Recession fears pressure discretionary space; Caesars gets 'knocked around'; Rite Aid declines

By Stephanie N. Rotondo

Portland, Ore., Aug. 23 - Distressed debt was heavy Tuesday, even as the equity markets posted decent gains.

"Even with the stock market flying, the bond market opened up quite a bit weaker," a trader said. "Everything was just quoted lower and actually trading lower."

As fears of a double-dip recession increase, discretionary sectors like gaming and retail are getting hit.

Caesars Entertainment Corp.'s debt was "knocked around" in volatile trading, a trader said. He said there were trades late in the day that seemed to indicate the bonds had rebounded, but he was unsure if the prints were accurate.

In the retail space, Rite Aid Corp. - which had been the most actively traded credit on Monday - quieted down some, but was still being quoted lower. Also weaker in the retail arena were Bon-Ton Stores Inc. and Burlington Coat Factory Warehouse Corp.

Caesars, gaming lose ground

A trader said Caesars' 10% notes due 2018 "definitely got knocked around" in volatile trading.

He said the issue dipped as low as 70, adding that there were late prints around 74. Still, he "wasn't sure if it really did rebound that much."

Another trader said the notes opened the day at 72 bid, 75 offered, versus Monday's closing levels of 74 bid, 75 offered. After the open, there were trades around 71, then "they kind of caught support at 71-72, maybe 72-73."

A third market source deemed the debt down 3 points at 72 bid.

Las Vegas-based Caesars wasn't the only gaming name to take a hit. Boyd Gaming Corp.'s 9 1/8% notes due 2018 fell a deuce to 96 bid, according to a market source.

Another trader said MGM International Resorts Inc.'s paper was down a couple points, the 9% notes due 2020 at 103½ and the 7½% notes due 2016 in the mid-80s.

Retailers get 'smacked'

After being the most heavily traded credit on Monday - for no apparent reason - Rite Aid bonds took a bit of a breather.

But that didn't stop them from losing ground.

"The first thing [Tuesday morning] I saw a run of Rite Aid," a trader said. "They were all offers and they were offering bonds lower."

He said the 8 5/8% notes due 2015 dipped just about half a point to 871/4. The 9 3/8% notes due 2015, however, lost 1½ points, ending around 87.

Another market source pegged the 8 5/8% notes at 87 bid, down nearly 2 points on the day.

The trader noted that Gap Inc.'s 5.95% notes due 2021 held in pretty well, closing at 92½ bid, 93½ offered.

Another trader said Bon-Ton's 10¼% notes due 2014 fell a couple points to around 88.

"Some of the retailers continue to get smacked around," he said.

Sears Roebuck Acceptance Corp.'s 6 5/8% notes due 2018, however, were "not all that different" at 80.

McClatchy still sliding

The McClatchy Co.'s 11½% notes due 2017, which were beaten down by several points last week and remained on the slide on Monday, retreated another 3 points on Tuesday, to 93 bid, 94 offered.

There was no fresh news out on the Sacamento, Calif.-based publisher of such notable newspapers as the Miami Herald, Kansas City Star, Fort Worth Star-Telegram and Charlotte Observer.

Broad market slips

Among other distressed issues, Clear Channel Communications Inc.'s 9% notes due 2021 traded down to 79 from 82¼ bid, 83¼ offered, a trader said. The trader noted that there "wasn't much volume" in the name.

Another trader said Edison Mission Energy's 7% notes due 2017 were "not dramatically different" around "68-ish."

Paul Deckelman contributed to this article

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