Harrah's finishes stronger; AIG paper gets boost from Alico sale; Lyondell quiet as plan filed

By Stephanie N. Rotondo

Portland, Ore., March 8 - Harrah's Operating Co. Inc. and American International Group Inc. were the distressed debt market's noms du jour on Monday, according to market sources.

Harrah's debt - corporate and bank - moved up 2 to 3 points during the session. The gains were prefaced by news that the casino operator had received consents to amend and extend $5.5 billion in loans.

AIG paper was meantime somewhat better in trading, following news of yet another asset sale. According to a press release announcing the sale, proceeds will be used to repay the government.

Meanwhile, Lyondell Chemical Worldwide Inc. inched slightly higher as the company filed its plan of reorganization. The chemical maker rejected a bid from reliance Industries Ltd. and instead chose to go the private equity route.

Still, traders noted that the bulk of Monday trading was in BBB-rated paper and higher, with little left over for distressed credits.

"Everybody is focused on the new issue calendar this week," a trader said.

Harrah's debt ends stronger

Harrah's Operating's debt structure moved up in Monday trading as its parent company, Harrah's Entertainment Inc., revealed that it received unanimous consent from its commercial mortgage back securities lenders to amend the terms of approximately $5.5 billion in loans.

In the bonds, a market source said Harrah's "was the only thing that had any jump up," seeing the 10% notes due 2018 closing around 80, on about "$40-odd million" traded. He called that "definitely up 2 to 3 points."

The source also saw the 11¼% notes due 2017 inch up a point to around 107, with some "$20-odd million" changing hands.

All of Harrah's bonds were trading "a point or two higher than normal," he added.

At another desk, a trader called Harrah's notes "pretty active." He also pegged the 10% notes around the 80 mark and the 11¼% notes around 107. He also placed the 10¾% notes due 2016 around 80, up 2½ points on the day.

In the bank debt, the term loan B-2 was quoted by one trader at 84¼ bid, 84¾ offered, up from 82 bid, 82¾ offered, and the term loan B-4 was quoted by that trader at 102½ bid, 103½ offered, up from 101 bid, 101¾ offered.

Meanwhile, a second trader had the term loan B-1 quoted at 84 1/8 bid, 84 5/8 offered, up from 82¾ bid, 83¼ offered, the term loan B-2 quoted at 84 3/8 bid, 84 7/8 offered, up from 83 bid, 83½ offered and the term loan B-3 quoted at 83 5/8 bid, 84 1/8 offered, up from 82¼ bid, 82¾ offered.

Harrah's amends loan terms

Under the amendment, Harrah's is extending the commercial mortgage-backed securities loan maturity date to 2015 and is getting permission to purchase CMBS loans at a discount in the future.

The amendment, which will improve the company's balance sheet by reducing debt by more than $4 billion and improve liquidity and maturity profile, will become effective upon execution of definitive documentation.

As part of the amendment, the company has agreed to purchase approximately $124 million face value of CMBS loans for $37 million.

Harrah's began purchasing discounted CMBS loans in the fourth quarter of 2009 and purchased approximately $950 million of face value loans for approximately $237 million.

"These revised terms for the CMBS loans represent the culmination of nearly two years of transformative activities that have allowed us to improve our balance sheet substantially; reducing our debt load by more than $4 billion while improving our liquidity and maturity profile," said Gary Loveman, chairman, chief executive and president, in a press release.

"We now have even greater financial flexibility as we have extended all of our maturities until 2015 and beyond."

In connection with the amendment, the borrowers under the CMBS loans agreed to pay the selling lenders an additional $48 million for the loans previously sold.

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

AIG boosted by Alico sale

American International Group's bonds were better following the announcement that the New York-based insurance giant would sell its American Life Insurance Co. unit to MetLife Inc. for $15.5 billion.

A trader said the 8.175% notes due 2058 were "kind of active" and slightly firmer around 77.

Another trader said the company's "holdco paper...had a little bit of a bounce on that Alico news." He said the 5.60% notes due 2016 earned a couple of points, closing around 89.

According to the terms of the asset sale, MetLife will pay $6.8 billion in cash and the remainder in MetLife equity securities.

"The cash portion of the proceeds from this sale will be used to reduce the liquidation preference of the Federal Reserve Bank of New York in the special purpose vehicle formed by AIG and the FRBNY to hold the interests in Alico," the company said in a press release announcing the transaction.

"This sale is an important step toward repaying the government," Harvey Golub, chairman of AIG, noted in the release. The sale of Alico and the sale of AIA to Prudential plc are expected to generate $50.7 billion for AIG, with $31.5 billion in cash to repay the Federal Reserve Bank of New York, plus another $19.2 billion in securities that the company can sell over time to repay the government.

"In addition, both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts, and focus on enhancing the value of our key insurance businesses," Golub said.

Other financial news

Elsewhere in the financial arena, First Data Corp.'s 9 7/8% notes due 2015 were "still plodding along" around 903/4, according to a trader.

Another trader said "a lot" of Genworth Financial Inc.'s 6.15% notes due 2066 traded up half a point to a point to 71 bid, 72 offered.

And, Lehman Brothers Holdings Inc.'s benchmark 5 5/8% notes due 2013 and 6 7/8% notes due 2018 were "a smidge better," a trader said, around 25.

Lyondell quiet as plan filed

Lyondell Chemical Worlwide's bonds were "suspiciously useless," a market source said, as the company filed a reorganization plan and rejected a takeover bid from Reliance Industries Ltd.

The source said the bonds were "nothing different," with the 10¼% notes due 2010 and the 9.8% notes due 2020 trading "all in the 80s." The 7 5/8% notes due 2026 were meanwhile trading in the high-20s, he said.

Another trader also noted that the debt was "not all that active." He pegged the 10¼% notes at 831/4, the 9.80% notes at 84½ and the 7 5/8% notes around 28.

LyondellBasell, the parent company of Lyondell Chemical, is seeking to exit bankruptcy with the help of an Apollo Management-led group of private equity investors. The group has agreed to back a $2.8 billion rights offering of class B shares.

Lyondell is hoping to emerge from bankruptcy protection by April 30. It is expected the company will have more than $5 billion in debt upon emergence.

Broad market mostly firm

In the rest of distressed debt territory, Energy Future Holdings Corp.'s bonds were somewhat active, but unchanged, according to traders.

One trader saw the 6½% notes due 2024 at 53½ and quoted the 10¼% notes due 2015 at 77 bid, 78 offered.

Another trader pegged the 10 7/8% notes due 2017 around 80.

Meanwhile, Blockbuster Inc.'s 9% notes due 2012 were holding steady at 26½ bid, 27 offered, a trader said. The trader also saw the 11¾% notes due 2014 at 76 bid, 76½ offered.

And, NewPage Corp.'s 10% notes due 2012 were "up another point or so," the trader said, around 66.

Sara Rosenberg contributed to this article

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