Caesars, ATP see gains; Beazer, Hovnanian bonds travel upward; Sprint higher despite downgrade

By Stephanie N. Rotondo

Portland, Ore., Oct. 14 - Distressed bonds finished the week a bit firmer Friday, traders reported.

"It came back a little bit," a trader said, though he added that overall the market was "lackluster."

"People are still looking for paper," said another trader. "But it's not as much of a feeding frenzy as it was earlier in the week. It's not just trading up; it's gapping up and people are reaching back into stuff they think is cheap."

A third trader said that "a lot of things were higher," though he deemed volume just moderate.

Caesars Entertainment Corp. continued to be one of the top trading names as the casino operator's debt regained some of the ground it had lost on Thursday. Other market mainstays like ATP Oil & Gas Corp. were also gaining value.

The housing arena meanwhile was gaining momentum after Beazer Homes Inc. released preliminary quarterly results that were not too shabby. Hovnanian Enterprises Inc.'s bonds were also seen better.

Market mainstays gain

A trader said there were "a ton of trades" in Caesars Entertainment's 10% notes due 2018, seeing about $32 million of the bonds changing hands shortly before the market closed.

He said the notes got as high as 70½ before settling in at 68½ bid, 69½ offered, still up a point on the day.

Another trader said the name was actively traded, seeing the 10% notes at 69¼ and the 11¼% notes due 2017 at 1051/2.

He called both issues up half a point.

At another shop, a trader pegged the 10% notes at 69, down from the intraday high around 70, but still 1 to 2 points better from the previous closing levels.

Other market mainstays were also gaining ground. ATP Oil & Gas' 11 7/8% notes due 2015 meantime earned 1½ points, closing around 771/2.

Beazer, Hovnanian move up

The housing sector has also seen a bit of a boost of late and Beazer's release of its preliminary quarterly results only served to further that trend.

One trader said Beazer's 6 7/8% notes due 2015 were up 4 points at 69, while the 8 1/8% notes due 2016 moved up 2½ points to 661/2.

The trader also saw Hovnanian Enterprises' 10 5/8% notes due 2016 up 1½ points at 801/2.

A trader at another shop echoed those levels as well.

Atlanta-based Beazer said Thursday that based on preliminary fourth quarter estimates, new orders were up 33% and closings gained 23% from 2010.

The company also reported cash and equivalents of $646 million, including about $370 million of unrestricted cash.

According to Vicki Bryan, an analyst with Gimme Credit LLC, Beazer and Red Bank, N.J.-based Hovnanian have "been in a race to the bottom," as the two companies have the weakest balance sheets among homebuilders. She opined, however, that Beazer could be gaining ground.

"While Hovnanian is currently offering a desperate and particularly unsavory bond exchange offer, which suggests that its fourth quarter results could include some nasty surprises, Beazer jut announced encouraging growth in homes ordered and delivered for its fiscal fourth quarter ended Sept. 30," Bryan wrote in a report out Friday.

Bryan maintained that Beazer's unsecured debt has little to no value but remarked that "even Beazer's fragile liquidity beats Hovnanian's."

Sprint shakes off downgrade

A trader said Sprint Nextel Corp.'s debt was "still up 2 to 3 points" despite getting a rating downgrade.

"They barely gave back much," he said.

He quoted the 8 3/8% notes due 2017 at 92½ bid, 93 offered and the 6.90% notes due 2019 at 87½ offered.

Another market source called the 6% notes due 2016 up nearly a deuce at 87¾ bid.

Moody's Investors Service dropped about $20 billion of Sprint's debt to B1 from Ba3, citing concerns about the costs of constructing its own network and its plan to phase out its network partnership with Clearwire Corp.

Because of the rating cut, Sprint - which said it will need to raise funds to construct the new network - will likely face higher borrowing costs.

Clearwire, for its part, was also downgraded.

"Rumors about an upcoming secured debt offering have not been substantiated," wrote Gimme Credit analyst Dave Novosel in a commentary out Friday. "Management promised to be opportunistic about its foray into the capital markets and today's environment is anything but."

Sprint is an Overland Park, Kan.-based wireless services provider.

Broad market ends firmer

Among other distressed issuers, a trader saw Clear Channel Communications Inc.'s 10¾% notes due 2016 at 633/4, up 2¾ points.

Another trader said Springleaf Finance Corp.'s 6.90% notes due 2017 had risen to 73½ bid, 74, a gain of "about a point."

Meanwhile, some "$20-odd million" of NewPage Corp.'s 11 3/8% first-lien notes due 2018 traded, down "a little bit" around 721/4.

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