Harrah's dips post Paulson IPO news; TXU slips on exchange offer; CIT debt lower on technicals

By Stephanie N. Rotondo

Portland, Ore., July 16 - Distressed debt ended Friday "not down nearly as much as the equity markets, but it's starting to drift off a little bit," according to a trader.

The trader said there was "no incentive to do anything" as sellers were largely absent and volumes were thin as there are "a lot of people out for some reason."

News that hedge fund owner John Paulson might soon publicly trade his equity holding in Harrah's Entertainment Inc. resulted in some losses for the company's debt. Traders said the bonds saw decent volume, but noted in the same breath that the level of activity was not unusual for the credit.

Meanwhile, Energy Future Holdings Corp. announced an exchange offer, which did little to stir up any gains, as market sources saw the bonds falling up to a point by market close.

CIT Group Inc. bonds also dipped. A trader said the bonds had previously "been stuck in kind of the same place" for awhile, but that all changed come Friday.

Harrah's debt dips

Harrah's Entertainment's debt traded actively following news that billionaire investor John Paulson could soon publicly list the stock he holds in the Las Vegas-based casino operator.

But while the bonds were trading actively - as one traded noted, that is pretty typical - they were seen falling up to a point.

A trader called the 10% notes due 2018 down nearly a point, ending around 83, while the 10¾% notes due 2016 dipped half a point to close around 80.

Another trader said the 10% notes were "down a little bit, down about a point," also around that 83 mark.

Back in June, Apollo Management LP and TPG - the owners of Harrah's - offered Paulson new equity in exchange for $710 million in debt holdings. The debt-for-equity swap gave Paulson a 9.9% equity stake in the company.

According to a Bloomberg report, the company's chief executive officer said that the stock could be traded in the open market "within a matter of months," pending regulator approval.

Paulson's hedge fund is no stranger to the gaming sector. The fund is the second-majority shareholder in MGM Resorts International Inc. and the fourth largest shareholder in Boyd Gaming Corp.

TXU notes slip on exchange offer

Energy Future Holdings - more commonly referred to by its former moniker TXU Corp. - announced an exchange offer for its 11¼%/12% senior toggle notes due 2017 and its 10 7/8% senior notes due 2017.

The news, however, failed to produce gains in the Dallas-based energy company's debt.

A trader said the 10 7/8% notes were down a good couple of points. He saw the paper opening at 76¼ bid, 76¾ offered and by the end of business, the bonds had fallen to around 731/2.

The 11¼% notes meantime began the day around 70, he said. The issue closed out the day around 671/4.

At another desk, a trader said the 10 7/8% notes were "pretty active" following the news, but lower nonetheless. He said the notes "opened a little bit higher" around 74 bid, 75 offered. "It seems like they faded throughout the day," he added, seeing them trade down to around 72 and then close around "73-ish."

Under the terms of the swap, TXU is looking to exchange $2.7 billion of the toggle notes and $1.78 billion of the senior notes for new debt and cash. The new debt consists of $2.18 billion of 10% senior secured notes due 2020 and $500 million in cash.

For each $1,000 principal amount of notes tendered by the early deadline date, holders will receive $720 for the toggle notes or $785 for the 10 7/8% notes. If tendered after the early deadline, holders will get $670 for the toggle notes and $735 for the 10 7/8% notes.

The breakdown of new debt and cash per each $1,000 tendered will depend on how much is tendered by the early deadline. If all bonds are accepted by the early deadline, then holders of the toggle notes would get $134.33 in cash and $585.67 in new notes, while the 10 7/8% noteholders would receive $146.46 in cash and $638.54 in new notes.

However, no cash will be paid out to those tendering after the early deadline.

The early tender deadline is 5 p.m. ET on July 29. The offer expires midnight ET on Aug. 12.

CIT debt lower on technicals

A trader said CIT Group paper weakened during the final trading session of the week, opining that accounts were covering "longs and shorts."

The trader said he saw a 92½ bid, 93 offered market for the 7% notes due 2017 initially, but then saw the bonds trade down to 911/2. It was a similar situation for the 7% notes due 2016, which opened at 93¾ and then traded off to 921/4.

However, he noted that after the 92¼ trade, he saw a 93¼ bid for the paper.

"Go figure," he said.

CIT Group is a New York-based middle market lender.

Broad market mixed

The distressed debt market began to drift as the equity markets fell, traders reported.

"The market faded a bunch with the equities," he said.

This was evidenced in names like General Motors Corp., whose benchmark 8 3/8% notes due 2033 tend to fluctuate with the general market. A trader said the debt "came in" about half a point to close at 32¼ bid, 32½ offered.

Some credits, however, did manage to improve. The trader said Tronox Worldwide LLC's 9½% notes due 2012 were "better," trading up to around 84.

© 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.