MGM bonds mixed ahead of reported loss, credit waiver; Idearc deteriorates further; Primus quiet post-Chapter 11

By Paul Deckelman and Sara Rosenberg

New York, March 17 - While investors playing in the gaming sector noted the heavy activity in Wynn Las Vegas LLC's bonds in response to its equity sale, there was also some trading in MGM Mirage ahead of the release after the close of fourth-quarter results which, as, expected, were sharply worse than a year ago. The Las Vegas-based gaming giant also got a "going concern" warning from its auditors, but won a little breathing room on covenant compliance from its bankers.

Rouse Co.'s bonds were seen mixed, even as corporate parent General Growth Properties Inc. got a waiver till year-end on covenant compliance, as Rouse struggles to convince its bondholders to likewise give it a break.

Elsewhere, Idearc Inc.'s bonds continued to lose grounds amid bankruptcy buzz about the phone director publisher, sliding below the psychologically significant 1 point level.

Little real trading was seen in Primus Telecommunications Group Inc.'s bonds in the wake of the company's Chapter 11 filing. Those bonds are now trading flat, giving up their accrued interest.

Wynn dominates gaming trading

Easily the dominant name in Tuesday's gaming sector was Wynn Las Vegas LLC's 6 5/8% notes due 2014, up about a point or so to the mid-73 range on very heavy trading after the Nevada-based casino operator bolstered its liquidity with a successful equity sale.

A trader in distressed bonds said that "other than Wynn, which did 90% of its volume before 10 o'clock this morning, nothing else really seemed to do a lot."

MGM reports wider loss, credit waiver

Outside of Wynn, he said "the rest, for me, saw the same volumes that you'd always expect."

For instance, he saw $12 million of MGM Mirage 6% notes coming due on Oct. 1 at 65, while "a like amount" of the 6¾% notes due 2012 traded at 38 bid, 39 offered.

A second trader also saw the 6s at 65 bid, or a 109% yield to maturity, up from 64 on Monday. But he said that its 6¾% notes due 2012 were meantime down 2 points at 38 bid, with $11 million changing hands, while its 7½% notes due 2016 dipped to 36.5 from 37.25, on $6 million of volume.

At another desk, a trader called the bonds "a little active." He saw the 6s up 1½ points to 65, while the 63/4s lost 2 points to end at 38, the 71/2s were down ¾ point at 36.5, and the 6 5/8% notes due 2015 retreated 1 3/8 points to 37.625

Another market source said that with the company expected to post a big loss when it reported 2008 fourth-quarter and full-year trading results after the market close, trading in the MGM paper was "like the calm before the storm."

After trading had wound down for the day, MGM reported a fourth-quarter loss of $1.15 billion, or $4.15 per share, a sharp deterioration from its year-earlier profit of $872.2 million, or $2.85 per share. The loss included a $1.18 billion charge related to the declining value of several recent acquisitions that the company bought in 2005, including Mandalay Resort Group.

Revenue fell 16% year-over-year to $1.62 billion, well below the roughly $1.71 billion that Wall Street was looking for. Excluding the charges and other unusual items, the company posted 10 cents per share of adjusted earnings, down by about a nickel per share from what the analysts had been looking for,

Along with the earnings, MGM delivered the not-unexpected news that its auditors expressed "substantial doubt" whether the company could continue as a "going concern" given the downturn in the gaming business and the company's heavy leverage burden. The warning increases the likelihood MGM will seek bankruptcy protection from creditors at some point - although that is not going to happen immediately, since the company also said that it had gotten a waiver from its credit facility lenders on complying with its financial covenants through May 15.

In connection with the waiver, the company repaid $300 million under its revolving credit facility, an amount that is not available for re-borrowing without the consent of the lenders.

MGM is also barred from prepaying or repurchasing any debt or disposing of assets.

The company said that it intends to work with its lenders to obtain additional waivers or amendments prior to the expiration of this one so as to address potential future non-compliance with covenants.

Sands loan off, but bonds, shares firmer

Elsewhere in the gaming sector, Las Vegas Sands Corp.'s strip of institutional bank debt lost some ground in trading as Standard & Poor's announced that it lowered the company's ratings, according to a trader.

The strip of debt was quoted at 42¾ bid, 43¾ offered, down from Monday's levels of 43¾ bid, 44¾ offered, the trader said.

On Tuesday morning, Standard & Poor's downgraded Las Vegas Sands' corporate credit rating to B- from B and its senior secured credit facility to B- from B+.

The ratings were removed from CreditWatch and the outlook is negative.

According to Standard & Poor's, the lowering of the ratings reflects concerns over the Las Vegas-based gaming company's ability to maintain compliance with its credit facilities while funding its development pipeline.

The rating agency said that based on its projections for performance in 2009 and 2010 at the company's properties in the United States, Macau and Singapore, combined with additional spending requirements of more than $4.5 billion, there will be a liquidity shortfall absent potential asset sales in Macau.

Standard & Poor's also attributed the downgrade to the expectation that the company will continue to be required to fund equity cure payments over at least the next several quarters in order to remain in compliance with covenants within its bank facilities.

Despite that negative news, a trader saw its 6 3/8% notes due 2015 up a point at 42 bid, 44 offered, although a trader at another desk said that he had seen "no prints in a couple of days" in the company's bonds. He had seen "no trades, no markets."

Las Vegas Sands' NYSE-traded shares were meantime up 28 cents, or 14.07%, to finish at $2.27, on volume of over 25 million, about 20% above the norm.

