Harrah's bonds slip on rating downgrade; Sprint, WaMu bonds active during short holiday session

By Stephanie N. Rotondo

Portland, Ore., Dec. 24 - The Christmas Eve session in the distressed bond world was essentially the final wind-down of the year, traders said.

Many market players were already gone from their desks by Wednesday. Those that were in said there was little to report, especially given that the stock market was also closing early for the day.

"That hardly ever happens," a trader said.

Another trader said that there was "no reason to stir the pot," as the likelihood of getting a lot done between Christmas and New Year's was slight.

Still, the tone of the market was generally firm.

"The market is in the same position it was last night," a trader said. "It's generally firm."

However, Harrah's Entertainment Inc. did not follow that trend. Though traders said that trading was light, the casino operator's bonds fell 1 to 2 points on the back of a rating downgrade from Standard & Poor's.

Elsewhere, Sprint Nextel Corp.'s debt was considered the most active of the short day. There was no news to explain the recent activity.

Some market players also thought that calling Sprint active was a bit misleading.

"It was the most active, but everything else is standing still," said one source.

Also busy - relatively speaking - was Washington Mutual Inc.'s holding company paper. The bonds, which were also active on Tuesday, had pushed higher as the market tried to put a value on the bankrupt company's capital structure. However, during Wednesday trading, the bonds moved up only to fall off their highs of the day.

Harrah's slips; Sprint, WaMu active

Harrah's bonds lost some ground during the Christmas Eve session, though market sources noted that activity in the name was virtually non-existent.

One trader said there was "no trading really at all" on the back of a downgrade from Standard & Poor's. But another source saw the bonds drifting lower 1 to 2 points, its 6½% notes due 2016 at 14 bid, 14.5 offered and its 5¾% notes due 2017 at 14.5 bid, 15 offered.

S&P cut Harrah's corporate credit rating to SD from CC, though it raised the newest bond issues to B from B-. S&P cited the company's recent distressed tender offer as an explanation for both moves.

Meanwhile, Sprint Nextel's debt -at least one issue of it - was called the most active of the day, though only about $4 million of the 6 7/8% notes due 2013 traded, sources reported.

Traders pegged the bonds between 42 and 42.5, calling it down 1 to 1.5 points on the day.

Sprint's bonds were also considered one of the more active issues on Tuesday, though there was no news to explain the surge.

As was also the case on Tuesday, Washington Mutual's bonds remained "relatively busy" in an otherwise very dull session. There was some active trading seen at higher levels, although the bonds later fell back from those peaks, traders reported.

Traders said that WaMu is being pushed up by investor speculation about the valuation of the company's remaining assets other than its far-flung branch network, which was seized by federal regulators back in the fall and sold to J.P. Morgan Chase & Co. WaMu minus the branch network, is currently restructuring under Chapter 11.

A market source saw the 4% senior holding company notes coming due on Jan. 15 push as high as 66 bid, although the bonds were slightly below that zenith in late trading, but still up from levels around 64 to which it had traded on Tuesday. However, the bonds remain well below their most recent round-lot levels, in a 67 context.

The most active WaMu issue was its 4 5/8% subordinated holding company notes due 2014, with a trader seeing about $3 million of the bonds changing hands. They had moved as high as 24 bid during the session, but later were seen around 21, actually down about a point on the day.

Also relatively active, with about $2 million bonds traded, was the company's Washington Mutual Finance unit's 6 7/8% notes due 2011, which soared briefly to the exalted 98 mark, though only on one trade, before backing down to around 92 bid, down 2 points.

Paul Deckelman contributed to this article.

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