Pilgrim's files for Chapter 11; Trump, Harrah's unchanged; GM, Ford mixed as new bailout talks loom

By Stephanie N. Rotondo

Portland, Ore., Dec. 1 - The distressed bond market was still reeling from its holiday weekend, traders reported.

Whether it was word that the United States has officially been in a recession since last December, or if would-be investors still had a turkey hangover, traders said volumes were on the light side.

Even news of Pilgrim's Pride Corp.'s bankruptcy seemed to have little effect. The poultry producer's debt was largely unchanged and traded very little on the news.

Trump Entertainment Resorts Inc.'s debt was also unchanged despite news that the company had missed its Dec. 1 coupon. The story was the same at Harrah's Entertainment Inc. Traders saw only slight changes in the bonds on news that the company had extended its early tender deadline for a previously announced debt swap.

General Motors Corp. and Ford Motor Co.'s term loans headed higher during the session, as the Big Three prepares for its meeting with Congress this week. But the automakers' bonds finished the day mixed.

Pilgrim's files for Chapter 11

Pilgrim's Pride said it filed for Chapter 11 protections Monday. But the news was either expected or investors did not seem to care, as traders saw very little movement in the company's debt.

One trader, who eloquently called the company a "choking chicken," quoted the 7 5/8% notes due 2015 at 12.5 bid, 16.5 offered and the 8 3/8% notes due 2017 at 1 bid, 6.5 offered.

Another trader said less than $7 million bonds traded, pegging the 7 5/8% notes at 16 bid, 17 offered and the subordinated notes at 3 bid, 4 offered.

Yet another source called the bonds better bid, the 7 5/8% notes at 15.5 bid, 16.5 offered, versus levels of 13 bid, 16 offered late last week. He also placed the 8 3/8% notes at 5 bid, 7 offered, which he called "not much different."

The nation's largest chicken producer filed for bankruptcy after months of speculation that reorganization was looming. Rising costs of feed, coupled with low prices for poultry, weighed on the company's balance sheet. Its debt obligations also pressured the bottom line.

"After careful consideration of all available alternatives, the company's board of directors determined that a Chapter 11 filing was a necessary and prudent step and the best way to obtain the financing necessary to maintain regular operations and allow for a successful restructuring," Clint Rivers, chief executive officer, said in a statement. "We expect to emerge from this restructuring a stronger, more competitive company that is well positioned for growth and enhanced profitability."

The bankruptcy filing came after Pilgrim's failed to secure a fourth bank covenant waiver.

After the news, Moody's Investors Service downgraded the company's probability-of-default rating to D from Caa2.

Pilgrim's Pride is a Pittsburg, Texas-based poultry producer.

Trump, Harrah's mostly unchanged

Much like Pilgrim's, Trump Entertainment's bonds were largely unchanged despite news that the company skipped its Dec. 1 coupon payment.

"No one likes that name," a trader said.

A market source noted that trading was "unbelievably light, which was strange, given what happened." He saw the 8½% notes due 2015 at 12 bid, 16 offered, adding that he had seen the bonds both bid for and offered at 15 late last week.

"It was not so much as non-event, but as this point, it was already in the toilet," the source explained as a possible reason for the light trading.

Another trader pegged the issue at 13 bid, 16 offered.

The Jersey Shore casino operator said late Friday it would enter into the 30-day grace period on its bonds, opting to hold on to the $53.1 million to "maintain sufficient liquidity." During the grace period, the company plans to enter into discussions with its lenders in an attempt to restructure.

On the news, Standard & Poor's cut its rating on Trump to D from CCC. Moody's also lowered its grade on the company.

The rating actions reflect the company's announcement that it will forgo making the Dec. 1 interest payment on its senior secured notes, said S&P credit analyst Ben Bubeck.

Elsewhere in the casino arena, Harrah's Entertainment's bonds "got a little more active," a trader said.

The trader quoted the 5 3/8% notes due 2013 at 23.25, with $7 million trading hands. The 10¾% notes due 2016 were seen at 21.

At another desk, a trader saw the 10¾% notes at 23 bid, 2.5 offered and the 5½% notes due 2010 "traded into a 50 bid," leaving the market 49.5 bid, 50 offered.

Another source called the 5¾% notes due 2017 down just more than a point at 13.75 bid.

The world's biggest gaming operator said Monday that it had received tenders for about $4 billion of debt in exchange for new debt with longer maturities. The company said the debt exchange for notes maturing 2010 through 2018 was oversubscribed. It also extended the deadline for the offer.

Still, some did not see the news as all that good.

"Out of the $4 billion of bonds tendering on the early tender date...most were holders of the longer maturity bonds," Gimme Credit analyst Kim Noland wrote in an afternoon comment. But of the bonds the company really wants to swap - those maturing in 2010 and 2011 - only 19% were tendered. That explained why, she wrote, the company decided to extend the early tender date to 5 p.m. on Dec. 5.

Among other casino names, Isle of Capri Casinos Inc.'s 7% notes due 2014 fell nearly 2 points to 41.75 bid, while Station Casinos Inc.'s 6% notes due 2012 dipped to 31 bid.

GM, Ford mixed

General Motors Ford Motor both saw their term loans gain ground during the trading session on new hopes of a government rescue, according to traders.

General Motors, a Detroit-based automotive manufacturer, saw its term loan quoted at 43 bid, 44 offered, up from 41 bid, 43 offered, traders said.

And, Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 41.75 bid, 42.5 offered, up from 41 bid, 43 offered, traders continued.

"Going back to the table to negotiate with the government so people are hopeful that some new deal will be reached. People may be hesitant to sell these right now especially if they think they're going to get something," one trader added.

In the bonds, a trader said GM's paper was one of the day's "big traders" in an otherwise lackluster day. He said most issues, including the 8 3/8% notes due 2033, were trading around 20.

"It's a little bit lower, but it is hard to tell" given that Wednesday and Friday were pre- and post-holiday trading days, he said.

Another source deemed GM's 7 1/8% notes due 2013 at 22 bid, or 4 points weaker, while Ford's 7% notes due 2013 gained a point to close at 44 bid.

At another desk, a trader deemed GM's financing arm, GMAC LLC, "a little better," its 8% notes due 2031 at 25 bid, 26 offered, up from 24.5 bid, 25.5 offered last week, but down from opening levels of 26 bid, 27 offered. He also saw the 6¾% notes due 2014 at 33.5 bid, 34.5 offered, up 1.5 points on the day.

Sara Rosenberg contributed to this article.

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