MGM debt recoups losses, Harrah's mixed; Sirius XM gains on Liberty news; GM stronger, Ford steady

By Stephanie N. Rotondo

Portland, Ore., March 6 - MGM Mirage's debt managed to recoup some of the losses it incurred earlier in the week, traders reported Friday.

The bonds had begun to slide the week before, as liquidity concerns put pressure on the company's debt structure. As for Friday's gains, traders gave no explanation for the move.

Among other gaming names, Harrah's Entertainment Inc.'s bonds ended the week largely mixed. The company had announced a debt exchange offer earlier in the week and was subsequently downgraded come Friday.

Sirius XM Radio Inc.'s bonds moved up some during trading. The movement came after the company said it had completed a $530 million investment deal with Liberty Media Corp.

In the automotive arena, General Motors Corp.'s term loan gained some strength after the company denied thoughts of bankruptcy. Ford Motor Co.'s term loan ended unchanged.

MGM higher, Harrah's mixed

MGM's bonds continued to regain ground lost earlier in the week as liquidity concerns pressured the company's debt.

A trader said the bonds began to trade up early in the session, though come afternoon, some of the notes fell back a bit.

"But some held in there," he added.

The trader quoted the 13% notes due 2013 at 70 bid, 73 offered, down from earlier levels of 72 bid, 73 offered, but well up from Thursday markets of 67 bid, 68 offered.

The trader also saw the 7 5/8% notes due 2013 at 36 bid, 37, up from 31.5 bid, 32 offered. The 6¾% notes due 2013 gained 3.5 to 4 points to end at 37.5 bid, 38 offered, while the 8½% notes due 2010 inched up to 42 bid, 42.5 offered from levels around 41 on Thursday.

Also, the 6% notes due 2009 gained a couple points to end at 48 bid, 49 offered. But the 8 3/8% notes due 2011, a subordinated issue, "haven't budged, the trader said, noting that they remained at 9 bid, 11 offered.

Another trader called the 6% notes "a little better" at 49 bid, 50 offered, with about $40 million trading.

Traders had no explanation for the gains, which came after several straight sessions of losses in the casino operator's bonds. The declines began last Friday after the company announced it had drawn down the remaining balance under its revolving credit facility, causing investors to become concerned about the company's cash position.

Meanwhile, Harrah's Entertainment's debt was mixed after a debt swap was announced and the company was subsequently downgraded.

A trader placed the 10¾% notes due 2016 at 15.25, up slightly from 14 bid, 15 offered. The 8 1/8% note due 2011 were unchanged at 23.5, while the 7 7/8% notes due 2010 came off its daily highs to end at 31 bid, 33 offered.

Harrah's longer paper "is still in the single digits," the traded noted, placing the 5% note due 2015 and the 5¾% notes due 2017 at 8.5 bid, 8.75 offered.

Harrah's announced on Wednesday that it was looking to exchange $2.8 billion in debt for new notes with a longer maturity. The new notes will bear interest at 10% and will mature on 2018. Holders of old debt will receive $30 in new notes for every $1,000 of old notes tendered.

As of November, Harrah's had about $24 billion in debt.

On Friday, Standard & Poor's cut its rating on the company, calling the proposed exchange offer tantamount to default given its distressed exchange status.

Wynn Las Vegas LLC's 6 5/8% notes due 2014 closed at 66, with about $22 million changing hands, a trader said.

Sirius up on Liberty news

Sirius XM Radio's debt moved up in trading after the company announced its had closed on its $530 million investment deal with Liberty Media Corp.

A trader said the 13% notes due 2013 was trading around 50, while the 9 5/8% notes due 2013 ended in the mid-40s.

Another trader quoted the 13% notes at 48 bid, 52 offered.

Sirius XM said that it had closed on the previously announced investment deal with Liberty on Friday. Sirius had sought financial help from the company as it struggled with a heavy debt load. The company was believed to be on the brink of bankruptcy if it could not refinance debt maturing in 2009.

