Distressed marketplace stays strong; Harrah's gains on numbers, IPO details; Sprint debt slips

By Stephanie N. Rotondo

Portland, Ore., Nov. 5 - The distressed debt market continued to have a firm feel to it on Friday as investors "cruised into the end of the week," a trader said.

"The market has done pretty well; volumes are pretty good," he said.

A swing to a profit, combined with new details about its planned initial public offering, helped Harrah's Entertainment Inc.'s bonds move up a point or two on the day. The company also said it would change its name once the IPO launched.

Meanwhile, concerns about Clearwire Corp.'s ability to continue as a going concern put pressure on Sprint Nextel Corp.'s bonds. However, a trader noted that there was only a moderate amount of trading in the credit, leaving him to speculate that the news was nothing to get worked up about.

Investors were also preparing for another round of earnings releases next week. Clear Channel Communications Inc. and Realogy Corp. - both of which will report results early next week - saw their debt trading up about a point.

IPO, results help Harrah's

Harrah's Entertainment's bonds traded "a decent amount, but the same amount as every day," a trader said, as the company disclosed some of the terms of its planned initial public offering.

The debt did gain "a couple of points," he said, on the news, the 10% notes due 2018 closing with a 91 handle.

Another trader also saw the bonds trading in that 91 context, deeming it up 1¾ points.

Harrah's said in a regulatory filing that it had increased the size of the IPO to $610.9 million. It plans to sell 31.3 million common shares at $15 to $17 per share.

The deal includes an overallotment option of 4.69 million shares.

Additionally, Harrah's will change its name to Caesars Entertainment Corp.

Harrah's also released its third quarter results, which showed a 0.3% increase in revenue. Revenues hit $2.29 billion, up from $2.28 billion the year before.

The Las Vegas-based casino operator said the revenue gain was "due primarily to revenues associated with our February 2010 acquisition of Planet Hollywood, which were mostly offset by the continuing impact of the recession on customers' discretionary spending."

Harrah's also turned a $175.7 million profit, which compared with a loss of $1.05 billion in the same quarter of 2009.

"Revenue rose slightly during the third quarter," said Gary Loveman, chairman, president and chief executive officer, in the earnings release. "Although visitation also increased slightly in certain markets, including Las Vegas, and there are signs consumer spending may be stabilizing, we're continuing to exercise cost discipline while pursuing innovative ways to provide rewarding customer experiences."

Sprint falls on news

Sprint Nextel investors responded to news that Clearwire Corp. was in danger of going broke, pushing the company's bonds lower.

Still, a trader said he didn't "think anybody put too much concern into that," seeing the 6% notes due 2016 fall just half a point to end around par.

"When [the news] first came, there was a rumble [of trouble for Sprint, a 54% stakeholder in Clearwire]," he said. But as only $30 million to $40 million of Sprint paper traded, he believed that "apparently" there was little concern.

Another trader, however, called the 6% notes down as much as a point, also around par. He added that Sprint's other issues were "all lower" by a quarter to three-quarters.

Clearwire said in a regulatory filing that its mounting losses and difficulties obtaining financing raised doubt about its ability to continue as a going concern. In a separate filing, Sprint said it would be severely impacted if the Clearwire defaulted on its loans.

Because Clearwire could be considered a subsidiary of Sprint, that could make the Overland Park, Kan.-based wireless telecommunications provider liable in the event of a default. However, Sprint said it was looking at how it could diminish its liability, including possibly selling its equity stake in Clearwire.

But whatever happens, Dave Novosel, an analyst with Gimme Credit LLC, believes there "are several reasons to get excited about the Clearwire story."

Novosel noted that Clearwire has been able to increase its subscriber base, adding that management upped its guidance for year-end subs to 4 million from 2 million. However, its heavy cash burn remains.

"While the potential for success is alluring, we do not think it is worth the risk that bondholders are assuming," he wrote in an afternoon comment to clients.

Fresh earnings boost debt

Upcoming earnings had investors jockeying for position during Friday's session.

A trader said Clear Channel Communications - which will post numbers on Monday - gained a point in trading, the 11% notes due 2016 at 79¼ and the 10¾% notes due 2016 at 801/2.

Realogy will report its earnings on Tuesday and the trader also saw those bonds climbing a point on the day. He pegged the 10½% notes due 2014 at 911/4.

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