Visteon debt drives up; Residential Capital paper sees strength; Trader: Casinos to take a hit

By Stephanie N. Rotondo

Portland, Ore., April 30 - As the month came to a close, distressed bond traders were somewhat busier, helped in part by the eagerly awaited interest rate cut from the Federal Reserve.

"It was crazy busy" said one trader.

In mid-afternoon, the central bank said it would reduce interest rates by a quarter percentage point, a move expected by most market players. Earlier in the week, traders speculated that investors were waiting to see what the Fed had to say before jumping into the distressed arena again.

And though the Fed was vague on its predictions for the future of the economy, the market was overall firmer yet again.

Leading the pack was Visteon Corp. The automotive parts supplier posted a narrower loss for the first quarter of 2008, and seemingly pleased investors responded by pushing up the company's debt structure. The company's bonds rose as much as 3 points on the day - and at least 4 points over the week - while its bank debt ended about 2 points stronger.

Residential Capital LLC also continued its trek toward higher ground. The mortgage lender's bonds began moving up in the previous session after its parent company restated its pledge to help save the struggling company. That trend continued Wednesday, with the bonds gaining at least another 2 points.

Throughout the gaming sector, price movements were mixed, at best. Harrah's Operating's newest issue remained one of the more popular pieces of paper, while Trump Entertainment Resorts Inc.'s bonds closed unchanged. But after Las Vegas Sands Corp. posted its first-quarter financials, one trader speculated Thursday's session might bring some gloom to the sector.

Visteon debt drives up

In a day that was categorized as "crazy busy," Visteon's debt was seen as one of the most active names of the session.

Traders reported that the company's corporate debt gained as much as 4 points on the back of its first-quarter numbers. One trader called Visteon "the single biggest trader" of the day.

The trader quoted the 7% notes due 2014 - considered the most active of the company's issues - at 67.75 bid, 68.25 offered. The trader said that was up 3 points during the session and 4 points better over the week.

At another desk, a trader pegged the 7% notes at 68 and the 8¼% notes due 2010 at 88. Another market source called the 2014 maturity 2.5 points better at 68.5 bid.

Meanwhile, Visteon's term loan popped during market hours as investors were pleased with the company's first-quarter results, according to a trader.

The term loan was quoted at 87½ bid, 88 offered, up from 85½ bid, 86½ offered, the trader said.

For the quarter, the company posted a net loss of $105 million, or 81 cents per share, on total sales of $2.86 billion, compared to a net loss of $153 million, or $1.19 per share, on total sales from continuing operations of $2.89 billion in the first quarter of 2007.

EBIT-R for the quarter was $51 million, an improvement of $97 million over first-quarter 2007.

And, operating loss was $15 million, an improvement of $67 million from the same period in 2007, reflecting improved gross margin and lower SG&A spending.

"Our first-quarter results demonstrate the benefit of Visteon's increased diversification of customer and geographic sales as well as significant operating improvement in our business," said Michael F. Johnston, chairman and chief executive officer, in a news release. "We expanded our margins and remain focused on additional cost reduction through the implementation of our restructuring plan and our overhead cost reduction initiative."

For full-year 2008, product sales are expected to be in the range of $10 billion to $10.2 billion, primarily due to a weaker U.S. dollar and the timing of divestitures.

Visteon also affirmed that it expects EBIT-R for full-year 2008 to be in the range of negative $25 million to positive $25 million and free cash flow for full-year 2008 to be in the range of negative $350 million to negative $250 million.

"The progress Visteon is making, combined with the additional actions we will execute in 2008, lays the foundation for Visteon to be free cash flow positive in 2009," Johnston added in the release. "With $1.6 billion of cash at March 31, 2008 and additional available liquidity, we have the flexibility to execute our plans."

Visteon is a Van Buren Township, Mich.-based automotive supplier that designs, engineers and manufactures climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers.

Trader: Sands' numbers to hurt casinos

The gaming sector's performance was mixed on Wednesday, but one trader was predicting a downturn for Thursday's session.

The trader speculated that first-quarter numbers from Las Vegas Sands Corp. would "bring the sector down" during the following session. The financials came out just after the closing bell had rung.

