NewPage, Caesars, Hovnanian see declines as wary investors retreat; Clear Channel debt softens

By Stephanie N. Rotondo

Portland, Ore., Aug. 4 - Distressed bonds were "getting slaughtered," a trader said Thursday, following the equity market's 500-plus-point loss.

"A lot of things were definitely down 3 to 5 points," the trader said and some of them lost big despite any credit-specific news.

NewPage Corp., Caesars Entertainment Corp. and Hovnanian Enterprises Inc., for example, lost anywhere from 2 to 4 points on the day, with no news to act as a catalyst.

Clear Channel Communications Inc. meantime dropped as much as 5 points during the session. The San Antonio-based multimedia company reported earnings on Wednesday.

Elsewhere, a trader said Dynegy Inc. debt was weaker, but by comparison the bonds "hung in there." He said the bonds were down between half a point and 2½ points overall.

NewPage, Caesars, Hovnanian decline

With no credit-specific news to pressure the bonds, names like NewPage, Caesars Entertainment and Hovnanian lost ground anyway as investors shied away from lower-quality paper.

One trader saw NewPage's 10% second-lien notes due 2012 trading with a 16 handle, while Caesars' 10% notes due 2018 fell to around 82.

Another trader also placed NewPage's 10% notes around 16, deeming that down 4 points day over day. He said the 11 3/8% first-lien notes due 2014 fell only 2½ points to 853/4.

The second trader also said that Caesars' 10% notes were "one of the most active" issues of the day, dropping 4 points to close around the 82 mark.

And, he saw Hovnanian's 10 5/8% notes due 2016 slipping a deuce to 883/4.

At another desk, a market source called Caesars' 10% notes down more than 3 points at 82 bid and Hovnanian's 10 5/8% notes over 2 points softer at 88½ bid.

Clear Channel falls

Clear Channel Communications' bonds "had a good day," a trader said facetiously.

The trader saw both the 10¾% and 11% notes due 2016 down about 5 points at 78 and 761/2, respectively.

Another trader quoted the 10¾% notes at 79½ bid, 80 offered.

On Wednesday, the multimedia company reported earnings. The parent company, CC Media holdings Inc. posted a narrower loss of $38 million, compared with $77 million the year before.

Revenues increased about 8% to $1.6 billion from $1.49 billion in the second quarter of 2010. Cash flow was also up, gaining 10% to $503 million.

"Our results reflect a gradually improving global advertising marketplace and the benefits of our globally diversified platform," said Tom Casey, chief financial officer, in the earnings statement. "Our top line growth combined with our focus on cost management has resulted in consistent improvement in our overall operating profit margin."

Subsidiary Clear Channel Outdoor Holdings also reported Wednesday. The unit saw a second-quarter profit of $34.2 million, versus a loss of $33 million the year before.

Revenues were $789 million, a gain of 13% year over year.

Dynegy better than most

Dynegy debt "hung in there" by comparison, a trader said. He saw the power producer's bonds falling just half a point to 2½ points on the day, "not bad on a day like this."

The 7¾% notes due 2019 slipped half a point to 641/2, he said. The 7½% notes due 2015 lost 2 points, closing at 69, while the 8 3/8% notes due 2016 declined 2½ points to 67.

Another market source called the 7¾% notes nearly 2 points lower at 64¾ bid.

Meanwhile, Dynegy's new senior secured term loans hit the secondary market on Thursday, with the $1.1 billion five-year GasCo term loan and the $600 million five-year CoalCo term loan quoted at 98½ bid, 98¾ offered on the break and then moving to 97 7/8 bid, 98 3/8 offered, according to traders.

Pricing on both term loans is Libor plus 775 basis points with a 1.5% Libor floor, and they were sold at an original issue discount of 98. The loans are non-callable for two years, then at 102 in year three and 101 in year four.

During syndication, the GasCo term loan was downsized from $1.3 billion, the CoalCo loan was upsized from $400 million and maturities on both were shortened from six years. Also, pricing on GasCo was increased from Libor plus 650 bps, the discount widened from 99, and call premiums were sweetened from 103 in year one, 102 in year two and 101 in year three. Pricing on CoalCo came in line with talk.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. are the leads on the deal.

Proceeds from the GasCo loan will be used to repay Dynegy Holdings Inc.'s existing senior secured credit facility, repay existing debt relating to Sithe Energies Inc., make a distribution and fund cash collateralized letters of credit and cash collateral for existing collateral requirements.

The distribution, sized at $400 million, is being split into $200 million from GasCo and $200 million from CoalCo, as opposed to the entire amount coming from GasCo. Additionally, the CoalCo loan will be used to fund cash collateralized letters of credit and cash collateral for existing collateral requirements and for general working capital and general corporate purposes.

GasCo and CoalCo are being created through a reorganization. GasCo will be a subsidiary that owns eight primarily natural gas-fired intermediate and peaking power generation facilities, and CoalCo will be a subsidiary that owns six primarily coal-fired baseload power generation facilities.

Last week, a Delaware Chancery Court judge refused Public Service Enterprise Group Inc.'s attempt to thwart the refinancing effort with a temporary restraining order. The bondholders have alleged that the refinancing and the subsequent restructuring of the units have stripped bondholders of assets.

PSEG is reportedly appealing the decision.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

Hawker nosedives again

In other recently topical names, a trader said Hawker Beechcraft Acquisition Co.'s bonds were "not super active," but still down "another 3 to 4 points" after losing as much as 15 points in the previous session.

He said the 8½% notes and 8 7/8% notes due 2015 were in the mid-50s, while the 9¾% notes due 2017 were in the mid-40s.

Another market source placed the 8½% notes at 56½ bid, down 4 points.

For the three months ending June 30, the Wichita, Kan.-based aircraft manufacturer reported net sales of $581.7 million, down $57.6 million from the year before.

Operating income was slightly better with a loss of $19.6 million, compared with a loss of $20.7 million for the second quarter of 2010.

Liquidity, however, was much lower, with $382.4 million available as of June 30. On March 31, liquidity was at $546 million.

"The decrease was due to a variety of factors, including temporary supply disruptions that have contributed to an otherwise anticipated seasonal inventory increase in preparation for deliveries during the third and fourth quarters of 2011," the company said in its earnings statement.

Additionally, Hawker said it had drawn $25 million from its revolving credit facility "in order to keep a prudent amount of cash on hand as it works through the supply issues, seasonal slowdown and working capital swings driven by transformative projects. The company anticipates making additional draws on the revolver, which currently has approximately $214 million of availability, in order to maintain an appropriate supply of cash."

On the positive side, Hawker noted that cancellations in the quarter were surpassed by new orders. New orders totaled $487 million, while cancellations came to $80 million.

Gross margins also improved, rising to $79.4 million from $72.5 million the year before.

GenMar sinking

General Maritime Corp.'s 12% notes due 2017 also remained weak, traders reported.

One trader quoted the paper at 50 bid, 52 offered, down from levels in the high-50s. Another trader pegged the debt around 52, which he deemed down 7 points.

"It's just market-related," the second trader said of the losses.

Last week, New York-based GenMar reported disappointing earnings. On top of that, China recently announced that steel production would decline, which could mean weaker revenues for the overcapacity shipping industry.

Sara Rosenberg contributed to this article

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