Casinos stronger despite poor revenue numbers; Motorola, Sprint firm; Six Flags widens loss, bonds mixed

By Stephanie N. Rotondo

Portland, Ore., March 10 - Distressed bond traders reported Tuesday that the market was better in both volume and pricing.

"It was much more active than yesterday," a trader said. "Everything was positive."

The more positive tone came as the equity markets experienced a sizable rally, due in large part to good news from Citigroup Inc.

But it was bad news for Las Vegas and Atlantic City. Both gaming centers released monthly revenue reports and neither showed any sign of recovery for the historically recession proof sector. Still, most names, including MGM Mirage and Wynn Las Vegas LLC, ended the session stronger.

Meanwhile, Motorola Inc.'s paper continued to gain ground and Sprint Nextel Corp.'s debt moved higher as well. Traders had little in the way of explanation for the gains.

Six Flags Inc. posted its fourth-quarter results and despite gains in revenue and attendance, its loss for the period was wider. The company's bonds finished the day mixed.

Casinos stronger

New revenue numbers seemed to stop would-be investors from entering the gaming sector, as trading in the arena - especially in MGM and Wynn - dropped off considerably after both Las Vegas and Atlantic City announced monthly revenue numbers.

Still, the sector was seen largely better, following in line with the rest of the market. A trader saw MGM's 6% notes due 2009 at 53.5, a gain of nearly 2 points, while Wynn's 6 5/8% notes due 2014 gained 1.5 points to close at 66.

The trader also saw Starwood Hotels & Resorts Worldwide Inc.'s 7 7/8% notes due 2012 at 80.5, unchanged, and its 6¼% notes due 2013 at 73.25, up more than a point.

Harrah's Entertainment Inc.'s 5½% notes due 2010 also gained nearly a point to close with a 31 handle.

Another trader said MGM's senior paper, like the 6 7/8% notes due 2016, were quoted at 37 bid, 39 offered.

Yet another market source placed MGM's 6 5/8% notes at 37 bid, a 2.5-point increase. Isle of Capri Casinos Inc.'s 7% notes due 2014 also ended better at 45.75 bid.

Nevada's Gaming Control Board said revenue on the Strip dropped 15% during the month of January in their monthly report. Revenue fell to $510.4 million for the month. Throughout the state, revenue fell 15% to $908.6 million, while revenue in Clark County, which includes the Strip, dropped 16% to $777.5 million.

Also, tourist visits to Sin City are expected to decline 3% to 4% through 2009.

Over on the East Coast, Atlantic City's revenue declined to $310.3 million, including a 19% decline in slot revenue at $214.3 million and a 20% decline in table play at $96 million.

"They can't keep going down at that rate," one trader said of the numbers.

Furthermore, MGM was added to a list of 283 so-called bottom rung companies most likely to default, according to a report issued by Moody's Investors Service. MGM has $8.1 billion in corporate debt outstanding, with $1.28 billion maturing this year alone.

Motorola, Sprint firm

Motorola's bonds continued to climb up during Tuesday's session and Sprint Nextel's debt jumped on the bandwagon as well.

A trader pegged Motorola's 6 5/8% notes due 2037 at 66.25, a gain of more than a point with about $20 million changing hands.

At another desk, Sprint's 7 5/8% notes due 2011 were quoted at 82 bid, 84 offered, versus 82 offered previously. The 8 3/8% notes due 2012 moved up to 77.5 from 75 the day before and the 8¾% notes due 2032 were seen at 56.5 bid, 57.5 offered, compared with levels around 55 on Monday.

It was unclear what was driving the debt - aside from an overall market rally - as there was no news to explain it. However, members of the telecommunications sector did meet with the U.S Commerce Department on Tuesday to discuss President Barack Obama's $7.2 billion grant program for high-speed internet expansion. The meeting, which also included lobbyists, was aimed at helping the government decide which firms were to receive the funds.

Six widens loss

Despite a gain in revenue and attendance, Six Flags posted a wider loss for the fourth quarter due to an income tax expense.

