MGM bonds slip on Dubai World report; GM debt active, but unchanged; NewPage rally continues

By Stephanie N. Rotondo

Portland, Ore., Aug. 25 - Distressed debt continued to languish as the end of summer doldrums took hold.

"It wasn't a sterling day," a trader said. He added that the market traded down right out of the gate, but noted that a few credits managed to pare the losses to end unchanged.

"There's not much of a calendar," he said and bids for paper faded early on. And, as there "weren't many sellers around" to chase bids, there was little to do.

"[The market] spent the first nine hours going down and in the last hour there was a bid," another trader commented. "There's not a lot of impetus to do stuff."

Yet another trader speculated that the subdued marketplace would remain though the end of the month until Labor Day.

"Maybe we'll get some month-end stuff, some employment stuff" to help moves things around, he added optimistically.

A Reuters article regarding Dubai World's restructuring plan was pointed to as the reason for a slip in MGM Resorts International Inc.'s bonds. Dubai is reported to be considering massive asset sales, including its stake in the casino operator.

Meanwhile, General Motors Corp. was yet again one of the more active credits of the day. Though the carmaker's debt traded down initially, traders said the bonds rallied a bit toward the end of the session, leaving the paper unchanged day over day.

And, NewPage Corp. continued to see improvement, however slight. As has been the case of late, there has been no fresh news out on the papermaker.

MGM slips on Dubai World report

Trading in MGM Resorts' debt was "definitely a mixed bag," according to one trader.

"I saw a lot of MGM trade," he said. "Every single issue traded."

Some of the Las Vegas-based casino operator's debt traded down, he said, while others were about unchanged.

The 11 1/8% notes due 2017 were seen slipping half a point to 1111/2, while the 6¾% notes due 2012 dipped about a point to 91. The 13% notes due 2013, however, were "kind of right where they were" at 1153/4.

Those levels were echoed at several other desks as well.

Another market source said the 6 5/8% notes due 2015 had dropped over 2 points on the day, ending around 78¾ bid.

The slip in the paper came after Reuters issued a report about Dubai World's restructuring.

Dubai World is MGM's partner in the CityCenter project. The state-owned conglomerate's plan is to sell off about $20 billion in assets, including its stake in MGM Resorts.

Elsewhere in the casino arena, Harrah's Entertainment Inc.'s 10% notes due 2018 were "not super active," a trader said, though they "traded down a little bit."

The trader quoted the paper at 78½ bid, 79 offered.

GM active, but unchanged

General Motors long bonds - the benchmark 8 3/8% notes due 2033 - were "once again active," a trader said.

However, he said the bonds were initially lower, dropping down to a low of 311/2. By the end of the day, the bonds managed to rally some to close at 32 bid, 32½ offered.

In his view, the fluctuations in the credit were due to the performance of the broader market.

"The market was down early and it recovered throughout the day, so it could have just rallied some with the market," he said.

Another trader said as much as $120 million to $130 million of the bonds changed hands, also placing the issue in the 32 context.

"It's definitely staying pretty active," he said. The trading volume in the Detroit automaker's bonds signified to him that there is a "hugely diverse group of people playing in this and for different reasons."

On Tuesday, market sources theorized that the dip in the debt was because of everything from the recently announced initial public offering to comments made by government officials regarding its intentions concerning the U.S.-held stake in the company.

Other theories centered on recent economic data, such as the new housing report that showed a 27.2% decline in existing home sales in July. As one source put it, "if no one is buying houses, they sure aren't buying cars."

NewPage rally continues

NewPage paper continued its winning streak, market sources reported.

The 11 3/8% notes due 2014 were pegged at 81½ bid, 82 offered at one desk.

Another saw the notes at 811/4, which he deemed "a touch better."

NewPage is a Miamisburg, Ohio-based coated papermaker.

Homebuilders unmoved by home data

Traders saw little or no activity in the bonds of such homebuilder credits as Hovnanian Enterprises Inc. or Beazer Homes USA Inc. - despite two straight days of terrible statistics about home sales.

"You see a lot of quotes in CDS, but I don't see it in the bonds," he declared. "There's just not much activity in these things. They don't trade much."

He saw Red Bank, N.J.-based Hovnanian's 10 5/8% notes due 2016 at 98¼ - the only trade of the day in the $785 million deal, and this was after checking three or four other bonds, so "activity is very slim."

And he checked several issues of Atlanta-based Beazer and "didn't even see a trade, nothing of any kind of size. So there was virtually no activity" in Hovnanian or Beazer bonds.

On Wednesday, the Commerce department reported that new-home sales slumped 12.4% in July from a year ago, to a 276,000-unit annual pace - the slowest pace since the department began keeping records in 1963. June's pace was meantime revised downward to 315,000 units annually. Wall Street was looking for 330,000-unit rate for July.

Those poor numbers followed by a day Tuesday's existing-home sales data from the National Association of Realtors, which showed sales of existing homes having nosedived by 27.2% in July, to an annual pace of 3.83 million units, the slowest since May 1995. Wall Street had been expecting a more moderate 12% decline, to a 4.7 million-unit annual rate.

Paul Deckelman contributed to this article

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