Stronger earnings boost Idearc, Spectrum bonds; Tropicana bonds, loan head higher; MGM slips

By Stephanie N. Rotondo

Portland, Ore., May 6 - The distressed arena was flooded with first-quarter numbers Tuesday and, as a result, Idearc Inc. and Spectrum Brands Inc. saw their debt bolstered.

First of all, Idearc's better-than-expected quarterly profit prompted the company's bonds to gain as much as 4 points on the day, while the term loan was also seen nearly 2 points higher. Meanwhile, Spectrum Brands' narrower loss buoyed the company's bonds in fairly active trading.

A trader said it was "as expected" that Tropicana Entertainment LLC would file for bankruptcy. The company filed for Chapter 11 protections late Monday. Come Tuesday, the casino operator's bonds - and bank debt - moved up. The trader attributed the movement in the corporate debt to short covering.

Elsewhere in the gaming sector, a trader said MGM Mirage Inc.'s debt was lower, though not "materially" so, on the back of the company's first-quarter results. The trader also noted that MGM's management stated a split of the company could happen.

Overall, the junk sector turned softer after managing to maintain its strength for the last few weeks.

"It was kind of weaker at the start," a trader said. He speculated that some market players were "backing off from overbought positions."

"A couple of things were weaker," said another source. "It felt like some things were giving back a little."

Still, one trader categorized the day as "pretty unexciting."

Idearc loan, bonds head higher

Better-than-expected quarterly numbers resulted in a "busy day" of trading in Idearc's bonds, a trader said.

The trader said the 8% notes due 2016 were "up a lot," about 3 to 4 points, at 68 bid, 68.25 offered. Another trader called the bonds "better by a couple points" at 67 bid, 68 offered.

Idearc's term loan headed higher in trading as well. The term loan was quoted at 83 bid, 84 offered, up from 81¾ bid, 82¾ offered, a trader said.

The phone book publisher posted a first-quarter profit of $111 million, versus a profit of $103 million the year before. The stronger figures came despite a decrease in revenue, which fell 4.5% to $770 million. The company attributed the increase to higher internet revenue and lower operating costs.

"The economic softness that began in the latter half of 2007 continues to impact our results and, while the first quarter proved to be challenging, we remain committed to our multi-product strategy," said Frank Gatto, acting chief executive officer, in a statement.

Idearc is a Dallas-based publisher of phonebook and internet directories.

Spectrum bonds boosted

Better numbers were also given credit for boosting Spectrum Brands' bonds during Tuesday's session.

A trader said there was a "fair amount of trading" in Spectrum's 11¼% variable-rate toggle senior subordinated notes due 2013, which were "up a few points" at around 85.

"It's hard to tell with these bonds," the trader said, pointing out that there was a high trade of 81.5 bid, 83 offered in the previous session. "Maybe somebody knew something," he added.

Another trader called the issue a "touch better" at 85 bid, 85.5 offered on the back of the numbers.

Spectrum reported a narrower loss for the first quarter at $111.7 million, compared to a loss of $237.5 million in the first quarter of 2007. The company cited better currency exchange rates as the reason for the improved financials.

Spectrum also said that is has decided to put off selling its lawn and garden business, as the current economic conditions make it unlikely the company will receive a favorable price. Given that, according to one trader, it remained a mystery why the bonds went up.

"It is a conglomeration of businesses that don't go well together," he said, adding that the company has "a lot of debt."

"I don't think they are very clear on how they will manage the business," he said.

And, with no asset sale in sight, he wondered what would happen to holders of the toggle notes.

"I think the mindset must be that these are going to be taken out in an asset sale," he said of the gains in the paper. "But nobody explained how that would work."

Spectrum Brands is an Atlanta-based manufacturer of consumer products, including Rayovac brand batteries and Tetra pet supplies.

Tropicana up despite filing

It came as no surprise when Tropicana Entertainment filed for Chapter 11 protection late Monday, a trader said.

"It was completely expected," he said of the bankruptcy filing.

As such, it was likely of little surprise that the bonds were not overly active on the day, either.

The trader said the 9 5/8% notes due 2014 moved higher despite the filing, closing at 51.5 bid, 52 offered.

"The shorts were controlling it," he explained.

Another trader quoted the bonds at 51 bid, 53 offered, while another pegged the issue around 51.

The latter trader said that "initially, bids were lower," hitting a low of 49 bid. The markets slowly got better throughout the day, he said, but noted that trading was "not too active."

Tropicana's opco term loan also traded up on Tuesday on the back of the company's Chapter 11 filing, according to traders.

The opco term loan was quoted at 97 bid, 98 offered by one trader and at 97¼ bid, 98¼ offered by a second trader. On Monday, the opco term loan was quoted at 96 bid, 97 offered.

Tropicana lost its Atlantic City gaming license in December 2007, which forced the company to look to sell its assets. Since then, the market has been waiting for the company to file for bankruptcy.

The company plans to keep its various properties running during the bankruptcy process. The company is also still reportedly looking at selling some of its assets. According to one trader, rumor has it that the company received some bids after the filing.

Tropicana Entertainment is a Fort Mitchell, Ky.-based hotel and casino operator.

MGM slips on numbers

Elsewhere in the gaming arena, MGM Mirage reported a 30% decline in profit for the first quarter of 2008. The Las Vegas-based company posted earnings of $118.3 million, compared to $168.2 million the previous year. Revenue fell 3% to $1.88 billion, attributed in part to a decline in tourism.

During a conference call, MGM chief executive officer Terry Lanni also said that it would be possible to separate the company's business into two parts: hotel and casino.

On the news, a trader saw MGM's debt slip anywhere from half a point to a point, which he said was "not materially lower." He also noted that trading was not overly active.

The trader pegged the 7½% notes due 2016 at 90 bid, 90.5 offered and the 8 3/8% notes due 2011 at 99.5 bid, 99.75 offered.

"I think the initial take on the numbers was bondholders were not too keen on it given what has been spent on equity at their expense," he said. "The knee-jerk reaction was to sell paper," though he added that there was "no follow through."

Broad market mostly weaker

A trader said the "tech sector took a beating" after Dutch chipmaker NXP reported weaker first-quarter results.

"The numbers were OK, but they guided lower for the next quarter," the trader said.

The trader quoted NXP's 9½% notes due 2015 at around 93, versus levels around 97 on Monday.

Freescale Semiconductor's bonds were "lower in sympathy," the trader added. The 8 7/8% notes due 2014 closed at 88.5 bid, 89 offered.

Neff Corp. also reported its first-quarter results, which fell in line with expectations, a trader said.

"No one was expecting good numbers," the trader said, noting that as a result, expectations were low.

After the numbers, the trader said "one seller took the market down," and the 10% notes due 2015 ended the session down 2.5 points at 47 bid, 47.5 offered.

The trader also said that the news that Pope & Talbot's negotiations with a potential buyer of its pulp mills had gone awry prompted sellers to enter the marketplace, though there were no bids to be seen.

Meanwhile, a trader said Delphi Corp.'s debt "continued to tick up," quoting the bonds generically at around 39.

Charter Communications Inc.'s 11% notes due 2015 were seen weaker at around 83.

Residential Capital LLC's 14% notes due 2013 and the floating-rate notes coming due in June were a "couple points lower," a trader said, at 51 and 94 bid, 94.5 offered, respectively.

Linens n'Things Inc.'s floating-rate notes due 2014 were a "smidge better" at 37 bid, 38 offered, up a point.

Sara Rosenberg contributed to this article.

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