Merisant files for Chapter 11, loan heavier; Charter heads higher; Tropicana rebounds, casinos slip

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Jan. 9 - After a week of busier-than-normal trading, traders reported that Friday's distressed bond market was "subdued."

"There's not a lot," a trader said. "It was definitely more subdued than the rest of the week."

And, overall, the market closed the week a mixed bag.

Merisant Worldwide Inc. filed for bankruptcy during the session. But investors had little reaction to the news. A trader saw the term loan falling ahead of the filing, while another said the bonds remained steady. Still, both traders acknowledged that those involved in the name knew it was coming.

Meanwhile, Charter Communications Inc.'s bonds headed higher, though traders were not sure what prompted the move. One trader pointed out that there were likely "behind-the-scenes" goings-on that could have caused the gain.

Tropicana Entertainment LLC's bank debt recovered some after falling in the previous session. The rest of the sector was largely quiet, though new revenue numbers weighed on the bonds.

Merisant loan ends heavier

Merisant's term loan weakened during Friday's trading session on news that the company filed for Chapter 11.

The term loan traded at 55 on Friday, compared with previous levels of 60 bid, 65 offered, the trader said.

The trader added that the trade took place prior to the bankruptcy filing on Friday afternoon, but it was likely done by someone who had caught wind of the situation. Post-filing, the trader had not seen any updated levels on the debt.

Meanwhile, the company's bonds were little affected by the news.

"They filed but bonds are extremely tightly held among just a few holders who were already restricted and knew this was coming," a trader said. He added that the 9½% notes due 2013 remained at 9 bid, 11 offered. However, according to the Finra Trace system, the notes last traded late last year with a 5 handle.

As of Nov. 30, the company had $331.08 million in assets and $560.72 million in debt.

Merisant's decision to go into bankruptcy was largely expected by the market, a trader remarked, and had already been written up as a possibility by Moody's Investors Service a few days earlier.

On Jan. 6, Moody's Investors Service downgraded Merisant's ratings, including cutting its bank debt to Caa1 from B3.

Moody's had said that the downgrade was based on concern that, given the current bank credit markets and the company's weak credit metrics, Merisant may not be able to refinance its revolver and term loan A, which mature on Jan. 11.

The rating agency also said that the upcoming bank debt maturities increased the likelihood of a distressed exchange or bankruptcy filing.

Merisant is a Chicago-based producer and marketer of low-calorie and zero calorie tabletop sweeteners.

Charter bonds head higher

Charter Communications debt gained a couple points during the session, but it was not clear what had propelled the bonds upward.

A trader called the 8¾% notes due 2013 "a little bit better" around 67. Another trader also saw the issue around that mark, calling it up a couple points.

The second trader also saw the 10¼% notes due 2010 at 52, likewise a couple points higher.

When asked about the move, the first trader remarked that the St. Louis-based cable provider had a coupon payment coming up on Jan. 15. Those that think the payment will be made were likely behind the gains, he said.

The second trader said he was not sure why the paper inched up, but noted that there were "probably behind-the-scenes stuff" going on as the company's owner, Paul Allen, negotiated with bondholders.

In the news, reports came out Friday that Charter was suing Verizon Communications Inc., which incidentally closed on its purchase of Alltel Corp. Friday as well. Charter claims that Verizon is infringing on its Video-On-Demand and data-transmission services. Verizon believes there is no merit to the claim.

Tropicana rebounds, casinos slip

Tropicana Entertainment's opco term loan rebounded a bit from the losses it amassed during the previous trading session, but the improvement was on pretty low volume, according to a trader.

The term loan was quoted at 23½ bid, 24½ offered, up from Thursday's levels of 22½ bid, 23½ offered, the trader said. On Wednesday, the loan was quoted at 26 bid, 26½ offered.

"There was a seller yesterday and it was a heavy day and I think people were nervous about the [plan of reorganization]. Didn't learn a whole lot from it so think people are getting back in it and moving it back to where it was," the trader explained.

Earlier in the week, the company announced its plan of reorganization, but there was no disclosure statement released.

Under the plan, the Fort Mitchell, Ky.-based company will do a $100 million common stock rights offering for holders of unsecured noteholder claims, issue $100 million of new notes and issue four-year warrants equal to 15% of the value of the common stock outstanding on the confirmation date.

Elsewhere in the gambling arena, many names were weaker after monthly revenue numbers came out, though traders reported little activity in the sector as a whole.

One trader saw Wynn Las Vegas LLC's 6 5/8% notes due 2014 trade at 79.5, with about $10 million trading. He also saw MGM Grand's 6% notes due 2009 at 96.25.

At another desk, MGM's 6 5/8% notes due 2015 dropped 2.5 points to 68 bid. Station Casinos Inc.'s 6% notes due 2012 were likewise lower at 23 bid.

Nevada's revenue numbers for November came in at $836.8 million, down from $982 million the year before. In Atlantic City, casino wins fell 18.7% to $302 million in December.

Broad market mixed

Nortel Networks Corp.'s floating-rate notes due 2011 dropped about a point to close around 25, a trader said.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 continued to firm, ending around 17. Neiman Marcus Group Inc.'s 9% notes due 2015 rebounded from Thursday's levels to finish at 52 bid.

Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, moved up to close at "73-ish," a trader said, while the subordinated issues edged up to 26.5 bid, 27 offered.

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