Caesars bonds attempt rally after second-quarter earnings; NewPage active in first-lien paper

By Stephanie N. Rotondo

Portland, Ore., Aug. 9 - After Monday's massive sell-off, distressed debt investors were taking a breather Tuesday, according to traders.

"It was the stock show," one trader said. "Everybody was really paying attention to the stocks."

"We didn't have a ton of movement," said another trader. He noted that some issues attempted to rally slightly from the previous session's lows.

"More illiquid names are catching up on the downside," he said. "Most bonds that are actively quoted are still down 10 points in the last few days."

Caesars Entertainment Corp.'s bonds continued to dominate trading. The issue in question - the 10% notes due 2018 - is quite liquid, accounting for its gyrations over the course of the last few days.

NewPage Corp. also was "very actively traded again," a trader said. However, he saw more action in the first-lien notes, which he said was typical of the day. Investors were flocking to higher-dollar priced paper in an effort to raise more cash.

Meanwhile, short covering might have been why Nortel Networks Corp.'s bonds ended modestly higher, a trader said.

Caesars attempts rally

Caesars Entertainment's 10% notes due 2018 continued to gyrate in Tuesday trading, but managed to gain ground after reporting a narrower loss in the second quarter.

A trader said the bonds opened at 77 bid, rising to 81 "within minutes," and then closing at 79 bid, 80 offered. That compared with 75 bid, 77 offered previously.

Another market source called the notes 3 points better at 79½ bid.

For the quarter, the Las Vegas-based casino operator posted a net loss of $255.5 million. By comparison, Caesars reported a loss of $274 million for the same quarter of 2010.

Net revenues were 0.4% higher at $2.3 billion. Higher hotel revenues and revpar, or revenue per available room, offset declines in visits, as well as the temporary shuttering of five Midwest properties due to flooding.

NewPage seniors trade actively

NewPage's debt remained busy on Tuesday, though the bulk of the action shifted from the 10% second-lien notes due 2012 to the 11 3/8% first-lien notes due 2014.

A trader said there was "not much volatility" in the first-liens, which closed at 83 bid, 83½ offered.

He added that there were "only a couple of trades" in the 10% notes, which he pegged at 13 bid, 14 offered.

"It seems like people were going towards the high dollar-priced stuff so they can still try to raise cash," he said.

There was no fresh news out on the Miamisburg, Ohio-based papermaker.

Nortel improves slightly

A trader said there are "scraps of short covers" in Nortel Networks' debt, accounting for the modest gains in the paper.

He saw the 6 7/8% notes and the 10 1/8% notes due 2013 and the 10¾% notes due 2018 around 109.

"That was kind of the same, maybe up a little bit," he said.

The bankrupt Toronto-based telecommunications equipment manufacturer is currently dealing with a Department of Justice investigation into its recent $4.5 billion sale of its patent portfolio to a consortium led by Apple Inc. The DOJ is reportedly interviewing the buyers to see if they intend on using the patents to sue competitors.

Broad market mixed

Among other distressed credits, Lehman Brothers Holdings Inc.'s bonds were "down a little bit," a trader said, around 251/2.

OPTI Canada Inc.'s 7 7/8% and 8¼% notes due 2014 meantime hit a low around 60 and a high around 62, the trader said. The bonds closed near the day's highs, he added.

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