Distressed debt boosted as Fed puts taper on hold; Caesars mixed on refi news; TXU stays busy

By Stephanie N. Rotondo

Phoenix, Sept. 18 - The distressed debt market was again stronger on Wednesday, especially as the Federal Reserve's Federal Open Market Committee said it would not begin tapering its stimulus program just yet.

"Conditions in the job market today are still far from what all of us would like to see," said Ben Bernanke, the Fed chairman, at a press conference in Washington after a two-day meeting. "The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth."

Ahead of the Fed news, a trader said, "Everybody was sitting on the edge of their seats, waiting." Post-news, activity picked up considerably and the market took off.

"The market ripped after the Fed [announcement]," another trader said.

That trader also remarked that the news boded well for "yield-y" securities such as new issues.

Caesars Entertainment Corp. meantime had news of its own out as the casino operator said it was planning to price bonds and a new term loan to refinance debt. However, the existing notes and loans had a mixed reaction to the news.

Caesars mixed on refi news

Caesars Entertainment's debt saw mixed reactions in the secondary market on Wednesday after the company announced that it will be taking out its roughly $4.4 billion of CMBS debt and $450 million senior secured credit facility entered into by Octavius Linq Holding Co. LLC with new financing, according to a trader.

"Caesars was in focus," a trader said, seeing the 10% notes due 2018 falling to end around 60 versus a 63 to 64 context in the previous session. However, he said the 9% notes due 2020 were "about unchanged to maybe a smidge better" at 98½ bid, 99 offered.

The bonds had been trading up in the previous two days on news the company was launching a real-money online poker game in Nevada on Thursday.

Another trader also saw the 10% notes declining, deeming them down 3 points at the 60 mark. He called the 9% notes unchanged at 99. The 11¼% notes due 2017 were also steady, trading around 105.

A third market source pegged the 10% notes at 63½ bid, up a touch.

As for the bank debt, the B-4 non-extended term loan was quoted at par bid, 101 offered, down from par ½ bid, 101½ offered, the B-6 extended term loan was quoted at 92 5/8 bid, 93 1/8 offered, versus 92½ bid, 93½ offered on Tuesday, the PropCo term loan was quoted at 98 bid, 98¾ offered, up from 97 bid, 97½ offered, and the mezzanine debt was quoted at 89¾ bid, 90¼ offered, up from 84 bid, 85 offered, another trader said.

The new debt that will be used for the refinancing includes a $3,269,500,000 senior secured credit facility, comprised of a $3 billion term loan and a $269.5 million revolver, $500 million of first-lien notes and $1.35 billion of second-lien notes, the company said in an 8-K filed with the Securities and Exchange Commission.

A bank meeting for the new Citigroup Global Markets Inc.-led credit facility is set to take place at 2 p.m. ET in New York on Thursday, a source added.

Caesars is a Las Vegas-based diversified casino-entertainment company.

TXU still buzzing

Energy Future Holdings Corp.'s Texas Competitive Electric Holdings Co. paper continued to be on the active side Wednesday, though market sources had mixed reviews of how the bonds performed.

One trader said the 15% notes due 2021 dropped over 1½ points to 16 7/8. That issue had fallen a couple points in the previous session as news came out claiming the parent company was searching for a bankruptcy loan.

But another source said the issue was up on the day, gaining just over half a point to close at 17 3/8 bid, 17 5/8 offered.

According to an article published in The Wall Street Journal late Tuesday, the Dallas-based power producer has spent the last week talking with banks such as Citigroup Inc. and JPMorgan Chase & Co. to provide a debtor-in-possession loan valued at over $2 billion. The loan would be used to continue operating the subsidiary.

Additionally, the company has engaged in negotiations with creditors to try to develop a pre-packaged bankruptcy plan. The company is also creating another plan should negotiations fail.

A bankruptcy is expected as soon as November. For its part, Texas Competitive Electric carries about $32 billion of debt.

As for other power producers, Ameren Energy Generating Co.'s debt was firm, with one trader seeing the 7% notes due 2018 at 84 and the 6.3% notes due 2020 at 77.

Sara Rosenberg contributed to this article

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