Caesars rallies as sentiment improves; ATP up; Travelport, Hovnanian gain despite downgrades

By Stephanie N. Rotondo

Portland, Ore., Oct. 5 - Distressed bonds were "up from where they left off yesterday," a trader said Wednesday.

"All the beat up stuff was rebounding nicely," he said.

Caesars Entertainment Corp., for example, broke through 60 again on "heavy volume." There hasn't been any news out on the casino operator, but the bonds are liquid, making it an easy play for investors.

ATP Oil & Gas Corp. also experienced a rally, gaining about 5 points on the day. The debt had been getting hammered since Moody's Investors Service last week said there was a "high likelihood" that the company would have to restructure in order to meet its obligations.

In the news, Travelport LLC got downgraded in the midweek session. But instead of heading down, the bonds - which have been "widely volatile over the last couple sessions," according to a trader - rose a good 5 points.

Hovnanian Enterprises Inc. also received a downgrade, but with market sentiment so positive, the debt gained ground anyway.

Caesars rallies

A trader said Caesars' 10% notes due 2018 had "huge volume" on Wednesday, with at least $50 million of bonds changing hands.

He called the debt up 1½ points at 611/2.

Another market source called the issue up over 3 points, also at 611/2.

A third trader quoted the notes at 61 bid, 62 offered, up from the high-50s on Tuesday.

Caesars is a Las Vegas-based casino operator.

ATP moves up

ATP Oil & Gas' debt has taken a beating of late, spurred by a report out last week from Moody's.

The report indicated that the company - which has been cash flow negative since the Deepwater horizon oil rig explosion of April 2010 - would not be able to meet its 2015 debt obligations if conditions persisted and that there was a "high likelihood" a restructuring would ensue.

For its part, the company has said all is well and that based on its current production targets, it should be in the black in no time.

The overall positivity in the marketplace on Wednesday helped the bonds regain some lost ground.

One trader said the 11 7/8% notes due 2015 were 'very active" and up by 5 points around 65.

Another trader said the debt was "a good bit higher" at 65 bid, 66 offered.

ATP is a Houston-based oil exploration company.

Travelport unfazed

Travelport and its parent company, Travelport Holdings Ltd., were downgraded by Standard & Poor's on Wednesday.

The ratings were changed to SD from CC. The agency blamed the move on the company's recent restructuring of its PIK loans, which S&P said was considered a distressed exchange and therefore tantamount to default.

However, the bonds did not fall on the news, given the more optimistic tone of the market.

A trader saw the 11 7/8% subordinated notes due 2016 rising 5 points to 38, compared to 31 bid, 33 offered on Tuesday.

Another trader pegged the 9% notes due 2016 at 51 bid, 52 offered, up from the high 40s.

Hovnanian brushes off cut

S&P also dropped its ratings on Red Bank, N.J.-based homebuilder Hovnanian and Fitch Ratings placed the company on watch.

A trader said there were 'a dozen trades or so" in the 10 5/8% notes due 2016, which rose to 75.

A second market source called the notes up nearly a deuce at 743/4.

A third source quoted the bonds at 73 bid, 74 offered, versus 71 bid, 72 offered previously. He noted that late in the day, some trades were hitting as high as 75.

S&P lowered its rating on the company to CC from CCC. Fitch currently rates the business at CCC.

Broad market climbs

Elsewhere in the distressed debt realm, Cemex SAB DE CV's 0% notes due 2017 gained 7 points to end at 60, while the 9½% notes due 2016 climbed 5 points to 70, according to a trader.

Another trader said NewPage Corp.'s 11 3/8% first-lien notes due 2014 had gained 3 points to close around 70, though there "wasn't a ton of activity" in the debt.

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