Sprint mixed following numbers; Blockbuster trends upward; Harrah's wins despite Nevada losses

By Stephanie N. Rotondo

Portland, Ore., Feb. 11 - Distressed debt players reported a somewhat stronger trading day Thursday, as many names ended up at least a point.

Sprint Nextel Corp., however, was one of the few that did not follow that trend. In fact, the company's bonds were mixed, at best, as investors digested earnings that came out Wednesday.

Meanwhile, Blockbuster Inc. continued to gain momentum. The recently bottom-heavy bonds started to improve in the midweek session and continued to do so throughout Thursday. However, there was no new to explain the movement.

Nevada released its December and full-year revenue results, which showed some disappointing figures. Still, Harrah's Entertainment Inc.'s debt did not seem much fussed by the news and finished up the session higher.

In bank debt news, Six Flags Theme Parks Inc. announced it had altered its credit facility. The alteration included a shifting of funds and a repriced term loan.

Sprint mixed following numbers

Sprint Nextel bonds ended the trading day mixed, as investors digested the earning report put out on Wednesday.

A trader called the 7 5/8% notes due 2011 "kind of active" at 101 bid, 102 offered, deeming that "about half a point better." However, the 8 3/8% notes due 2017 were called a point softer at 93 bid, 94 offered.

Elsewhere, a market source said about $10 million of the 7 5/8% notes traded at 1011/4, while "$20-odd million" of the 8 3/8% notes moved around 94. He also called the latter issue softer on the day.

And, yet another source saw the 6% notes due 2016 dropping nearly 2 points to 83½ bid.

On Wednesday, the Overland Park, Kan.-based wireless telecommunications company posted its fourth-quarter and full-year 2009 results. The results showed an improvement in free cash flow, which was $666 million for the quarter and $2.8 billion for the year. The yearly flow was the highest annual cash flow since Sprint merged with Nextel.

Net loss for the quarter came to $980 million, or 34 cents per diluted share. For the year, the company saw a loss of 84 cents per share.

Sprint also saw 69,000 retail subscribers leave in the fourth quarter. However, the company pointed out that net post-paid subscriber losses improved by more than 40% in the second half of the year.

"Sprint's performance built notable momentum during the second half of 2009, leading to a fourth quarter with the best sequential and year-over-year improvement in net post-paid subscriber results in Sprint Nextel history, and positive post-paid net subscriber growth for services carrying the Sprint brand," said Dan Hesse, chief executive officer, in the earnings release. "The company's continued focus on clear, simple offers, exciting devices, a better customer experience, dependable network performance and industry leadership in 4G services is resonating with customers.

"We continue to closely manage costs, and in 2009 we generated the highest annual free cash flow since the merger," Hesse added. "The fourth quarter completion of the Virgin Mobile USA, Inc. and iPCS, Inc., acquisitions, as well as our additional large investment in Clearwire, are important to our future."

Still, not everyone was convinced that the results meant Sprint had turned a corner.

"Management continued to brag about lower subscriber losses and improved customer satisfaction," Gimme Credit analyst Dave Novosel wrote in an afternoon comment. "Nevertheless, Sprint is still losing net subscribers."

Novosel also noted that while Sprint said it expected to see fewer postpaid losses in 2010, "it did not say add postpaid subs."

Blockbuster trending upward

Blockbuster bonds remained active and continued to head higher, according to traders.

A trader said the 9% notes due 2012 were "very active" at 18 bid, 19 offered. He called the up about 1½ points on the day.

"There was lots of BBI, as you can imagine," said another source, adding that the debt was "all over the place." He saw about $25 million of the 9% notes trade a point higher around 18.

The Dallas-movie rental chain's bonds have suffered greatly in recent weeks. But Wednesday trading saw the bonds heading higher, with no real news to explain the gains.

However, on Wednesday it was reported that the company had filed for bankruptcy in Portugal, blaming internet piracy for its weakening state.

At the height of its presence in the country, Blockbuster had 27 stores. According to reports, the company now has only 17.

Harrah's wins despite Nevada losses

Despite the release of yet another disappointing monthly revenue report from Nevada, Harrah's Entertainment's debt traded strong.

A market source said a "big hunk" - about $50 million - of the 10% notes due 2018 traded at 74 bid, 75 offered. He said that was "a little bit better, probably a point or two."

The source also saw the 11¼% notes due 2017 inch up to around 103.

Following the release of Atlantic City's January revenues, Nevada put out its December and full-year revenues Thursday. Like the Jersey Shore gaming center - which posted an 8.5% decline in wins - the state that is home to Las Vegas saw revenues fall 3.2% to $859.3 million. The Las Vegas Strip, however, saw its revenues increase 6% to $502.1 million. The opening of MGM Mirage's CityCenter in December was given credit for the gain.

For the year, Nevada reported total revenues of $10.39 billion. That was the lowest level since 2003, when the state won $9.56 billion from gamblers.

Six Flags alters credit facility

Six Flags Theme Parks came out with some changes to its credit facility on Thursday, shifting funds between its term loan and revolver tranches, and reducing pricing on the term loan, according to a market source.

The six-year term loan is now sized at $730 million, up from $680 million, while the five-year revolver is now sized at $100 million, down from $150 million, the source said.

In addition, pricing on the term loan was lowered to Libor plus 375 bps from Libor plus 425 bps and 101 soft call protection for one year was added to the tranche, the source continued.

The term loan still provides for a 2% Libor floor and is still being offered at an original issue discount of 99.

Covenants contained in the credit agreement include a maximum senior secured leverage covenant, a minimum consolidated interest coverage covenant and a maximum consolidated capital expenditures covenant.

Proceeds from Six Flags' $830 million credit facility (B1) will be used to repay $1.147 billion of pre-petition bank debt upon the company's emergence from Chapter 11. The revolver will also be available for general corporate purposes.

JPMorgan, Bank of America, Barclays and Deutsche Bank are the joint bookrunners and joint lead arrangers on the deal.

Mandatory repayments are required from 100% of any debt incurred at Six Flags Theme Parks Inc., 25% of debt at Six Flags Operations Inc. and Six Flags Inc. when the Six Flags Theme Parks leverage ratio is above a level to be agreed and 100% of asset sale proceeds. Also, on an annual basis, commencing with the fiscal year ending Dec. 31, 2010, the company will be required to sweep 50% of its excess cash flow to prepay the term loan.

Six Flags is a New York-based regional theme park company.

Broad market ends firmer

Elsewhere in the distressed debt realm, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were half a point better at 28 bid, 29 offered, a trader said.

Visteon Corp.'s 7% notes due 2014 meantime ended "about the same," said another trader, around the 45 level.

About $25 million of Clear Channel Communications Inc.'s 11% notes due 2016 changed hands, according to a source. The bonds ended somewhat stronger around 59.

And, Rite Aid Corp.'s 9½% notes due 2017 were dubbed a "busy issue." A source said about $20 million to $25 million of the paper traded at 75 bid, 75½ offered. He added that the level was only "fractionally different" from the previous session.

Sara Rosenberg contributed to this article.

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