Caesars' bonds drop on asset sale news; Patriot Coal earnings disappoint; PDVSA mixed

By Stephanie N. Rotondo

Portland, Ore., May 8 - The distressed debt market was "generally weaker," a trader reported Tuesday.

However, "it was a little better toward the end of the day."

Other traders remarked that investors were again focusing on new issues.

A declining stock market was also noted.

"The stock market sold off big," one trader said. "It didn't really hit the bonds that much, but it was certainly quiet."

"I would have expected things to be off more than they were," said another trader. "But it seems to be holding up OK for the most part."

Of the day's dealings, Caesars Entertainment Corp.'s debt came in a bit after the company announced it was selling off one of its St. Louis properties to Penn National Gaming Inc.

Patriot Coal Corp. was also making headlines after reporting weaker quarterly results. However, the bonds managed to finish the day firmer from Monday's session, leaving one trader to opine that the gains were a result of short covering.

Mixed on the day was Petroleos de Venezuela, the Venezuelan-based, state-owned oil company. A trader said the name was the most active of the day.

Caesars' debt loses

Caesars Entertainment's bonds dropped after the company announced it was selling its Harrah's St. Louis property to Penn National Gaming for $610 million.

One trader called the 10% notes due 2018 down a point at 72, while another market source pegged the paper at 72¼ bid, down 1¼ points.

A third source said the bonds were active, trading down a point to around the 72 mark.

The all-cash deal is expected to close during the second half of 2012. Penn will rebrand the name under its Hollywood moniker.

Caesars is a Las Vegas-based casino operator.

Patriot Coal up despite earnings

A trader said gains in Patriot Coal's debt might have been due to short covering, as "the numbers weren't good," referring to the company's earnings release out Tuesday.

He called the 8¼% notes due 2018 up a deuce at 761/4.

Another trader quoted the issue at 76½ bid, 77½ offered, up on the day, but down from the intraday high around 78.

Another market source pegged the notes at 77½ bid, up a point.

Patriot Coal' s first-quarter loss was larger than 2011 comparables at $75.3 million, or 82 cents per share. That compared to a loss of $15.9 million, or 17 cents per share, the previous year.

Revenues dipped 13% to $502.6 million and operating costs fell 12% to $455.3 million.

Tons sold dropped 21% to 6.3 million, though revenue per ton increased 8%.

The St. Louis-based coal producer said the figures reflected a shifting energy sector, in which natural gas is favored over coal. However, Patriot said that it was looking for ways to cut costs, announcing that it had cut 1,000 jobs thus far in 2012.

The company also lowered its annual sales guidance to 25 million to 27 million tons.

Among other coal producers, James River Coal Corp.'s 7 7/8% notes due 2019 fell a point to 661/2, according to a trader.

PDVSA a volatile one

PDVSA, the Venezuelan state-owned oil company, saw its bonds ending the day mixed.

A trader called the name the most active of the day, seeing the 9% notes due 2021 up 2 points at 81 and the 5 3/8% notes due 2027 up 2½ points to 611/2.

However, the 8½% notes due 2017 fell over a point to 88 and the 5¼% notes due 2017 dropped "almost 2 [points]" to 76.

The bonds have been on a roller-coaster of late, as questions centered on the nation's president, Hugo Chavez, have left many contemplating how a regime change could impact the oil producer.

Chavez has been fighting cancer.

Additionally, Venezuelan newspaper El Universal reported Tuesday that PDVSA is preparing a bond offering worth up to $3 billion.

According to the report, the bonds would be set at 9% with a maturity in 2032. A majority of the debt is expected to be purchased by the Central Bank of Venezuela.

No bonds will be sold to institutions, the report said.

SuperMedia loan rises

SuperMedia Inc.'s term loan jumped to 57¾ bid, 58¾ offered on Tuesday, from 56½ bid, 57½ offered as the company came out with first-quarter results that showed a substantial year-over-year improvement in earnings, according to a trader.

For the first quarter, the Dallas-based directory publisher reported net income of $62 million, or $3.92 per share, compared to net income of $30 million, or $1.91 per share, in the previous year.

However, operating revenue was down 17.1% at $363 million for the quarter, versus $438 million in the first quarter of 2011.

And, adjusted EBITDA for the quarter was $148 million, down 3.9% from $154 million last year.

Furthermore, during the quarter, the company reduced its credit facility debt by $64 million, including $60 million through open market debt repurchases at a cash price of $31 million.

Broad market winners, losers

In the rest of the distressed realm, Travelport LLC's 9% notes due 2016 dipped a point to 64, a trader said.

The trader also saw Exide Technologies Inc.'s 8 5/8% notes due 2018 slipping over half a point to 813/4.

Another trader said NewPage Corp.'s 11 3/8% notes due 2014 were steady at 72 and that PMI Group Inc.'s debt was "up a bit" at 231/4.

Nortel Networks Inc.'s 10¾% notes due 2016 were "slowly creeping [up]" to 1141/2.

At another desk, a trader said Edison International Inc.'s 7% notes due 2017 linked to Edison Mission Energy were active but unchanged at around 64.

And, Clear Channel Communications Inc.'s 11% notes due 2016 traded down to 68 from "69-ish" previously.

Sara Rosenberg contributed to this article

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