Caesars, NII Holdings, Logan's remain active; Energy Future reported to line up DIP financing

By Stephanie N. Rotondo

Phoenix, March 13 - Distressed debt investors continued to focus on recently notable names in Thursday trading.

Caesars Entertainment Corp., for instance, was continuing its recent descent, spurred by weak earnings posted earlier in the week. NII Holdings Inc. meantime was on the decline again, despite seeing a bit of a rebound in the previous session.

Logan's Roadhouse Inc. was another active credit. Like Caesars, the company reported earnings earlier in the week and while the restaurant operator swung to a loss, the bonds have been gaining ever since.

However, not so active on the day were Energy Future Holdings Corp.'s bonds, even as news reports indicated that the company had lined up over $7 billion in debtor-in-possession financing ahead of a Chapter 11 filing.

According to various traders, the bonds were essentially unchanged on the day.

Caesars remains weak

Caesars Entertainment debt was mostly weaker again Thursday as investors reacted to the casino-operator's latest earnings report.

A trader saw the 11¼% notes due 2017 fall almost half a point to 94 1/8 and the 8½% notes due 2020 were off a like amount to 87.

However, the trader called both the 9% notes due 2020 and the 10% notes due 2019 slightly higher at 89 and 43, respectively.

Another market source pegged the 10% notes at 42¾ bid, down almost a point.

Yet another trader said the 10% notes were "about unchanged" at 421/2.

For the fourth quarter, Caesars reported a net loss of $1.76 billion, which compared to a loss of $480.3 million the year before. Net revenues, however, were up over 2% at $2.08 billion.

For the full year, the casino operator posted a loss of $2.95 billion, versus a loss of $1.51 billion in 2012.

Yearly revenues declined slightly to $8.56 billion.

On March 3, the company announced it was selling four of its properties to an affiliate for $1.8 billion, though the assets were valued at around $2.2 billion. In the same announcement, Caesars issued preliminary fourth quarter results, estimating a loss of $1.7 billion to $1.8 billion on revenues of $2.05 billion to $2.11 billion.

NII gives back gains

NII Holdings' bonds gave back the gains incurred in midweek trading, a trader said.

A trader said the 10% notes due 2016 were "down a few more" at 47, while the 8 7/9% notes due 2019 fell "a couple points" to "53-ish."

The 7 5/8% notes due 2021 were holding around "331/2-ish."

The Reston, Va.-based provider of Nextel mobile phone service in Latin America said earlier in the week that it had hired Rothschild and UBS Investment Bank to review its strategic alternatives.

Logan's remains strong

After reporting a swing to a loss on Wednesday, Logan's Roadhouse's debt continued to gain ground on Thursday.

A trader said the 10¾% notes due 2017 moved up nearly 2 points to 761/2. Another trader called the issue up "another 2 points" in a 76 to 77 context.

For the 13 weeks ending Jan. 26, the Nashville, Tenn.-based company posted a loss of $8.99 million.

The company had reported a profit of $5.52 million the year before.

Net sales dropped 4.7% to $153.1 million amid a 5.3% decline in same-store sales. While customer traffic declined by 8%, the average check amount increased 2.9%.

For the year, net loss was $21.06 million versus $4.55 million in 2013. Sales dropped 3.5% to $300.1 million.

Energy Future lines up DIP

Energy Future Holdings has reportedly lined up as much as $7.2 billion in DIP financing ahead of a bankruptcy filing that has been largely expected by the marketplace.

Of that DIP amount, $5.2 billion is being provided by Citigroup Inc., Morgan Stanley & Co. Inc. and Deutsche Bank AG. Another $2 billion gives the parent company an option to repay existing second-lien debt held by a subsidiary, Energy Future Intermediate Holding Co.

Another subsidiary, Texas Competitive Electric Holdings Co. LLC, is said to have arranged more than $4 billion in DIP financing.

Speculation has been that the parent company might try to spin off the unregulated unit in a bankruptcy.

But given that the market has been expecting a Chapter 11 filing due to the high amount of leverage, the bonds were holding steady.

One market source pegged the 10¼% notes due 2015 linked to Texas Competitive at 35, unchanged on the day. The 15% notes due 2021 were off half a point at 231/2.

Another trader also said the 15% notes were unchanged, seeing the paper around 24.

Fannie, Freddie drop again

There was more turmoil for Fannie Mae and Freddie Mac preferreds on Thursday, as one U.S. senator said the fate of shareholders rested with the courts.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped 67 cents, or 5.93%, to $10.63. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 60 cents, or 5.5%, to $10.30, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) lost just a quarter, or 1.89%, to $13.00.

The agencies' preferred shares have taken hits all week as a group of bipartisan senators said they planned to introduce a bill that would wind down the GSEs. Investors got spooked by the news, as the proposed plan has more bipartisan support than previous plans have.

Still, markets sources have speculated that the deal won't get far and that it was really a matter of political posturing ahead of an upcoming election cycle.

On Thursday, Sen. Mike Crapo (R-Ida.) said in a Bloomberg television interview that the bill - which he is co-writing with Senate Banking Committee Chairman Tim Johnson - doesn't decide how investors will be treated. Instead, he said he would let the courts decide.

A lawsuit has already been filed by investors who allege that the government's decision to commandeer nearly all of the agencies' profits was illegal.

For his part, Crapo said that private-sector investors should have an opportunity to reap the benefits of the companies' turnaround. That comes on the heels of Sen. Pat Toomey's (R-Pa.) note to Treasury Secretary Jacob Lew, in which he said that while he believed in reform, any plan should be mindful of private investors.

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