Harrah's gains on turn to profit; Nortel notes firm on Ericsson bid; Hawker debt flying higher

By Stephanie N. Rotondo

Portland, Ore., July 27 - It was not so much what was trading Monday that market players found notable as what was not trading.

"CIT [Group Inc.] was pretty nonexistent after being pretty much the only thing that mattered for a week," a trader said. He noted that the "spigot turned off" in regard to the struggling bank's debt.

"Volumes were way, way lighter," he added, though he said that "the bias was better."

Of the names that were trading, Harrah's Entertainment Inc. saw a reasonable amount of activity. Investors seemed to react positively to the company's second-quarter results - released Friday - and come Monday, that resulted in modest gains.

Meanwhile, Nortel Networks Corp. announced a winner had been named in the auction for its wireless equipment unit. The news gave the bonds a couple-point gain during the session.

Hawker Beechcraft Acquisition Co. LLC's notes moved up as much as 5 points, traders reported. There was no news to explain the increase, except for the company's launch of its newest aircraft.

Harrah's bonds improve

Harrah's Entertainment's debt traded somewhat actively in what one trader called an otherwise "mundane" day.

A trader quoted the 10¾% notes due 2016 at 62 bid, 63 offered, up from opening levels around 61. He added that the bonds had been around 57 just Thursday.

Another market source pegged the 5¾% notes due 2017 at 43.75 bid, a nearly 2-point gain. One other source saw the 6½% notes due 2016 at 40 bid, 41 offered.

Late Friday, Harrah's released its second-quarter results, which showed a 19.2% decline in Las Vegas-based revenue. Revenue from that area fell to $705.2 million from $873.1 million the year before.

In total, revenues dropped 12.7% to $2.271 billion from $2.602 billion.

Operating profit slipped to $416.7 million from $460.8 million.

Still, Harrah's was able to post a profit of $2.273 billion compared with a loss of $97.6 million in 2008. The turn to profit was largely due to a one-time gain of $4.279 billion from the retirement of debt.

"The second-quarter financing activities enabled us to extend our average debt maturity and improve our overall liquidity," said Gary Loveman, Harrah's chairman, president and chief executive officer, in a press release. "The note sale, credit-facility amendment, exchange offers and open-market repurchases of HOC notes have strengthened our balance sheet and enhanced our financial flexibility.

"We still face challenges, particularly in Las Vegas and Atlantic City, though our cost-reduction efforts led to improved second-quarter EBITDA margins in other markets we serve," Loveman added. "A bright spot in Las Vegas was the on-schedule opening this month of our new state-of-the-art convention and meeting center at Caesars Palace."

Nortel firms on Ericsson bid

Nortel Networks' debt got a boost after the company announced that Ericsson AB had won the auction for Nortel's wireless equipment unit.

A market source generically quoted all issues at 41 bid, 44 offered, a gain of 3 to 5 points, depending on the issue.

Another trader said that the bonds "showed some good numbers today, in activity," following its asset auction on Friday. He saw its bonds ending up in a 41 to 43 range. He saw the 10 1/8% notes due 2013 mostly trading in a 43 to 43.25 context, "so that's up 5 points from last week."

He saw the 10¾% notes due 2016 around 43 to 44, up 4 points on the day, on "good volume." The auction results, he said, "were positive," with Ericsson putting in the winning bid.

Ericsson beat out bids from Nokia Siemens Networks and M MatlinPatterson Global Advisers LLC with its $1.13 billion offer. Ericsson said the cash deal is expected to garner a "positive effect" on earnings within a year from closing.

Nortel filed for bankruptcy earlier this year and has since looked to re-stabilize by selling off certain assets. An auction for its corporate-networking business is expected later in the quarter.

Among other names in the technology sector, a trader saw NXP BV's 7 7/8% notes due 2014 around 64 to 65, going out at 64.5 bid, which he called up 1.5 points, "but not as much activity" as on Friday. "Most of the action was on Friday, size-wise," he said. "They were in the [upper] 40s and ended up in the [lower] 60s on Friday, and so they're sort of maintaining that range today."

Hawker debt flying high

Hawker Beechcraft's notes were seen moving higher during Monday's session.

One trader said the bonds were up half a point from Friday, "but up 6 points over the last week," noting that the debt had been in the low-50s on Wednesday. Come Monday, the trader saw the 8½% notes due 2015 at 56 bid, 57 offered - a market echoed by another source.

On Monday, the aircraft manufacturer launched its new Beechcraft King Air C90GTx - "the latest advancement for the most successful turbine aircraft in general aviation today," the company said in a press release. The plane is cited as one of the greenest and most efficient currently available in the industry.

"The C90GTx is the latest example of our commitment to keeping the Beechcraft King Air family the most successful turboprop lineup in aviation history," said Bill Boisture, chairman and CEO, in the release. "We took an outstanding product, the C90GTi, and made it even better in the new C90GTx. No other aircraft in its class can compare."

Broad market mostly better

Elsewhere in the distressed debt world, TXU Corp.'s 11¼% notes due 2017 were seen ending around 64. A trader said the company's entire debt structure was "up over 2 points over the last two or three days."

Nuveen Investments Inc.'s 10½% notes due 2015 closed at 70.5 bid, 71.5 offered, according to a trader.

Paul Deckelman contributed to this article.

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