Caesars unit enters bankruptcy, bonds gain; RadioShack eyes filing; oil dips, weighs on sector

By Stephanie N. Rotondo

Phoenix, Jan. 15 – Despite another decline in equities and oil, the distressed debt market was a bit firmer in Thursday trading.

Caesars Entertainment Corp. placed its operating unit in bankruptcy on Thursday – the company’s second such filing this week after junior creditors attempted to push the company into Chapter 11 involuntarily.

The casino operator’s debt was higher on the news.

In other bankruptcy-related news, RadioShack Corp. is said to be in talks to put the company under court supervision as early as February, as its turnaround efforts have failed to elicit results.

But one trader said the market was not much surprised by the news, noting that the company’s bonds “just weren’t trading at all.”

Meanwhile, oil prices fell into the red again on Thursday, erasing the previous day’s gains. That meant more pain for that sector.

Iron and coal names also continued to see weakness, just one day after Citigroup cut its price forecasts for the commodities.

Caesars officially files

Caesars’ Caesars Entertainment Operating Co. Inc. unit entered bankruptcy for the second time this week, after the parent company looked to follow through on its restructuring plan.

Earlier in the week, junior creditors had filed an involuntary bankruptcy petition in Delaware. That group – led by Appaloosa Management – alleged that the parent was actively looking to devalue their claims and stripping assets from them.

Still, the Las Vegas-based company’s debt improved on the latest filing news.

One trader said the 11¼% notes due 2017 jumped a deuce to 74½, while the 9% notes due 2020 gained over 2½ points, closing at 76.

Another market source placed the 10% second-lien notes due 2018 at 15¼, up a quarter-point.

At another desk, a trader said the 9% and 11¼% notes “traded up a couple points” to a 74 to 75 context.

Caesars has been working with senior lenders and creditors on a restructuring plan that would split the opco into a two-sided real estate investment trust – one side would manage the properties that the other side owned.

But junior creditors are saying that the plan unfairly protects the interest of higher-ranking creditors at the expense of those at the lower end.

With Caesars making its filing in Chicago, the jurisdiction of where the case will be heard could be the first of many showdowns as the drama unfolds.

As is customary when a company files for bankruptcy, Standard & Poor’s, Fitch Ratings and Moody’s Investors Service all cut their ratings on Caesars.

RadioShack filing looms

RadioShack might soon be making a bankruptcy filing of its own, according to news reports.

Citing a “person with direct knowledge of the matter,” Bloomberg further reported that the Fort Worth, Texas-based electronics retailer was in talks with Sprint Corp. to sell the leases on some of its stores.

The bankruptcy would allow RadioShack to shutter over 1,000 stores – something company management had previously attempted to do, but could not because lenders refused to give their approval.

But after 11 consecutive quarterly losses, the looming filing likely did not come as a surprise to investors and trading in the company’s 6¾% notes due 2019 was therefore limited.

One trader said that the notes were quoted at 12 bid, 15 offered on Wednesday and offered at 12¾ on Thursday.

Another market source saw odd-lots trading between 9 and 10, which compared to a range of 12 to 14 previously.

Oil gives up gains

Oil gave back the previous day’s gains on Thursday, as OPEC cut its demand forecast.

Debt connected to the oil and gas sector remained under pressure.

A trader did see California Resources Corp.’s 6% notes due 2024 rising “1 and change” points to 80½, however.

He added that there was “pretty decent volume” in the issue.

But the 5½% notes due 2021 dipped nearly a point to 80 1/8.

Samson Investments Co.’s 9¾% notes due 2020 were meantime deemed 4 points lower at 26.

Sources gave mixed reports on SandRidge Energy Inc.’s bonds.

One trader pegged the 7½% notes due 2023 at 62½, off almost a point on the day. But another source saw the 7½% notes due 2021 rising a point to 64¾.

In its monthly report, OPEC said demand for its oil products would be about 28.8 million barrels per day in 2015, down 100,000 barrels from the previous month’s forecast.

On Wednesday, the U.S.’ Energy Information Administration said that domestic output had increased to 9.19 million barrels per day.

But as OPEC has been slow to cut production – or in some cases, outright refused to do so – that has put a lot of pressure on oil prices.

West Texas Intermediate crude dropped $2.21, or 4.56%, to $46.27. Brent crude declined $1.02, or 2.09%, to $47.67.

Cliffs rebounds, coal dips

Oil hasn’t been the only commodity under pressure – iron and coal have been dealing with issues of their own as well.

Those issues were exacerbated on Wednesday when Citigroup cut its pricing forecasts for the commodities.

In a research note published Wednesday, Citigroup analyst Ivan Szpakowski suggested that iron ore would see an average price per metric ton of $58 in 2015.

He posited that the price will improve to $62 per ton in 2016.

However, both prices were down from previous estimates of $65.

As for coking and thermal coal, those prices could decline as much as 18%.

In the iron space, Cliffs Natural Resources Inc. actually managed to trade a little better come Thursday, though it was down in the previous session.

A trader saw the 3.95% notes due 2018 putting on over 2 points to end at 81½. The 6¼% notes due 2040 inched up a touch to 65¼, he said.

The trader also called both the 4.8% notes due 2020 and the 4 7/8% notes due 2021 2 points higher at 69½ and 71¼, respectively.

A second trader said the 2018 paper “traded up a couple points” to an 81 to 82 zip code.

All was not well with coal, however.

“Coal keeps leaking,” a trader said.

One trader said Alpha Natural Resources Inc.’s 6¼% notes due 2021 fell almost a point to 25¼, though he said the 6% notes due 2019 improved half a point to 27.

Another trader said the unsecured issues were trading around 25.

In Arch Coal Inc., a trader said the 7¼% notes due 2021 and the 7% notes due 2019 weakened over half a point to 24½ and 25 1/8, respectively. The 7¼% notes due 2020 dipped half a point to 28¼, while the 9 7/8% notes due 2019 declined almost 4 points to 29¼.

At another shop, a trader said Arch’s unsecured notes were trading in a 24½ to 25 context.

Rounding out that space, Walter Energy Inc.’s 9½% notes due 2019 were seen 3 points softer at 72½.

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