Liberty, which beat out a takeover bid by DISH Network Corp.'s Charles Ergen, thus gave the satellite radio provider $530 million, of which $280 million was used to pay off $171.6 million of debt that came due in February.

Sirius also extended the maturity on $250 million of debt coming due in May to 2010. Another $100 million was to come due in two months, but Liberty replaced that debt with a loan maturing in 2010.

Furthermore, of the $226 million maturing in December, Liberty will replace with $150 million in new notes due 2011, with the rest being paid in cash.

GM gains, Ford steady

General Motors' term loan was a little stronger on the day as the market was abuzz with bankruptcy chatter following an article in the Wall Street Journal, according to a trader.

However, in response to the article, General Motors did come out to say that "contrary to today's story in the Wall Street Journal, GM has not changed its position on bankruptcy."

GM claims that restructuring the business out of court remains the best solution and that it has established a clearly defined plan for a restructuring that it is aggressively executing through a series of actions outlined in its Feb. 17 viability plan.

"As a prudent business measure, the company has analyzed various bankruptcy scenarios. However, the company firmly believes an in-court restructuring would carry with it tremendous costs and risks, the most significant being a dramatic deterioration of revenue due to lost sales," the company added in its release.

Amid all this news, GM's term loan was being quoted by one trader at 38 bid, 40 offered, up from 37 bid, 39 offered on Thursday; by a second trader at 37½ bid, 39½ offered, up from 37 bid, 39 offered; and by a third trader at wider levels of 35 bid, 40 offered.

The speculation on a bankruptcy for General Motors seemed to pick up after the company filed its 10-K with the Securities and Exchange Commission on Thursday, in which auditors issued the opinion that there is substantial doubt about the company's ability to continue as a going concern.

GM said in the filing that its future is dependant on the successful enactment of its viability plan that was presented to the government, and if this viability plan does not go through it may be forced to file for bankruptcy protection.

On Dec. 31, the company entered into a loan agreement with the U.S. Department of Treasury for funding of $13.4 billion, which was paid in three tranches.

In the viability plan filed with the Treasury on Feb. 17, Detroit-based GM included a request for additional government funding, as well as support from other governments outside of the United States so that it can continue operations until global automotive sales recover and its restructuring actions generate benefits.

Elsewhere in the autosphere, Ford Motor's term loan was pretty flat on the day after spending the previous two trading sessions seesawing around, according to traders.

The term loan was quoted at 33 bid, 34 offered, unchanged from Thursday's closing levels, traders said.

By comparison, late Wednesday, the loan was quoted at 35 bid, 36 offered, and prior to the company's restructuring announcement on Wednesday the debt was seen at 29 bid, 33 offered.

In the bonds, a trader said there was "diddly in the way of follow up," after Thursday's session in which the bonds had gained on news of a debt swap. He said a "few odd million" of the 7.45% notes due 2031 traded at 28.25, which was "kind of right where they have been."

As was already reported, Ford is planning to restructure its debt through tender and conversion offers that the company says would result in a significant reduction in its debt obligations and annual interest expense.

As part of the restructuring, Ford commenced a $500 million cash tender offer for its senior secured term loan debt, of which $6.9 billion is outstanding.

The term loan tender offer is being done as a Dutch auction where lenders are being invited to submit bids to sell their term debt within a price range of 38 to 47.

If the aggregate purchase price for term loan debt tendered exceeds $500 million, Ford will purchase at the clearing price all loans tendered below the clearing price and purchase loans tendered at the clearing price on a pro-rated basis.

In addition, the company is doing a $1.3 billion cash tender offer for its unsecured non-convertible debt securities, of which approximately $8.9 billion is outstanding, and a conversion offer relating to its approximately $4.88 billion 4.25% senior convertible notes due Dec. 15, 2036.

Ford is a Dearborn, Mich.-based automaker.

Sara Rosenberg contributed to this article.

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