Isle of Capri up on numbers; GMAC cuts jobs, notes firm; Dollar General bonds up, Burlington slips

By Stephanie N. Rotondo

Portland, Ore., Sept. 3 - Isle of Capri Casinos' bonds inched upward during Wednesday trading after the company released its quarterly results.

The casino operator had delayed filing its 10-Q, leaving some to believe that the numbers would be dismal. But in a surprising twist, the company posted a narrower loss for the quarter. That meant a 1- to 1.5-point jump for the bonds.

Meanwhile, GMAC LLC announced Wednesday that it plans to cut jobs and close its retail stores in a move brought on by the housing downturn. However, the mortgage lender's debt traded up - or at least held steady - on the news.

Dollar General Corp.'s notes got a boost after posting what one trader called "good numbers." But Burlington Coat Factory Warehouse Corp., which filed its annual report recently, continued to slide.

Revlon Inc. said it was looking to pay down debt, and as a result, the cosmetics company's debt structure ended somewhat better. The term loan closed about a point higher, while bond traders said the rarely traded bonds moved rather actively.

Numbers lift Isle of Capri

Isle of Capri's bonds got a 1- to 1.5-point boost during trading after posting a narrower quarterly loss, traders reported.

One trader pegged the 7% notes due 2014 at 74 bid, 74.25 offered, noting that the bonds "got as cheap" as 73 bid, 73.25 offered.

"Then they just jumped up from there," the trader said.

At another desk, a trader saw the paper close around 74, up 1.5 points on the back of "good earnings."

Cost-control efforts helped the casino operator's financial performance for the period ended July 27. The company posted a net loss of $3.6 million, versus a loss of $7.1 million the year before. Total revenue increased 1% to $282.3 million from $278.5 million, while casino revenues moved up to $281 million from $277.2 million.

However, despite the better numbers, the figures missed analysts' expectations of a loss of 4 cents per share on sales of $294.1 million.

The results for the first quarter included a charge for the cancellation of rights of a land acquisition, as well as a termination fee related to a possible Portland, Ore., casino development.

The company also said that it closed its Louisiana and Mississippi casinos ahead of Hurricane Gustav. Damage was minimal, and the gaming centers are expected to reopen soon.

Elsewhere in the sector, MGM Mirage Inc.'s bonds were "kind of sideways" after Standard & Poor's revised its outlook to negative.

A trader quoted the 7½% notes due 2016 at 82.5 bid, 83 offered and the 5 7/8% notes due 2014 at 80 bid, 81 offered.

The rating agency attributed its decision to change its position on MGM to liquidity concerns, as well as whether the company will be able to remain in compliance with covenants under its bank facility.

GMAC cuts jobs, notes firm

A trader dubbed GMAC one of the more active issues of the day as the mortgage lender announced it would cut its workforce and reduce mortgage lending.

The trader quoted GMAC's benchmark 8% notes due 2031 at 54.75 bid, 55.75 offered. He also saw the 7% notes due 2012 at 59.25 bid, 61.25 offered and the 7¾% notes due 2010 at 80 bid, 81 offered. He called the debt up a tad.

"It seems like there was a slightly better bid undertone to just about everything," he said.

But another trader called the debt unchanged "relative to yesterday," with its 6 5/8% notes due 2012 at 57.5 bid, 58.5 offered.

The New York-based lending arm of General Motors Corp. said Wednesday that it would cut about 5,000 jobs, most of which will come from GMAC offspring Residential Capital LLC. The layoffs will reduce ResCap's workers by about 60%.

GMAC also said it will close all 200 of its retail stores. Customers will still be able to reach the company online or by phone.

"While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment," Tom Marano, ResCap's chairman and chief executive, said in a statement. "Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk."

Dollar bonds up, Burlington slips

Decent quarterly results helped Dollar General's bonds inch higher, while Burlington Coat Factory's debt continued to slide.

A trader called Dollar's 10 5/8% notes due 2015 better at around 102 and the 11 7/8% notes due 2017 likewise up to around 97. He saw Burlington's 11 1/8% notes due 2015 down "a couple more points" at 65.

