Bankrupt Caesars unit reaches deal with creditors; Concordia bonds mixed; iHeart upping debt facilities

By Stephanie N. Rotondo

Seattle, Sept. 27 – After starting out the week with a softer tone, the distressed debt market was trending firm on Tuesday.

Some of those gains were due to credit-specific news, such as in Caesars Entertainment Corp. It was reported Tuesday that the company and its “major creditor groups” had reached a deal on a restructuring agreement that would improve the recovery for second-lien noteholders of the bankrupt Caesars Entertainment Operating Co. unit.

In response, the bonds improved.

Traders meantime gave mixed reviews of Concordia International Corp. Goldman Sachs issued a report on Tuesday that opined a takeover of the struggling drugmaker was less likely now that the United Kingdom was looking to stem exorbitant price increases.

The picture was also mixed for iHeartCommunications Inc. The San Antonio-based multimedia company said in a regulatory filing that it was looking to increase its credit facility by $500 million.

In the coal arena, Murray Energy Corp.’s 11¼% notes due 2021 continued to gain strength, according to a trader.

He pegged the issue in a 50 to 51 zip code.

However, another trader deemed the issue off a quarter-point at 50.

Peabody Energy Corp.’s 10% notes due 2022 were meantime called unchanged at 40 5/8.

Caesars inks deal

Major creditors of bankrupt Caesars Entertainment Operating have agreed to new terms of a restructuring agreement, the company and its parent said Tuesday.

The bonds “got some relief” on the news, according to a trader.

He saw the 11¼% notes due 2017 rising almost 2 points to 104, while the 11% notes due 2021 added a deuce to close at 107 3/8.

The 9% notes due 2020 improved nearly 3 points to 104½.

However, the trader said the 10% notes due 2018 slipped a touch to 63.

He noted that there was “heavy volume” in the latter issue.

But at another desk, the 10% notes were called almost a point better at 63¼ bid.

A third market source pegged the 10% notes at “64-ish.”

Under the terms of the new plan, second-lien bondholders will receive 66 cents on the dollar, an increase of about 27 cents from previous proposals.

Unsecured creditors will also see their recoveries rise to 66 cents on the dollar.

First-lien bankers will get about 115 cents on the dollar, a slight reduction to the previous proposals. First-lien noteholders will receive about 109 cents on the dollar, unchanged from before.

The latter group will also get a fixed cash payment of $142 million in exchange for waiving their right to certain excess cash sweeps. That is a reduction of $79 million.

Equity sponsors Apollo Global Management and TPG Capital have also agreed to give up their 14% equity stake. In exchange, creditors agree to drop certain claims levied against them.

Concordia prospects dim

Concordia International’s bonds were mixed on Tuesday, as Goldman speculated that its takeover prospects were waning.

A trader said the 9½% notes due 2022 were up a quarter-point at 68½, though he saw the 7% notes due 2023 losing a shade to close at 62 3/8.

Another trader said the 7% notes were “about where they were,” trading “62½-ish.”

Concordia debt has been on a ride, ever since the U.K. introduced a bill on Sept. 15 that would limit the amount of price increases on certain generic drugs. In a report out Tuesday, Goldman analyst Stephan Stewart said the bill could limit the company’s ability to find a buyer.

Concordia has been known for hiking up drug prices, which has helped the company gain market share in the U.K. That segment represents about 40% of the company’s drug sales.

Stewart also opined that Concordia could see volume declines in its U.S. business.

“Concordia’s business model of acquiring legacy branded drugs beyond their peak and with little to no patent protection render its portfolio particularly susceptible to these declines on increased competition from both generics and more innovative brands,” he said.

Neil Maruoka, an analyst at Cannaccord Genuity, also sees trouble ahead, noting that if the bill passes in the U.K., organic growth prospects could also be limited.

“The proposed legislation is a cause for concern, specifically relating to whether this longer-term growth driver remains intact,” Maruoka wrote in a research note. However, he expects the company to be able to meet its obligations over the next two years, assuming a considerable free cash flow cushion.

iHeart to increase debt limit

iHeartCommunications said it was seeking consents from senior noteholders of its 2021 paper in order to increase its credit facilities by $500 million.

Holders who consent will receive a portion of an $8.6 million consent fee.

A trader said the 10% notes due 2018 fared better on the news, rising 4 to 5 points to hit a high of 64.

“Any time they try to do some sort of balance sheet finagling, it’s got to be good for the short-dated stuff,” the trader said.

But another trader saw the 9% notes due 2019 dipping nearly a point to close just north of 80, while the 10 5/8% notes due 2023 were steady at 74¼.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.