For the first quarter of 2008, the Sands reported net revenue of $1.08 billion, a 71.8% increase year over year. Operating income decreased to $96.9 million, compared to $131 million the year before. The company attributed the decline to increased operating costs, among other things.

Adjusted net income was $23.6 million, or 7 cents per diluted share, compared to $114.6 million, or 32 cents per share, in 2007. Net loss was $11.2 million versus net income of $90.9 million the previous year.

Still, distressed casino operators overall were unchanged to perhaps slightly better on the day.

One trader said Harrah's Operating's recent 10¾% notes continued to be a popular name and ended the day "up again nicely." He said the bonds closed at around 86.5 after slipping below 86 in the previous session.

At another desk, a trader said Trump Entertainment's 8½% notes due 2015 were unchanged at 63.5 bid, 64 offered. Trump will report its first-quarter results on May 8.

Meanwhile, despite a default notice Tropicana Entertainment LLC's bonds were unchanged to slightly better, with a trader quoting the 9 5/8% notes due 2014 at 49 bid, 49.75 offered.

A Tropicana subsidiary received a default notice from its bank lender, Credit Suisse. Tropicana has 30 days to cure the default and has stated it is working on doing just that.

Isle of Capri's 7% notes due 2014 closed half a point firmer at 78 bid.

More strength for ResCap

Residential Capital's bonds remained on their upward path Wednesday, gaining as much as 2 points.

A trader said ResCap paper "continued to be busy, though not as busy as the day before." He said the 6 3/8% notes due 2010 have moved up 3 to 4 points since the week started, ending Wednesday at 53 bid, 54 offered.

Another trader also placed the 2010 issue at around 54, and the floating-rate notes due 2008 at 93.5. Another source called the 8 7/8% notes due 2015 better by 2 points at 51 bid.

ResCap spent a good part of the previous week on the decline as investors' concerns that the company was floundering were renewed. The worries were heightened by a series of downgrades, as well as the fact that the company drew down more than half of its new $750 million credit facility.

But on Tuesday, ResCap parent GMAC LLC held its quarterly conference call in which it reiterated its commitment to help its offspring. Though GMAC posted a wider loss, due in part to losses incurred at ResCap, market players were somewhat calmed by GMAC's commitment, and ResCap's bonds were bolstered.

ResCap is a Bloomington, Minn.-based mortgage lender.

Univision loan on the up-and-up

The run up that began in Univision Communications Inc.'s strip of institutional bank debt on Tuesday continued into the Wednesday session, although trading activity was noticeably lighter, according to a trader.

The bank debt was quoted at 84 bid, 85 offered, up from Tuesday's levels of 83½ bid, 84½ offered and from Monday's levels of 81 bid, 82 offered, the trader said.

The rally began Tuesday after news hit that the trial regarding the Grupo Televisa SA litigation was postponed to July 1 from April 29, creating an assumption that there's some sort of settlement in the works.

The legal battle between Univision and Televisa first began in June 2005 and focuses on breach of contract issues and royalties.

Under the lawsuit, Televisa is seeking a declaration that Univision breached certain contracts and therefore, Televisa has the right to suspend or terminate those contracts without liability to Univision.

Televisa is also fighting for the right to transmit or permit others to transmit any television programming into the United States from Mexico over or by means of the internet.

Univision is a Los Angeles-based Spanish-language media company.

Broad market edges higher

Sea Containers Ltd. settled its dispute with General Electric Capital Corp. over a joint venture issue, which could clear the path for the company to finally emerge from bankruptcy. A trader said that the 10¾% notes that were to have matured in 2006 moved up 3 points to 45 bid, 48 offered, though he noted there were no trades.

Distressed retailers were "popping," a trader said, as Bon-Ton Stores Inc.'s 10¼% notes due 2015 "jumped" 3 points to 78. The trader said that short covering might have caused the move.

Meanwhile, Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 closed better at 85 bid, 85.5 offered. The gains came despite a downgrade from Fitch Ratings.

R.H. Donnelley Corp.'s 8 7/8% notes due 2016 slipped a couple points on "no particular news" to 64. But Freescale Semiconductor Inc.'s 8 7/8% notes due 2014 edged up a couple points to around 89 in "pretty active" trading, a trader said.

Sara Rosenberg contributed to this article.

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