Sirius bonds slide on bankruptcy buzz; MGM loses 'big,' Isle gains; Charter unchanged, slightly lower

By Stephanie N. Rotondo

Portland, Ore., Feb. 11 - The distressed bond market ended firmer overall on Wednesday, despite gyrations in the equity markets.

"It was very, very active," a trader said. "Overall, things were up half a point on the wide across the board."

However, Sirius XM Radio Inc.'s bonds did not benefit from the positive tone. The satellite radio provider's debt dropped as much as 8 points on the day, following news reports that indicated the company was working with bankruptcy advisors.

MGM Mirage's bonds were not helped, either. One trader called MGM the sector's "big loser" as more negative Las Vegas revenue numbers came to light. But Isle of Capri Casinos Inc.'s debt moved higher after the company's tender offer expired.

Charter Communications Inc. saw its credit rating once again slashed and talk of a Chapter 11 filing renewed. Still, traders said the cable provider's bonds were little affected by the news, calling the notes unchanged to just a point lower on the day.

Sirius XM slides

Sirius XM Radio's notes took a hit during mid-week trading on renewed bankruptcy fears, traders reported.

A trader saw the 9 5/8% notes due 2013 trading around 34.5, down from 40 in the previous session.

"So that's off a good 6 points," he said.

Another trader placed the issue at 35.5 bid, 37.5 offered, calling that "off slightly."

Yet another market source quoted the bonds at 34 bid, 35 offered, a good 8 points down on the day.

The declines came on the back of a New York Times article, which stated that the company was working with bankruptcy advisors. The news only served to increase the Chapter 11 chatter, given that the company has nearly a billion dollars of debt maturing this year alone - including nearly $175 million coming due on Tuesday. Some market players believe that tightness in the credit markets will not help Sirius to meet its debt obligations.

Sirius recently rejected an unsolicited bid from EchoStar Corp.'s chief executive, Charles Ergen. Sirius and XM merged in February 2007, following a string of losses, in a $13.6 billion deal. In conjunction with the merger, Sirius assumed much of XM's debt. As such, the combined company's struggles have remained, with Sirius posting a loss of $4.88 billion in the third quarter of 2008.

MGM loses, Isle gains

Las Vegas' monthly gambling revenue numbers came out Thursday and the news put more pressure on an already flailing sector.

One trader called MGM Mirage the day's "big loser," its 7½% notes due 2016 off 2 points at 52.5 and its 6% notes due 2009 down 7.5 points at 76.

Another trader quoted the 7½% notes at 50 bid, 52 offered, calling that "down a couple." But it was the short paper that he saw really declining, the 6½% notes due 2009 at 82 bid, 84 offered from around 90.

At another desk, MGM's 6 5/8% notes due 2015 were seen more than 3 points lower at 50.75 bid, while the 8½% notes due 2010 dropped 10 points to end at 62 bid, 63 offered.

Along with the poor Vegas numbers, MGM also suffered from a downgrade from Fitch Ratings. Fitch attributed the downgrade in part to continued financing troubles associated with its CityCenter project.

Earlier this week, Clark County ordered MGM to have its Harmon Hotel at CityCenter re-inspected, as many construction errors were previously overlooked.

Meanwhile, Isle of Capri's 7% notes due 2014 gained slightly after the gaming operator's tender offer expired.

One source placed the bonds at 50 bid, a gain of a point. Another trader said he had not seen much in the name for some time, though he saw a quote of 48 bid, 53 offered a couple days ago.

Isle of Capri said that noteholders bearing more than $300 million of the bonds had validly tendered. The company added that it was exercising its right to increase the maximum tender amount of $140 million by 2% to $142.8 million.

But while other casinos have not fared so well, Isle of Capri's Kansas City casinos posted an increase in revenue for January. The company reported $6.9 million in revenue, a 5.2% gain year-over-year.

Back in Sin City, revenue on The Strip were down 23% in December to $474.2 million. Overall, the state's gambling revenue slipped 19% to $888 million in December and 10.6% to $6.12 billion for the year.

Elsewhere in the sector, Wynn Las Vegas LLC's 6 5/8% notes due 2014 fell nearly 2 points to 72.25, while Boyd Gaming's 7¾% notes due 2012 dropped a deuce to 78.5.

Charter steady, slightly lower

A downgrade and continuing bankruptcy concerns did little to affect Charter Communications' debt, traders said.

One trader saw the 8¾% notes due 2013 at 68 and the 10¼% notes due 2010 at 54.25, about unchanged on the day. Another trader quoted the 10¼% notes at 53 bid, 54 offered and the 8¾% notes at 67 bid, 68 offered. He called both of those issues a point weaker.

Moody's Investors Service dropped its rating on Charter to Caa3. The agency said the rating change came as the likelihood of Charter paying its recently missed coupon payment seemed slim.

Furthermore, Moody's noted that even if the payment is made by the end of the 30-day grace period - which ends Sunday - Charter is still facing potential bankruptcy.

"Even if the interest payments are made prior to expiration of the grace period, Moody's anticipates Charter will likely have to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code," the agency said in a statement.

Still, should Charter actually file, Moody's believes a recent revolver drawdown will help it to avoid a tight debtor-in-possession financing market.

"The recent revolver drawdown which left the company with more than $900 million of cash balances as reported in January will effectively preclude the need for a separate debtor-in-possession loan, the financing of which may have been difficult to come by given ongoing tightness in the credit markets," Moody's said.

Charter is a St. Louis-based cable services provider.

Broad market firms

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 gained more than half a point to close around 88.75, a trader said. The trader added that about $42 million to $43 million of the bonds traded, making it one of the most active names of the day.

Meanwhile, short covering was given credit for gains in Nortel Networks Corp.'s bonds. The 10¾% notes due 2016 moved back up to 14 bid, 15 offered after falling to around 12 in the previous session. The prior day's losses were due to the results of the company's credit default swaps auction.

Paul Deckelman contributed to this article.

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