Harrah's falls post-numbers; GM unchanged to weaker; Smurfit continues to climb; Rite Aid dips

By Stephanie N. Rotondo

Portland, Ore., April 27 - Distressed debt traders saw a weakening market Tuesday, pushed lower by the goings-on in the broader marketplace.

"Market was weaker overall obviously given European worries and stock market," a trader said, pointing to a credit crisis across the Pond that has drifted all the way to Portugal and an equity market that fell more than 200 points.

Another trader noted that while there was "better volume," it was "also quiet as everyone is watching the Goldman grill," referring the Goldman's inquisition from lawmakers in Washington, D.C.

Harrah's Entertainment Inc.'s debt took a hit during trading. The company reported earnings early in the session and the lackluster numbers took some joy out of the bonds and bank debt.

General Motors Corp.'s bonds were also weaker, or at best case scenario, unchanged. There was news out on the automaker, but it was not clear if the declines were caused by the news or if it was general market weakness driving them down.

On the upside, Smurfit-Stone Container Corp. paper continued to head for higher ground in active trading. In speaking with one market source, he opined that the company's assets were behind the recent, steady climb.

And, the market's softer tone was blamed for slips in Rite Aid Corp.'s notes, as there was no other fresh news out on the company.

Harrah's declines post-numbers

Harrah's Entertainment's debt ended the day with a softer tone following the release of the company's first quarter results.

In the bonds, a trader said the 10% notes due 2018 "traded a lot," though down "almost a point" to around 87.

Another trader called the issue a "tiny bit softer," also around the 87 mark. Though about $30 million to $40 million of the paper traded, he noted that the other issues were not as active.

"You would have thought that on the back of earnings you would have seen more," he said.

At another desk, the 10% notes were placed at 87¼ bid.

Harrah's term loans were also weaker on Tuesday as the first quarter numbers showed a larger net loss, a drop in revenues and a decline in adjusted EBITDA on a year-over-year basis, according to traders.

The term loan B-1 was quoted by one trader at 87¼ bid, 88¼ offered, down from 88 1/8 bid, 88½ offered, and by a second trader at 87 7/8 bid, 88 3/8 offered, down a quarter of a point.

The term loan B-2 was quoted by the first trader at 87¼ bid, 88¼ offered, down from 88 1/8 bid, 88½ offered, and by the second trader at 88 1/8 bid, 88 5/8 offered, down an eighth of a point.

In addition, the term loan B-3 was quoted by the first trader at 87 bid, 88 offered, down from 87 5/8 bid, 88¼ offered, and by the second trader at 87 5/8 bid, 88 1/8 offered, down a quarter of a point.

First quarter loss

For the first quarter, Harrah's Entertainment reported a net loss of $195.6 million, down 47.4% from $132.7 million in the first quarter of 2009, while Harrah's Operating saw a net loss of $165.1 million, down 24.3% from $132.8 million last year.

Net revenues for the quarter were $2.188 billion for Harrah's Entertainment, down 2.9% from $2.255 billion in the previous year, while Harrah's Operating's revenues were $1.711 billion, down 2.4% from $1.753 billion.

And, Harrah's Entertainment's adjusted EBITDA for the quarter was $481.6 million, down 12% from $547.3 million last year, while Harrah's Operating's adjusted EBITDA was $383.1 million, down 5.9% from $407.3 million.

Additionally, the Las Vegas-based casino operator noted that its debt reduction and maturity extension efforts have helped to improve its liquidity position.

During the quarter, Harrah's successfully secured consents from its commercial mortgage backed securities lenders to amend the terms of about $5.5 billion in loans. The amendments allow Harrah's to extend maturities until 2015 and to repurchase the loans at a discounted rate.

Also, the company completed a $750 million private placement of second-priority senior secured notes due 2018. The proceeds from the offering were used to buy back senior notes due 2010 and senior subordinated notes due 2011.