At another desk, a trader pegged Burlington's issue at 64 bid, 66 offered.

"They got banged down a little more," he said.

For the second quarter, Dollar General reported that sales increased 11.2% to $2.61 billion, compared to $2.35 billion in 2007. Gross profit rate increased 250 basis points to 29.1%. Net income was $27.7 million versus a net loss of $68.6 million for the same period of 2007.

"We are encouraged by Dollar General's strong financial performance during the second quarter and first half of 2008 in spite of the challenging economic environment," said Rick Dreiling, chief executive officer, in a press release. "Our sales increases in the quarter offer further evidence that customers continue to trust and rely on Dollar General for the quality products they want at value prices. While we believe that we may be benefiting somewhat from current economic conditions, we are confident that our recently implemented operating priorities are accelerating our progress."

Conversely, Burlington's continued declines came on the back of a Tuesday filing with the Securities and Exchange Commission in which the company posted weak financials and cautioned about the obstacles facing retailers.

Revlon debt better

Revlon's term loan saw some strength in trading as the company revealed plans to repay some debt, a trader said.

The term loan was quoted at 90¼ bid, 92 offered, up from 89½ bid, 90 offered, the trader said.

The trader explained that the term loan traded up because with a paydown, all ratios become better, meaning there is less likelihood of a covenant breach and defaults.

On the bond side, a trader called the 9½% notes due 2011 "super active," ending the day around 97. Another trader place the issue at 97 bid, 97.5 offered.

"They haven't really traded that much recently," he said. "It is the same zip code where it has been, to tell you the truth."

On Wednesday morning, Revlon announced that it plans to repay its $170 million senior subordinated term loan with MacAndrews & Forbes that is due on Aug. 1, 2009.

The funds for the paydown will come from the sale of the company's Bozzano business in Brazil - from which $63 million of proceeds will be used to repay the term loan - and a $107 million equity rights offering.

The equity offering is hoped to happen as early as the fourth quarter.

Revlon is a New York-based cosmetic, skin care, fragrance and personal care products company.

Sales report no trouble for Ford, GM loans

Ford Motor Co.'s term loan gained some ground on Wednesday, while General Motors Corp.'s term loan was unchanged even though both companies released August sales results that showed a decline from last year, according to a trader.

Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 78 bid, 78½ offered, up from 77¾ bid, 78¼ offered, the trader said.

GM, a Detroit-based automotive company, saw its term loan quoted at 74¾ bid, 76 1/8 offered, unchanged on the day, the trader continued.

"There was more activity in Ford today than GM. People in general are pretty bearish on these names. I think people expect the numbers to be bad. It's priced in already," the trader said, adding that Ford was probably up on market technicals rather than on any credit specific news.

In August, Ford's vehicle sales totaled 151,021 down 26% from 203,001 last year.

Ford said that the decline primarily reflected lower demand for SUVs (down 53%) and trucks (down 39%), and lower sales to fleet customers (down 31%).

"We expect the second half of 2008 will be more challenging than the first half, as weak economic conditions and the consumer credit crunch continue," added Jim Farley, Ford group vice president, marketing and communications, in the release.

Meanwhile, GM delivered 308,817 vehicles in August, down 20% from last year, and truck sales declined 25.6% compared with a year ago.

However, when compared with July, GM's total sales were up 31%, retail sales were up 32% and fleet sales were up 29%.

Broad market gains

R.H. Donnelley Corp.'s bond "traded a bunch," a trader said. He pegged the 8 7/8% notes due 2016 and 2017, respectively, at 52.5 bid, 53 offered. He also saw the 8% notes due 2013 of Donnelley's subsidiary, Dex Media Inc., at 60 bid, 61 offered.

Meanwhile, another trader said Six Flags Inc. and Neff Corp.'s debt were up a little on no news. He quoted Six Flags' 9 5/8% notes due 2014 at 58 and Neff's 10% notes due 2015 "north of 40."

Sara Rosenberg contributed to this article.

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