Sands' results weigh on sector; Visteon, Delphi paper better; Charter up on Comcast numbers

By Stephanie N. Rotondo

Portland, Ore., May 1 - The distressed bond market remained on the firmer side - at least in parts - on Thursday, but traders were surprised that there was not more activity.

Market players had expected that trading would pick up once the Federal Reserve had announced its decision on interest rates - the bank cut rates by another quarter percentage point on Wednesday.

And, in fact, trading did pick up - but it did not last.

"It was reasonably subdued," a trader said of Thursday's session. "I'm not really sure why. I would have thought that after the Fed yesterday, people would have some comfort level. I really expected more."

As at least one market source predicted on Wednesday, Las Vegas Sands Corp.'s first-quarter results placed some pressure on the sector as a whole - though not as much as expected. The Sands' debt slipped on the back of the earnings release, and Trump Entertainment Resorts Inc.'s bonds were also slightly weaker. However, Harrah's Operating's bonds were unchanged to slightly better on the day.

Visteon Corp. continued to drive upward after reporting a narrower first-quarter loss Wednesday. The bonds saw a 2-point gain during the session, while Delphi Corp.'s debt moved up another point.

Comcast Corp. reported its quarterly numbers Thursday, which fell in line with market expectations. Charter Communications Inc.'s paper was bolstered as a result.

Sands' results weigh on sector

As predicted, the gaming arena was somewhat lower on the back of Las Vegas Sands' weaker first-quarter numbers.

Though the Las Vegas casino reported better revenues at $1.08 billion - attributed to new casinos - competition and weak tourism resulted in a net loss of $11.2 million for the first quarter of 2008, compared to a net profit of $90.9 million in 2007.

The Sands' 6 3/8% notes due 2015 were "down a bit," a trader said, at 88 bid. The trader said the bonds were "offered as cheap" at 87.75 during the session.

Another trader placed the Sands' paper at 88, down from 89 the previous session.

Atlantic City casino operator Trump Entertainment saw its 8½% notes due 2015 slip as well. One trader quoted the notes at 61.5 bid, 62 offered, while another called the bonds "weaker" at 62 bid, 63 offered.

The second trader noted that Trump bonds had run up last week, but there was no news that might have brought the debt back down.

"All I can say is they probably shouldn't have run up in the first place," he said.

Trump will release its first-quarter figures on May 8.

Harrah's Operating's 10¾% notes were called better by one trader at 86 bid, 86.25 offered, while another deemed the debt "unchanged to slightly better" at around 86.5.

At another desk, a trader said Tropicana Entertainment LLC's 9 5/8% notes due 2014 were "up a few points" at 50 bid, 50.5 offered, though he was not sure why. He added that the bonds were trading flat with due bills to seller.

Earlier in the week, Tropicana said one of its subsidiaries was served with a default notice from its bank lender, Credit Suisse. The company said it is using its 30-day grace period to cure the default.

Visteon continues upward, helps Delphi

Visteon's paper continued to "pick up" after the company reported better-than-expected first-quarter numbers on Wednesday.

A trader pegged the 7% notes due 2014 at 70, while the 8¼% notes due 2010 closed around 90. Another source called the 7% notes up a deuce at 70.5 bid.

Another trader saw the 8¼% notes up 4 points on the day to 90 bid, 91 offered, noting the smaller loss that the company reported on Wednesday, and the fact that the bonds had already been up several points "over the last couple of days, before today." He saw its 7% notes due 2014 up a point at 68 bid. 70 offered.

The Van Buren Township, Mich.-based automotive parts supplier posted a narrower loss of $105 million, compared to a loss of $153 million the year before. The company said the better figures were a result of its restructuring program, as well as its increased exposure in emerging markets.

The stronger financials might also have helped others in the autosphere. A trader said Delphi's bonds edged up a point to around 36 - the Troy, Mich.-based company's bonds all trade in the same context. Another source also saw the bonds up about 1 point to 35.

But even as Visteon seems to be on the right track, some are still hesitant to jump for joy.

In a report issued Wednesday, Shelley Lombard, analyst with Gimme Credit LLC, said that while Visteon has cut its exposure to Ford Motor Co., the latter is dropping production faster than Visteon can pick up new customers.

"This year will be rocky with Visteon projecting less than $400 million of EBITDA, which doesn't cover interest expense and capital spending," Lombard wrote. Still, "we see more downside on the bonds near term."

Comcast numbers boost Charter

Cable operator Comcast released its first-quarter results Thursday, which came in better than most were expecting.

As a result, sector rival Charter Communications saw its paper "up a good bit," a trader said.

The trader said the bonds were up 3 to 4 points, depending on the issue. The 11% notes due 2015 gained 3 points to end around 82. A market source quoted the 8% notes due 2012 at 98.25 bid, up 1.5 points.

At another desk, a trader called the 8 3/8% notes due 2014 up a point at 97 bid, 98 offered while its subordinated 10% 2014 notes were 4 points better at 54 bid, 56 offered.

Elsewhere, Charter's CCH I Holdings' 11 1/8% notes due 2014 were seen up as much as 5 points on the session, at 57 bid.

For the quarter, net income slipped to $732 million from $837 million in 2007. Revenue, on the other hand, increased 14% to $8.39 billion - slightly over what analysts had expected. The company also reaffirmed its 2008 guidance.

Retail sector firms

The retail sector was a mite firmer on the day, though one trader said volume was rather light.

The trader said Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 closed at 86 bid, 86.5 offered, up a point. He called Bon-Ton Stores Inc.'s 10¼% notes due 2014 unchanged.

Another trader placed Bon-Ton's debt at 78 bid, 79 offered, "about where it has been over the last few days." The trader also quoted Burlington's bonds at 86 bid, 86.75 offered.

The trader also noted that there was "a fair amount of trading" in Michael's Stores Inc. But, "I can't tell if it was real buying or short covering," he said.

The trader placed the 11 3/8% notes due 2016 at 89.5 bid, 90 offered and the 10% notes due 2014 at 96.75 bid, 97.75 offered.

"That might be a tad cheaper," he added.

Broad market mostly stronger

Idearc Inc.'s 8% notes due 2016 rose a quarter point to around the 66 bid level, a source said, although another pegged the bonds unchanged at 65 bid, 67 offered. Rival Dex Media's 8% notes due 2013 lost more than a point to end around 76.

Neff Corp.'s 10% notes due 2015 lost a point to 48.

A trader saw Sea Containers Ltd.'s bonds, like its 7 7/8% notes that were to have come due on Feb. 15, up 2.5 points to 47.5, on top of the several-points gain they posted Wednesday in apparent reaction to the news of a settlement of the company's joint-venture dispute with General Electric Capital Corp.

Quebecor World Inc.'s bonds lost a point on the day to 42.

Beazer Homes USA Inc.'s 8 5/8% notes due 2011 closed up 2 points at 88 bid, 90 offered, while seeing no change in the bonds of Standard Pacific Corp. or Hovnanian Enterprises Inc. Standard Pacific's 7% notes due 2015 stayed at 74.5 and Hovnanian's 6¼% notes due 2015 remained at 69. But a source saw Hovnanian's 6 3/8% notes due 2014 half a point better in a 71-72 context. Another source called Hovnanian lower, with the 8 7/8% notes due 2012 down a point at 69.

Paul Deckelman contributed to this article.

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