MGM, Wynn debt gains on numbers; GMAC bonds mixed following earnings; broad market mostly better

By Stephanie N. Rotondo

Portland, Ore., May 5 - Earnings news created some activity in Tuesday trading, distressed bond traders reported.

MGM Mirage's bonds got a boost after the company reported its quarterly results. The casino operator posted an 11% decline in profit and reiterated its plan to explore its options, including asset sales.

Wynn Resorts Ltd. also reported earnings and, despite a swing to a loss, the company's debt still managed to gain slightly. In a conference call to discuss the results, Steve Wynn speculated that the sector as a whole had found its bottom, though other executives were hesitant to follow suit. Still, such comments could have helped the entire sector to gain some ground.

In other earnings news, GMAC LLC reported its sixth loss over the last seven reporting periods. Traders called the company's debt mostly lower on the day and one source pondered that the name had "taken a pause" from its recent run-up.

Overall, traders were still seeing the market moving in a positive fashion.

"The market is hot, everything still seems to be gapping up," a trader said. "There seems to be a fair amount of volume across the board."

MGM, Wynn gain on numbers

MGM Mirage's bonds were called "very active and also up" after the casino operator reported its first-quarter earnings.

A trader saw the notes moving up 4 to 7 points "across the board." He placed the 6¾% notes due 2012 at 67.75, up 7 points, while the 7½% notes due 2016 moved up 7.5 points to 65. He also saw the 8½% notes due 2010 at 81.5, up more than 4 points. Each of those issues, he added, traded in volume of about $23 million each.

The trader said the 6% notes due 2009 closed at 90, up more than 5 points, with $22 million trading.

Another source pegged the 6 5/8% notes due 2015 at 65 bid, a gain of 7.5 points on the day.

Also, MGM's term loan headed higher during Tuesday's market hours, according to a trader.

The Las Vegas-based gaming, hospitality and entertainment company's term loan was quoted at 72 bid, 74 offered, up about 3 or 4 points on the day, the trader said.

For the first quarter, net income was $105.2 million, or $0.38 per diluted share, compared with net income of $118.3 million, or $0.40 per diluted share, in the previous year's first quarter. That equaled an 11% drop year-over-year.

Net revenue for the quarter was $1.499 billion, down 20% from $1.884 billion in the comparable 2008 period.

And, consolidated EBITDA was $532 million in the quarter, compared with $536 million in the prior year period.

In its earnings release, MGM Mirage pointed out that it's seeing signs that business levels are stabilizing as resorts have seen increases in occupancy levels through the first quarter and into April, and forward booking has improved.

As for its balance sheet, at March 31, the company had approximately $14.4 billion of borrowings outstanding and its cash balance was approximately $1.4 billion.

During the quarter, the company drew down the remainder of unused borrowing capacity available under its $7 billion senior credit facility.

"We continue to work constructively with our advisors and senior lenders to find a comprehensive long-term solution to improve our financial position," said Dan D'Arrigo, executive vice president and chief financial officer, in the release.

"We are evaluating a variety of options - which may include asset sales, new capital and modifying or extending our existing debt - to address our liquidity needs and strengthen our balance sheet," D'Arrigo added.

Meanwhile, rival Wynn Resorts also released its first-quarter results, which showed the company swinging to a loss from a profit a year ago.

A trader called the 6 5/8% notes due 2014 up at 87.5 bid, 87.75 offered. Another trader also placed the notes around that level, calling them 2.75 points stronger.

For the quarter, Wynn posted a net loss of $33.8 million, of 30 cents per share. That compared with a net profit of $46.7 million, or 41 cents, in 2008. Excluding certain items, the loss shrunk to 27 cents per share.

Revenue dropped 5% to $740 million from $778.7 million. Of that, $448.7 million came from the company's Macau-based properties. That number reflected an 8.7% decline in revenue.

Adjusted EBITDA declined 36% to $43.9 million from $68.4 million.

Among other names in the sector, Harrah's Operating Co. Inc.'s term loan B debt climbed higher in trading in response to the overall better feel to the cash market and more specifically, the gaming sector, according to a trader.

The term loan B debt was quoted at 73¼ bid, 74¼ offered, up about a point on the day, the trader said.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

GMAC mixed following earnings

GMAC's bonds were a mixed bag Tuesday, as the company also filed its quarterly report. Despite the wider loss, the company said in its conference call to discuss results that it would be able to survive even if 49% stakeholder General Motors Corp. filed for Chapter 11 protections.

A trader saw the benchmark 8% notes due 2031 falling 1.5 points to 63 on $14 million traded. But the floating-rate notes due 2014 ended unchanged at 61, while the 6 7/8% notes due 2012 gained 2 points to close at 79.

Still, another trader called the name "off a little on the day, maybe a point across the board."

He quoted the 8% notes at 62 bid, 63 offered. He also saw the shorter maturities, such as the notes due May 2009, at 99 bid, par offered.

"They could be finally taking a pause," he speculated, referring to recent gains in the name after it was announced that the company would merge with Chrysler LLC's financial arm. "It's moved up a lot."

Yet another source called the 6 7/8% notes due 2012 2 points better at 79 bid.

Increasing loan defaults were to blame for the company's $675 million loss for the quarter, its sixth loss in the last seven reporting periods. In 2008, the company posted a loss of $578 million for the same quarter.

In its automotive finance unit, income dropped 13% to $225 million and auto loans more than 30 days past due increased 3.1% during the quarter.

Under its mortgage unit, which includes the struggling Residential Capital LLC subsidiary, the company lost $125 million.

"The effects of a soft economy and weaker credit performance on legacy assets continued to put pressure on GMAC's financial performance in the quarter," stated Alvaro G. de Molina, GMAC's top executive, in a press release. "We continue to manage through this economic cycle and focus on strengthening operations for the long term. There were also several signs of progress to mention, such as expanding retail auto lending, maintaining our commitment as a leader in wholesale financing, re-entering the prime jumbo mortgage market and increasing bank deposits by about $3 billion from the end of the year.

"In addition, last week we announced another milestone in the company's history - that GMAC will be the preferred provider of auto finance products and services for Chrysler dealers and customers," he continued. "This agreement leverages GMAC's strengths, diversifies our auto finance business and provides new revenue opportunities for the company."

GMAC is a New York-based bank holding company specializing in automotive finance, mortgage operations, insurance, commercial finance and online banking.

Broad market mostly better

In the rest of the distressed arena, a trader said "a lot" of Capmark Financial Group Inc.'s bonds were trading. However, he said the notes ended about unchanged, placing the 5 7/8% notes due 2012 around 25.

"That's about the same level they have been at for a week," he said.

Among other financial names, a trader said American International Group Inc.'s 6.9% notes due 2017 traded up a deuce at 44.25, with $40 million changing hands.

The always-active Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 slipped nearly a point to 98.25.

A trader said Rite Aid Corp.'s 9½% notes due 2017 "continued its upward trend," pegging the issue around 56.75. Another source quoted the paper at 56 bid, 57 offered, compared with levels around 54 on Monday.

Hovnanian Enterprises Inc.'s 6 3/8% notes due 2014 were seen better than 23 points higher, at the 41 bid level.

Sara Rosenberg and Paul Deckelman contributed to this article.

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