Vegas, Atlantic City numbers bad for casinos; Retailers dip; GM slips despite bankruptcy denials

By Stephanie N. Rotondo

Portland, Ore., July 10 - Trading in the distressed bond market picked up Thursday, traders reported. Sources attributed the increase in activity to more news flooding the marketplace.

"Most of it was negative," a trader said. Still, "at least that got things moving."

Las Vegas and Atlantic City reported monthly revenues Thursday, and neither were good. On the West side, Harrah's Operating tumbled 4 to 5 points after the disappointing figures came out. On the Jersey Shore, Trump Entertainment Resorts Inc.'s debt fell a deuce.

Meanwhile, somewhat positive sales figures for June were released during the session. But an unexpected gain in sales did little to help distressed retailers. Rite Aid Corp., for example, ended weaker, while Bon-Ton Stores Inc., which released its monthly sales report, also declined.

Rumors continue to swirl that General Motors Corp. is staring down the barrel of a bankruptcy filing. The company once again came out to deny the talk, but investors did not seem appeased. The automaker's debt closed softer on the day as a result.

Casinos weaken

Harrah's bonds took a 4- to 5-point dive after Las Vegas reported a 16.4% decline in revenue for May.

A trader said the 10¾% notes due 2016 began the day at 81 bid, 81.25 offered, but lost 5 points over the course of the session to close at 76 bid, 76.5 offered. He also saw the 10¾% toggle notes due 2018 end around 67.

"Harrah's seemed to bear the brunt of it," he said of Sin City's disappointing numbers.

At another desk, a trader said the 2016 issue ended at "76 and change," while the toggle bonds "traded into a 67 bid, leaving a seller at the end of the day." He called that down 2 to 2.5 points.

Another source saw the 5¾% notes due 2017 at 47 bid, down 4 points.

Harrah's term loan B debt also lost some ground, a trader said. The bank debt was quoted at 87 bid, 87½ offered, down from Wednesday's closing levels of 87½ bid, 88 offered, the trader said.

Along with the decline in revenue, gamblers lost just $969.9 million, 15.2% less than they did in April.

Atlantic City also reported its monthly figures, which were just as lackluster.

On that side of the continent, Trump Entertainment's 8½% notes due 2015 fell about 2 points to 57 bid, 57.5 offered, a trader said. Another source saw the debt offered at 56.5 late in the day.

"They've come in significantly," he said.

The New Jersey Casino Control Commission's monthly report showed casinos taking in $373.6 million in June, an 11% decrease from May's numbers.

Among other Atlantic City-based casinos, Tropicana Entertainment LLC's 9 5/8% notes due 2014 traded around 44, a trader said, though activity in the name has been slight since the bonds fell below 50.

"It's been kind of a mess," he said.

The trader was referring to how the casino's owners, Columbia Sussex, lost control of the company after failing to renew its gambling license. The casino was then taken over by an appointed trustee who has been attempting to sell the property.

But reports last week indicated that Columbia Sussex and former top executive William J. Yung III were looking to regain control. Without a valid license, however, it remains unclear how they would accomplish that. On Thursday, a New Jersey appeals court upheld the license revocation.

Positive retail data no help to retailers

Despite somewhat positive June sales data, distressed retailers - and those on the fringes - remained lower.

A trader said Rite Aid's 10 3/8% notes due 2013 were "pretty active and off a little bit" at 92 bid, 92.5 offered. The trader also saw Michael's Stores Inc.'s 11 3/8% notes due 2016 at 77.75 bid, 78.25 offered.

Another trader said Bon-Ton Stores' 10¼% notes due 2014 have been falling the last few sessions, leading him to believe that the company's 6½% decrease in same-store sales had already been in the market. He said the notes fell about a point from the previous session to 62.

"It looked to me like the damage had bee done" he said.

Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 ended the day at 79 bid, 80 offered, about where they had been all week.

The trader also saw Michael's 10% notes due 2014 at 85.5 bid, 86 offered, adding that the debt had been in the 90s just last month.

Among retailers still skirting the edge, Neiman Marcus' 9% notes due 2015 dipped to 96.75 bid, 97.25 offered, while the 10 3/8% notes due 2015 fell to 97.5 bid, 98.5 offered.

"They're going down with the market," the trader said. "But they are relatively strong. They have held up the best."

Still, "they were at a slight premium last month," he noted.

Levi Strauss' debt continued to fall after the jeans maker released poor quarterly figures earlier in the week, though activity had died down. The trader quoted the 9¾% notes due 2015 around 94.

For June, the retail sector posted a 4.3% increase in sales, a better gain than had been expected. The UBS-International Council of Shopping Centers had projected a 2% to 3% increase. The better figures were attributed to summer closeouts - a winner for bargain hunters - and the economic stimulus checks.

GM falters

Investors might not be buying General Motors' adamant denials regarding whether it is considering bankruptcy.

Traders reported that the automaker's bonds were weaker during trading, despite chef executive officer Rick Wagoner stating that the company has "no thoughts whatsoever" of bankruptcy.

A trader quoted the 7% notes due 2012 at 63.5 bid, 64.5 offered and the 5 5/8% notes due 2009 at 88.25 bid, 88.75 offered, calling both "a little weaker."

"They had a good run [Wednesday], then they gave back some today," he said.

The trader also saw GM's lending arm GMAC LLC slip, with the floating-rate notes coming due May 2009 at 85.75.

"They're all lower," said another trader of GM's debt. He pegged the 8¼% notes due 2023 at 54 bid, 55 offered, the 8 3/8% notes due 2033 at 55.5 bid, 56.5 offered, the 7.4% notes due 2025 at 47 bid, 48 offered and the 6¾% notes due 2028 at 45.5 bid, 46.5 offered.

Another source called GM's 7 1/8% notes due 2013 down half a point at 59.5 bid and GMAC's 6 7/8% due 2012 up the same amount at 63.5.

Over in the bank debt, GM's term loan was quoted at 80 bid, 81 offered, down about half a point to a point on the day, a trader said.

Last week, a Merrill Lynch analyst said that a Chapter 11 filing was "not impossible," as the company might have to raise $15 billion in additional capital if the economy continues to decline. But according to a Bloomberg article, Wagoner stated that the Detroit-based company had plenty of cash.

Sara Rosenberg contributed to this article.

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