was looming.

Furthermore, investment research firm Morningstar cut its value on Pilgrim's stock to $0 per share from $7.50 per share previously.

"After taking into account Tyson [Foods Inc.'s] recent announcement that it is maintaining production levels, we are changing our fair value estimate for Pilgrim's Pride to $0," analyst Ann Gilpin said in a note to clients.

In the rest of the sector, a trader said Smithfield Foods Inc.'s bonds "keep going lower." The trader called the company's various issues "all down a couple points," its 7% notes due 2011 at 69 bid, 70 offered from 71 bid, 72 offered previously, its 7¾% notes due 2013 at 63 bid, 65 offered and its 7¾% notes due 2017 at 62 bid, 63 offered.

Freescale unaffected by downgrade

Freescale Semiconductors' paper "didn't seem much changed from last week," a trader said, after a downgrade from Fitch Ratings.

The trader quoted the 9 1/8% notes due 2014 at 32 bid, 35 offered and the 8 7/8% notes due 2014 at 46 bid, 48 offered.

Another source saw the 9 1/8% notes quoted early on in the session at 32 bid, 34 offered.

Fitch cut its issuer default rating on the chipmaker to B from B+. The company's debt structure also got slashed and the outlook is negative.

The rating agency said that the downgrade was due to the expectation that free cash flow will be negative through the end of the year and into 2009, as consumers tighten their belts and production cuts in the automotive industry pressure the company. Fitch also noted that lower profitability and a recent revolver drawdown could result in weaker credit protection measures.

Trader: Primus bankruptcy looms

Primus Telecommunications released numbers earlier in the week and, in the words of one trader, the results were "not good."

The trader said there were offers for the company's debt, but no bids. He saw the 8% notes due 2014 offered at 19, the 3¾% notes due 2010 at 45 and the 12¾% notes due 2009 at 70.

"Primus is nothing but for sale," he said. "Folks thinking they will have to reorganize via Chapter 11 unless things change somehow and not likely."

For the third quarter, McLean, Va.-based Primus reported net revenue of $232 million, a $4 million decline from the year before. A net profit of $47 million in the previous quarter and a profit of $5 million in the third quarter of 2007 turned into a net loss of $33 million in 2008.

"The recent upheaval in the global capital markets has spawned recessionary forces and caused a volatile disruption in currency exchange rates, and Primus has not been spared," K. Paul Singh, chairman and chief executive officer, said in a prepared statement. "It now seems distant when we reported on July 31, 2008 that we had attained our second consecutive quarter of net revenue growth. That momentum caused us to revise upward both our revenue and adjusted EBITDA guidance for 2008, although these were expressly premised on the stability of currency exchange rates. That assumption has become a casualty of recent global events."

Sara Rosenberg contributed to this article.

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