Harrah's launches issue, debt trades higher; Ambac heads up, comes back; U.S. Concrete better

By Stephanie N. Rotondo

Portland, Ore., April 13 - The distressed debt market was "a little better here and there," a trader said on Tuesday.

Still, another round of new issues dominated the market.

"I would say 90% of everything was new issue-centric," a trader said. "Or Harrah's [Entertainment Inc.] in anticipation of the new deal."

The new Harrah's deal did give speculative-grade investors something to do and as a result, the casino operator's bonds ended the day mostly higher. Even the new issue quickly jumped up about 2 points from its original pricing.

Harrah's intends to use the proceeds from the new issue to pay down debt, something it has been seeking to do of late. However, some market players opine that there is still a ways to go before the company is once again on solid footing.

Meanwhile, Ambac Financial Group Inc. saw its hybrid debt continuing to trade up, at least early on in the session. But the notes drifted in slightly by the end of the day, closing unchanged to lower than Monday's levels.

U.S. Concrete Inc. received a downgrade during the day's session. But instead of declining, the bonds ended somewhat higher, though trading was mostly in odd lots.

Harrah's notes trade higher

Some of Harrah's Entertainment's debt moved up in trading, as the company launched a new upsized $750 million issue.

One trader said the "lower coupon" issues were up at least a point on the day, seeing the 5¾% notes due 2017 at 62½ and the 6½% notes due 2016 at 68. The 5 5/8% notes due 2015 meantime improved by 2 points, ending around the 70 mark.

However, he called the 10% notes due 2018, the 10¾% notes due 2016 and the 11¼% notes due 2017 "unchanged mostly." He pegged the 10% notes at 86 bid, 86¾ offered, the 10¾% notes around 88½ and the 11¼% notes at 109 bid, 109¼ offered.

At another desk, a source deemed the 10% notes up nearly 3 points at 87¼ bid.

Harrah's Entertainment's subsidiary, Harrah's Operating Co. priced its $750 million second-priority senior secured notes on Tuesday. The deal was originally slated to be $500 million but was soon increased.

The new 12¾% notes due 2018 came at 98.778 to yield 13%. According to traders, the new issue quickly moved up to trade at par and above.

"Everyone was focused on the new issue, which priced late in the day," a trader said, adding that the new paper "traded up just above par."

Harrah's loans gain ground

Meanwhile, Harrah's term loans also gained some ground in trading after the company said that it would be selling the second-priority senior secured notes to repay revolver debt.

On the news, the company's term loan B-1 was quoted by one trader at 88¾ bid, 89¼ offered, up from 88½ bid, 89 offered, and by a second trader at 88½ bid, 89 offered, up from 88¼ bid, 88 7/8 offered.

The term loan B-2 was quoted by the first trader at 88¾ bid, 89¼ offered, up from 88½ bid, 89 offered, and by the second trader at 88 5/8 bid, 89 1/8 offered, up on the bid side from 88½ bid, 89 1/8 offered.

And, the term loan B-3 was quoted by the first trader at 88 1/8 bid, 88 5/8 offered, up from 88 bid, 88½ offered, and by the second trader at 88½ bid, 89 offered, up from 88¼ bid, 88 7/8 offered.

The Las Vegas-based casino operator intends to use the proceeds from the note sale to pay down its revolving credit facility, as well as to redeem some senior notes that mature in 2010 and 2011.

According to Barbara Cappaert, an analyst with KDP Investment Advisors, Harrah's is "clearly taking advantage of a stronger market despite real concerns about this credit," she said in a note released to clients Tuesday. "Liquidity at HOC is still slim and...we have trouble coming up with a valuation which fully covers the [capital] structure through the second-lien notes."

Standard & Poor's gave the new notes a CCC rating and raised its corporate credit rating to B- from CCC+.

"The ratings upgrade reflects our assessment that several actions taken by management over the past several quarters have positioned the company with sufficient capacity to weather the current downturn in the gaming sector," said credit analyst Ben Bubeck in a statement.

Moody's Investors Service also rated the new notes, giving them a Ca rating. Moody's affirmed its overall Caa3 rating for the company and maintained that with its high leverage and debt-to EBITDA ratio, the outlook is negative.

Ambac heads up, comes back in

Ambac Financial Groups hybrid debt continued to move up in early trading, but drifted back in by the end of the day, traders reported.

"They have been moving up since the numbers came out on Friday," one trader said, pegging the 6.15% notes due 2087 at 8¾ bid, 9¾ offered. He noted that the bonds had gotten as good as 10 bid, 11 offered before coming back in.

"[Last] Thursday afternoon, you couldn't give these things away at 4," he added.

Another trader said the paper "traded a bunch this morning" at 11 bid 11½ offered. But he too saw the notes slipping back to around 10 by the close of business.

Yet another trader said that Ambac's paper was mostly in a 37 to 39 context, for issues such as the 5.95% notes due 2037, which he said was "right around 40, trading probably up a point or 2." The 6.15% hybrid paper was ending around 10½ bid, 11½ offered. With the last trade around 11, he called the bonds up a point from Monday, but "on good volume."

Last week, the New York-based bond insurer posted an improved fourth-quarter profit of $558.1 million. However, the company noted that it has "insufficient capital" to continue operating past the second quarter of 2011 and that it therefore might need to file for bankruptcy.

As such, JPMorgan Chase & Co. analysts speculate that the company's equity has little to no value.

"We believe any investment in ABK shares at this time is highly speculative," the analysts said in a research note published Tuesday.

RMIX inches up, concerns remain

A trader said U.S. Concrete's 8 3/8% notes due 2014 inched up a tad, despite a rating downgrade from S&P.

The trader saw the paper offered at 61, which he called "probably up half a point." He added that there was some trades around that level, though he noted there was "not much round-lot trading."

Another source placed the debt in the high-50s to low-60s, also on odd-lot trading.

The bonds are currently trading flat, or without accrued interest.

S&P downgraded the concrete producer to D from CCC, citing the company's nonpayment of its April 1 coupon. Though the company is currently within its 30-day grace period, the rating agency still considers the missed payment a default.

U.S. Concrete has attempted to restructure itself outside of bankruptcy. Last month, the company amended its senior credit facility, which allowed it access to $18.5 million in short-term liquidity. In September 2009, the company sold off some assets and the proceeds generated were used to pay down its revolving credit facility.

But some still see trouble in the cement and concrete industry, given the current state of the construction industry.

"RMIX experienced challenging market conditions, which have negatively impacted revenue, profitability and liquidity for quite some time and there is no signs of improvement," wrote RothmanResearch.com analysts in a report released Monday.

"In spite of cost control measures, including expanded wage freezes, elimination of 401(k) matching contribution, reduction of employee benefits and emergency-only capital expenditures the company is facing tuff [sic] time.

"The dwindling sales, intense pricing pressure and lack of demand has added further pressure to liquidity," the report continued. "Moreover, slow start of 2010 is matter of concern."

The note concluded that concerns about demand abound and the any recovery would likely be "sluggish."

Tronox notes improve

Tronox Worldwide LLC's 9% notes due 2012 have moved up solidly over the last several days, despite a lack of fresh new news out from the bankrupt Oklahoma City-based manufacturer of chemical pigments.

The bonds were seen going home at 119½ bid, up about 6 points from Monday and some 9 points above where they were trading in them at the end of last week.

Tuesday's round-lot volume was around $4 million, a market source said.

Sara Rosenberg and Paul Deckelman contributed to this article

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.