Las Vegas Sands meantime said Tuesday that its newly appointed president and chief operating officer - who was not expected to take the helm of the troubled company until April 1 - is already on the job. In a filing with the Securities and Exchange Commission, the company disclosed that Michael A. Leven, who was named to those posts on March 9, actually began working two days later, rather than the publicly announced Apr. 1 start date.

Leven, who has been a board member since 2004, was named to replace William P. Weidner, who was abruptly ousted from the positions he had held for 13 years, over disagreements on how to run the company with Sands' chairman and principal investor, billionaire Sheldon Adelson.

Harrah's up despite dire straits

A trader saw Harrah's Entertainment Inc.'s 5 5/8% notes due 2015 up 1¼ points to 12.5 bid, on $2 million volume, although another trader saw its 6½% notes due 2016 unchanged at 9 bid 11 offered.

The bonds were firmer, or at least, they did not go down, even as the Las Vegas-based casino operator - considered the world's biggest gaming company - disclosed in an SEC filing that it cannot guarantee it will generate enough cash flow to fund its debt. It blamed fewer patrons at its 53 casinos amid the ongoing economic downturn, which resulted in decreased revenues.

Harrah's also said that future borrowings to fund its liquidity needs remain uncertain, and cautioned that it may have to sell assets or restructure if it is unable to pay its debt.

Idearc descends even lower

Apart from the gaming names, a trader said "one of the biggest losers of the day" was Idearc Inc.'s 8% notes due 2016, "which everybody sees."

He marveled about "how the heck they're still trading with accrued" interest, even as the Dallas-based telephone directory publisher's nearly-worthless bonds dipped below the 1 point level.

He saw $7 million of the bonds trading at 3/8 point, down 2¾ points on the session.

He said that when the traders at his shop saw a trade in those bonds come across at ¼ bid ¾ offered, with accrued, "we were kind of stunned."

Another market source also saw the bonds trading at 3/8 point, calling it about a 1 5/8 points loss on the day.

Idearc said last Thursday that it was evaluating various restructuring options, possibly including a bankruptcy filing.

Rouse bonds active, mixed

A trader said there was "definitely a little bit more activity in GGP, or Rouse, whatever you want to call it." He said that there's "a general expectation that they're going to file any minute now - but that's been the case for weeks and weeks, and it's been trading like that anyway."

He estimated that the Rouse bonds "are all in the mid-20s to low-30s, depending on what someone's trying to accomplish. They're all right in that zone, the exception being the convert, which is way lower, in the 7s."

He said that the bonds had "not really" done anything in response to the news that Rouse parent General Growth Properties had gotten some lender waivers that it had been seeking.

Another trader saw the 5 3/8% notes due 2013 trading at 271/4, up slightly from the levels seen at the end of last week, with $8 million traded. He saw its 7.20% notes due 2012 drop to 25.625 from 28.125 last Thursday, while its shortest bond, the 8% notes coming due on April 30 - "not too far to go on that one," he said - which had been trading at 23 last week, had moved up to 29.75 Tuesday. He noted that even with that not-inconsiderable percentage gain of nearly 30%, the bonds' yield to maturity was a whopping 1,902%. Some $3 million traded on Tuesday.

General Growth said its lenders have waived declaring a default on its $2.58 billion credit agreement until the end of the year, giving the Chicago-based shopping-center owner some time to regain its financial footing.

However, subsidiary Rouse, which is seeking forbearance from its bondholders, was forced to extend its consent solicitation to this Friday from the now-passed Monday deadline, due to the so-far inadequate positive response from its bondholders.

Abitibi mixed as plan progresses

A market source saw AbitibiBowater Inc.'s 6½% notes due 2013 - actually issued by its Bowater Inc. unit back before the United States-based paper company joined forces with Canada's Abitibi-Consolidated Inc. to form the new Montreal-based super-company - up 3 points on the session at 10 bid.

However, another source, while seeing the bonds at that same 10 level, called them down a point on the day, and saw the old Abitibi-Consolidated 8 3/8% notes due 2015 off nearly 2 points to about 6.5 bid.

AbitibiBowater, looking to cut debt by some $2.4 billion and augment liquidity, on Friday unveiled a recapitalization plan that among other features calls for conversion of $2.9 billion in Abitibi-Consolidated notes to a combination of new notes, common stock and warrants, as well as the repayment of $413 million in secured notes due 2011, and pushing the maturity of a loan slated to mature March 30 out three years to 2012 while reducing its amount to $200 million. On Monday, the company - which had previously said that it had persuaded investors to provide $150 million to back the plan - said it had lined up an additional $100 million backstop commitment from an unidentified investor.

Little activity in Primus

A trader saw "no prints" on Primus Telecommunications Group's bonds, a day after the McLean, Va.-based telecom operator filed for Chapter 11 to carry out a restructuring agreement it had reached with a number of its debtors.

He saw a 37 bid for maybe around 300 bonds ($300,000) in its 14½% notes due 2011 "floating around, but no real trades."

Another trader saw Primus' 8% notes coming due Aug. 15 at 2 bid, 3 offered, trading flat, or without the accrued interest, after the bankruptcy filing, a drop of 2 points on the day, but added that he "didn't see a lot of trade in it."

High-grade names creep into distressed territory

A trader said that with not much else going on, "right now, there's as much high-grades trading in our market as there is the typical stuff you'd expect. We traded a bunch of Sallie Mae [SLM Corp.] today. It's very opportunistic".

He noted that General Electric Co. and its General Electric Credit Corp. bonds "had a little bit of a run-up" after a less than feared one-notch ratings downgrade by Standard & Poor's "but there's a real disconnect between the real short stuff, which I would consider still high-grade and all of the subordinated longer paper, which trades at 40 and 50 cents on the dollar."

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