"The CMBS agreement, success of our most recent note sale and the other financing actions we've taken over the past 18 months have effectively deferred material debt maturities until 2015 and beyond," said Gary Loveman, president, chairman and chief executive, in the earnings release.

"Today, the company is positioned with substantial liquidity and minimal near-term debt maturities and is better poised to capitalize on an eventual economic rebound and long-term growth opportunities."

Elsewhere in the casino space, Station Casinos Inc.'s 6% notes due 2012 "actually looked a little better," a trader said, at 71/2. The 6½% notes due 2014 were meantime seen around 5/8.

"They don't have a lot of value," the trader remarked.

GM unchanged to lower

General Motors' bonds were unchanged to slightly weaker, traders reported Tuesday.

At one desk, a trader called the 7.2% notes due 2011 the credit's most active issue. He deemed the notes "about the same," trading around 38 1/2.

The 8 3/8% notes due 2033, however, slipped about a point to the 38 level.

"Across the board, they were flat to down half a point to a point," the trader said. "But they pretty much hung in there."

Another trader saw the 7.2% notes at 38 bid, 39 offered, calling that "kind of right where they were," on $30 million - "maybe more" - traded.

He also saw the 8 3/8% notes falling a point to 381/4, with about $15 million to $20 million changing hands.

"The short stuff kind of seemed unchanged," he said. "The 33s were the weaker ones."

GM's losses could have been due to general weakness in the market. However, the company was making headlines during the session.

One story circulating about the Detroit-based automaker was about lawmakers who were upset at how the company was publicizing its recent U.S. loan repayment. GM has been saying that it repaid $6.7 billion in TARP money in full and ahead of schedule, but some lawmakers have pointed out that the company simply used another pot of bailout funds rather than their own earnings.

Another story making the rounds was centered on GM's planned $890 million investment into some of its plants. The funds will be used to make new engines and will allow the company to retain 1,600 jobs.

Smurfit continues to climb

Smurfit-Stone Container saw its debt shaking off the general market trend to end the day "up a solid point from the day before," a trader said.

The trader said about "$15-odd million" of the 8¼% notes due 2012 traded at 96½ bid, 97½ offered.

"Probably a year ago, they were trading in the single digits," he said. When asked why he thought the bonds had made such a comeback, he opined that it was because the company does have some decent assets.

"There are assets there," he said. "I think the claims against those assets values [the bonds] in that zone."

Another market source deemed the paper up 1 point at 97 bid.

Smurfit-Stone is a Chicago-based manufacturer of paperboard and paper packaging.

Rite Aid debt dips

In keeping with the rest of the market, Rite Aid bonds were seen falling at least a point on the day.

A trader pegged the 9½% notes due 2017 at 861/2, which he called off 1½ points.

Another said the issue "came off a little bit" to close around that 86½ mark. He added that about "$20-odd million" of the bonds traded.

And, another source saw the 8 5/8% notes due 2015 dipping a good point to 89 bid.

Rite Aid is a Camp Hill, Pa.-based pharmacy chain.

Atrium loan closes

Atrium Cos. Inc. closed the books on its $185 million six-year term loan (B3) on Tuesday, and the filled-out deal, which is anticipated to stay at initial terms, should allocate sometime in the next few days, according to a market source.

The term loan is priced at Libor plus 500 bps with a 2% Libor floor, and it was sold at an original issue discount of 981/2.

Security on the loan is a first-priority lien on all non-ABL assets.

Proceeds will be used to refinance existing debt in connection with the company's exit from Chapter 11.

Atrium is a Dallas-based vinyl and aluminum window company.

Financials mixed

In the financial sphere, First Data Corp.'s 9 7/8% notes due 2015 were placed around 91, a loss of over a point on the day, according to a trader.

Another trader said Synovus Financial Corp.'s 5 1/8% notes due 2017 were up 7 to 8 points to "around 90, post-their news late yesterday."

The trader was referring to word that the company was seeking to raise $630 million in new capital.

Sara Rosenberg contributed to this article

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