Distressed market wanes after week-long run up; Caesars in focus as plan deadline nears; Murray firms

By Stephanie N. Rotondo

Seattle, Sept. 23 – After being on firm footing all week, the distressed debt market was giving up gains on Friday.

“The market took a little bit of a breather,” a trader said. “I guess maybe guys weren’t anxious to buy anything” given that the broader markets were also in decline.

But traders also noted that there was limited volume in the distressed space, as investors instead focused on the $1.25 billion two-part offering that Alcoa Inc. priced on Thursday.

“A bulk of the volume was that new Alcoa deal,” one trader commented. Another trader said that the deal was “a large part of the volume.”

But among distressed names, Caesars Entertainment Operating Co.’s bonds were slightly better – or unchanged, depending on whom you asked – as a deadline on a renewed reorganization plan neared.

Earlier in the week, Caesars Entertainment Corp. – the operating company’s non-bankrupt parent – said it would increase the amount that it would contribute about $1.2 billion more to the bankrupt opco than previously proposed.

Creditors, including bondholders and senior lenders, have until midnight ET to agree to the new terms.

Meanwhile, Concordia International Corp. debt remained on a ride, giving up about what it had gained in the previous session.

The Canadian drugmaker’s debt has gyrated since last week, when the United Kingdom proposed a bill that would stem hefty drug price increases.

On Friday, a trader said the 7% notes due 2023 slipped half a point to 62½. Another trader, however, deemed the issue unchanged, straddling 63.

The second trader noted that the paper had crept back up to the mid-60s earlier in the week, from the lows in a 60 to 61 context.

As for the 9½% notes due 2022, those were seen in a 68 to 69 zip code.

“I would say they were marginally weaker,” the trader said.

Bucking the day’s downward trend, Murray Energy Corp.’s 11¼% notes due 2021 “continue to move up,” a trader said.

He placed the issue at 48.

“Thin volume, but they did trade up another almost 2 points,” he said.

Caesars’ deadline looms

Caesars Entertainment Operating’s 10% notes due 2018 were slightly better to unchanged in Friday trading.

One trader said the bonds were half a point higher at 60½. But a second trader said the debt was “kind of in line with where it was,” trading in a range of 60 to 60½.

“They were active, but pretty much unchanged,” the trader said.

Earlier in the week, the opco’s parent company said it would increase the amount that it contributes to the bankruptcy plan by about $1.2 billion, bringing the total amount to be distributed to creditors to over $5 billion. Most bondholders have agreed to the deal and the ball is now in the senior lenders’ court – which could be a problem.

The New York Post reported that Elliot Management – which holds about $2 billion of the casino-operator’s first-lien debt – was hesitant to jump on board.

That could be because agreeing to the deal would take potentially hundreds of millions from the fund and its fellow creditors.

But if the deal is approved by Friday’s midnight ET deadline, it could bring an end to the opco’s two-year stint in bankruptcy. If not, not only could lawsuits currently pending against the parent move forward, they could also force Caesars’ non-bankrupt units into bankruptcy.

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