But traders said the news did little to the amusement park operator's debt, with only odd lots trading.

One trader said he saw offers in the teens for the 9 5/8% notes due 2014. Another trader saw the bonds moving at 16, which was down a tad on the day. The second trader also pegged the 9¼% notes due 2013 at 16 bid, 17 offered, an advance of 5 points.

The New York-based company reported a loss of $206.6 million, or $2.12 per share. That compared with a loss of $132.4 million, or $1.39 per share, the year before.

Without the $109.5 million tax expense, Six Flags said the loss would have equaled about 83 cents per share.

Revenue climbed 5% to $118.1 million, versus revenue of $112.3 million in the fourth quarter of 2007. Attendance was also better with a 9% increase.

"The remaining challenge is the inherited balance sheet and we are in comprehensive dialogue with our lenders to remedy that issue," Mark Shapiro, the company's chief executive officer, said in a statement.

Still, there was bad news. Six Flags said it did not expect to have enough cash on hand to finance redemption of its Preferred Income Redeemable Shares, which mature Aug. 15. A total of about $300 million, including accrued and unpaid dividends, is needed to repay the debt.

"The Piers redemption is just one component of the comprehensive restructuring of the balance sheet that the company is pursuing," Six Flags said in its statement.

Michaels improves

Michaels Stores Inc.'s term loan B gained some ground during the trading session as the company released fourth quarter earnings, according to traders.

One trader had the term loan B quoted at 52½ bid, 54½ offered, up from 51½ bid, 53½ offered, while a second trader had the debt quoted at 52 bid, 54 offered.

For the fourth quarter, Michaels had net income of $74 million, up $21 million from net income of $53 million for the corresponding period of the prior year.

Net sales for the quarter were $1.268 billion, down 2.5% from $1.301 billion last year with same-store sales declining 5.6%.

And, adjusted EBITDA for the quarter was $207 million, or 16.3% of sales, versus $266 million, or 20.4% of sales, for the same period last year.

Also on Tuesday, Michaels said that, as of March 9, availability under its revolving credit facility was approximately $594 million. This compares with availability of more than $550 million at Jan. 31 - the end of the company's fiscal year.

Also at fiscal year-end, the company's debt levels totaled $3.928 billion, down approximately $255 million from the third quarter ending balance. However, the debt levels were up $65 million from the prior year.

During the fourth quarter, the company made a $5.9 million amortization payment on its senior secured term loan.

"Our focus during the fourth quarter was on driving sales and maximizing gross margin dollars while effectively clearing through our seasonal merchandise," Brian C. Cornell, chief executive officer, said in a news release.

"In the current environment, we are focused on managing all aspects of the business, including expenses, capital expenditures, cash and liquidity very conservatively," Cornell added.

Michaels is an Irving, Texas-based specialty retailer of arts, crafts, framing, floral, wall decor and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

Visteon steady

Visteon Corp.'s term loan was pretty much unchanged despite news reports that the company made an interest payment on its bonds that, if missed, had people speculating about bankruptcy, according to a trader.

The interest payment due on Tuesday was for roughly $16 million.

Following the news, the term loan was quoted at 15 bid, 18 offered, in line with previous levels, the trader said.

"No trades, no activity, no reaction," the trader added about the term loan.

Visteon is a Van Buren Township, Mich.-based automotive supplier that designs, engineers and manufactures climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers.

Broad market better

Aramark Corp.'s 8½% notes due 2015 gained nearly 2 points to close at 85.625, a trader said. Another trader also saw the bonds at that level.

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 inched up more than a point to end at 85.25.

Citigroup Inc.'s 8.3% notes due 2057 jumped right along with the company's equity after it said that it had operated at a profit for the first two months of the year. A trader called the bonds up more than 5 points at 36.

Despite a downgrade from Standard & Poor's on Monday, First Data Corp.'s 9 7/8% notes due 2015 moved up almost a point to 51.25.

Sara Rosenberg contributed to this article.

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