Harrah's dips, pares losses; Blockbuster bonds softer; GM debt volatile; Clear Channel gyrates

By Stephanie N. Rotondo

Portland, Ore., May 11 - Distressed debt traded down right out of the gate Tuesday, traders reported. But the "general theme," as one trader put it, was that the initial weakness was followed by attempts to pare the day's losses.

For example, one trader said that "gaming got beat up for awhile," with credits like Harrah's Entertainment Inc. falling as much as 4 points on the day. But as the rest of the market started to climb up, so did Harrah's, leaving them down only about 3 points.

Blockbuster Inc. also performed in line with the rest of the marketplace. The bonds tried to climb back up, but still ended softer than Monday.

Elsewhere, General Motors Corp. continued to be volatile, riding the up-and-down wave that was the day's trend. A trader said the automaker's benchmark debt closed the day unchanged.

And Clear Channel Communications Inc. was generally weaker. The company's parent released quarterly results late Monday, which, along with the wishy-washy market, contributed to the losses.

Harrah's dips, pares losses

Harrah's Entertainment's debt also went on a ride during Tuesday's session. The Las Vegas-based casino operator's bonds traded down as much as 4 points in early trading, but managed to trim some of those losses by day's end.

A trader said the 10% notes due 2018 got as low as 80 bid, 81 offered before regaining strength to close around 82. He noted that there was "a fair amount of volume" in the name.

The trader also saw MGM Mirage's debt moving around, with the 7½% notes due 2016 opening around 821/2, moving up to 84¼ and finally ending around 82 bid, 83 offered.

He called the 13% notes due 2013 "down a couple points" at 115½ bid, 115¾ offered.

At another desk, a trader said Harrah's 10% notes opened around 79 bid, 80 offered and then closed at 81½ bid, 82 offered.

"So they were grinding higher," he said.

Blockbuster bonds softer

Blockbuster paper traded down with the rest of the market in early Tuesday trading, but at least one source saw the debt attempting to climb back up.

One trader placed the 9% notes due 2012 at 18½ bid, 19 "and change" offered, down "from a little over 20" on Monday.

Another trader also saw the bonds at that level, but said they had likely come back, ending "probably 19½ bid, 20 offered."

The Dallas-based movie rental chain is slated to release its first-quarter earnings after the market closes on Thursday. According to one finance-tracking blog, analysts are estimating a net loss between 21 and 6 cents per share.

However, the recent demise of rival Movie Gallery Inc. could potentially generate positive effects for the suffering company.

"Looking forward to 2010, the company remains cautiously optimistic," according to AlphaEarnings.com. "Over the longer term, the recent announcement of store closings by Movie Gallery will affect favorably hundreds of Blockbuster locations as Movie Gallery liquidates and closes a number of their U.S. locations. Furthermore, the recently announced transaction between Warner and both Netflix and Redbox will provide Blockbuster with a 28-day head start on Warner titles in their stores.

"This reinforces an important element of differentiation and enhances Blockbuster's consumer relevance since 60% of the industry's $22 billion rental and retail business represents new releases during the first 30 days of street date."

GM ends steady

General Motors' bonds were "weaker initially," a trader said, in line with the broader market. But by the end of the day, the notes had "come back some," he said, ending about unchanged.

The trader quoted the benchmark 8 3/8% notes due 2033 at 34½ bid, 35 offered. He added that the debt saw "decent volume," though less than what has been typical of late.

The gyrations in the debt came as news reports indicated that the Detroit automaker was considering getting back into auto financing. GM sold its previous in-house lender - GMAC LLC - three years ago to Cerberus Capital Management in an effort to shore up its balance sheet.

GM is said to be weighing its options, which includes re-purchasing GMAC, or at least the auto finance unit, or finding others lenders willing to work with it. Should GM decide to go the GMAC route, it will have to contend with the U.S. Treasury, which owns 56% of GMAC, now Ally Bank.

Clear Channel gyrates post-numbers

As the rest of the market went on a rollercoaster, so did Clear Channel Communications' paper, a trader reported.

The trader said the 10¾% notes due 2016 started the day around 80 bid, 81 offered, and then got as low as "78 and change." The bonds moved back up a tad to finish at 79 bid, 80 offered.

The trader also saw the 11% notes due 2016 ending around the 76 mark, which compared to the intraday lows around 74.

Meanwhile, Clear Channel's term loan B weakened in trading as the market in general was down probably around another half a point to a point depending on the name, according to traders.

The term loan B was quoted by one trader at 80½ bid, 81½ offered, down from 80¾ bid, 81¾ offered, by a second trader at 79¾ bid, 80¾ offered, down from 81½ bid, 82½ offered, and by a third trader at 80 bid, 81 offered, down from 81 bid, 82 offered.

The third trader said that the term loan B had popped up by about a quarter to a half a point late Monday after earnings came out, but investors didn't seem to be digesting the news as well on Tuesday and there was some selling pressure.

Late Monday, Clear Channel's parent, CC Media Holdings Inc., said that for the first quarter it had a consolidated net loss of $179.6 million, compared to a consolidated net loss of $428 million in the prior year.

Revenues for the quarter were $1.26 billion, an increase of 5% from $1.21 billion in the first quarter of 2009.

Also, cash flow provided by operating activities for the quarter was $30.2 million, cash flow used for investing activities was $71.7 million, and cash flow used for financing activities was $360.3 million for a net decrease in cash of $401.7 million.

Clear Channel is a San Antonio-based media and entertainment company.

Sara Rosenberg contributed to this article

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