Caesars better on results; Clear Channel improved; Horizon holds despite negative speculation

By Paul Deckelman

New York, May 10 - Ceasars Entertainment Corp.'s bonds firmed smartly on Tuesday after the giant gaming company was out with first-quarter results. While the numbers weren't particularly great - Caesars is still losing money - there were silver linings in the report for investors to hang on to, including the fact that the numbers weren't as bad as a year ago.

Not-so-bad numbers seemed to also be propping up the bonds of Clear Channel Communications Inc., which have been firmer over the past two sessions. There too, the big radio broadcasting and outdoor advertising company showed a loss for the most recent quarter - but less of a loss than a year ago.

Also on the earnings front, there was some activity in the bonds of problem-plagued bond insurer MBIA Inc., which was also reporting numbers, this time as the financial markets were closing - and again, there was a sizable loss, but not as bad as a year earlier.

Away from numbers-related names, there seemed to be smooth sailing for Horizon Lines Inc., whose bonds rose by around a point. But the cargo ship company's shares hit rough seas as investors were apparently spooked by an article laying out a case why management should hoist the white flag and file for bankruptcy.

The usual distressed-market mainstays like NewPage Corp., Catalyst Paper Corp. and OPTI Canada Inc. were meantime all little-changed on the day and had relatively low volume.

Traders meantime lamented the relative lack of genuine low-dollar distressed paper around, noting that even many CCC bonds and credits in possibly risky industries like gaming or retail are trading at or near par.

Render unto Caesar

Several traders said that Caesars seemed like the story of the day in the non-new-deal segment of the high-yield market and in the distressed-debt precincts as well.

A trader saw the company's Harrah's Operating Co. Inc. 10% notes due 2018 up between 1½ and 2 points on the session, with the bonds going home around 96 bid after having traded around that level for "most of the day."

In contrast, those bonds had finished on Monday around a 943/4-95 context.

He said that there was "a lot of volume - it was something like number two on the volume list."

"A lot of Caesars changed hands," a second trader said, "and it got a pretty good boost."

He saw the 10s up "a solid 1½ to maybe 2 points," pushing as high during the day as a 96-97 bid complex on volume of between $50 million and $60 million.

The first trader noted that the company was out with its latest quarterly numbers, "which didn't look all that good to me but which were probably better than expected."

The Las Vegas-based gaming giant posted a $147.5 million net loss for the first quarter ended March 31, an improvement from the year-earlier $195.6 million loss. Overall revenues fell 1% year over year to $2.18 billion in the quarter.

The quarter also included a gain of $21 million related to an early retirement of debt.

Clear Channel climb continues

A trader said that Clear Channel Communications' bonds were "feeling better," seeing the San Antonio-based media company's 10¾% notes due 2016 trading around 99 bid, up around a half point from the levels seen on Monday, when the bonds had also firmed by around a half point.

He said that activity in the credit was "more quotes than volume."

A market source at another desk saw some relatively brisk activity in the company's 11% notes due 2016, which traded at 97 bid, up nearly a full point from Tuesday's close, on volume of more than $12 million, putting it among the day's more active junk bonds.

The bonds have firmed in the wake of Friday's report by company parent CC Media Holdings Inc. of first-quarter results. The company touted a 5% gain in revenues. They rose to $1.32 billion from $1.26 billion a year ago.

While CC Media finished in the red to the tune of a $132 million net loss in the latest quarter, that was less red ink than $175 million a year ago.

MBIA moves lower

Also on the earnings front, a trader said that MBIA's 14% surplus notes due 2033 took a drop of about a point, falling to 53 bid, 54½ offered from prior levels around 54 bid, 56 offered.

"How much trading there was I don't know, but I do see them quoted a point lower."

The Armonk, N.Y.-based bond insurer reported first-quarter numbers after the close, posting a net loss of $1.1 billion, or $5.68 per share, narrower than the $1.5 billion, or $7.22 per share, of red ink posted in the year-ago first quarter. The company was hurt badly during the 2008-2010 financial crisis as mortgage-backed securities that it insured defaulted.

Management touted its "improved credit quality" as the reason for the smaller loss in the latest quarter.

Horizon steady

A trader said that Horizon Lines' 4¼% notes due 2012 moved up a little to around 87½ bid, 88 offered, which he called up a point from Monday.

But he said that the Charlotte, N.C.-based cargo container shipping company's bonds "were more quoted up - there really was no activity in it."

But while the bonds were quietly firmer, it was quite another story over on the equity side of the fence, where the company's New York Stock Exchange-traded shares plunged by as much as 21.4% on the session before going out down 16.48%, or 30 cents, to close at $1.52. Volume of 3.7 million shares was almost double the norm.

There was no fresh hard news out about the company - but there was apparent investor reaction to a Monday article on the popular Seeking Alpha financial news website starkly titled "Why Horizon Lines Should Declare Bankruptcy."

Among the reasons cited by the piece were the company's crushing debt burden, which is 92% of total capital; its under-utilization of its 20-vessel fleet, with four of its ships expensively held in reserve and others completing the homeward legs of their cargo runs only half full, if even that; and the hefty salaries and severance being paid out to its present and former chief executive officers, which are more than $90,000 per month for each executive. The fat pay/severance packages, the writer pointed out, also make it virtually impossible for the company to seek meaningful contract concessions from its largely unionized workforce.

He also noted the numerous class-action suits pending against the company by investors who lost money upon disclosure of federal antitrust charges against Horizon, which it later pled guilty to, resulting in a $45 million fine against the company that was later knocked down to $15 million.

Investment-oriented internet message boards buzzed with commentary on the article Tuesday. Some posters said the company might, in fact, benefit from restructuring under court protection, and others denounced the story as an unfounded "hit piece" against the company.

Hawker back to earth

A trader said that Hawker Beechcraft Corp.'s bonds lapsed back into relative quiet on Tuesday after having seen a pickup in activity during Monday's dealings in its 8½% notes due 2015.

He said that the Wichita, Kan.-based aircraft manufacturer's paper were about unchanged at the same 85 bid level to which they had firmed on Monday, with no fresh news out about the company.

OPTI Canada little moved

OPTI Canada's 8¼% notes due 2014 were in the lower 50s for most of the day, a trader said, and finished in the same 52-53 context in which the bonds had traded on Monday.

The trader saw "some volume, but not a lot of trading - a few trades, but not much" - in the troubled Calgary, Alta.-based oil sands energy producer's beleaguered paper.

Capmark kicks around

A trader said that Capmark Financial Group, Inc.'s 5 7/8% notes due 2017 pushed upward by around a point to the 58 bid, 58½ offered area on "some activity,"

At another desk, a market source said that the bankrupt Horsham, Pa.-based commercial real estate finance company's bonds had firmed to around 58¼ bid with an active $8 million traded, while its floating-rate notes, which were to have been retired last year but were not, finished the day at 57¼ bid. About $6 million of the bonds changed hands.

Paper names not popping

After some recent increased activity in the bonds of NewPage, the Miamisburg, Ohio-based coated-paper manufacturer's 10% notes due 2012 - one of the busier credits in Monday's dealings - were heard to have taken a back seat on Tuesday.

A trader saw the bonds trading in a 57-57½ context, which he called around where those bonds had gone home the night before.

"There was pretty much more quoting than trading - there was not much activity there. They slowed down" from Monday's busier pace.

The trader meantime saw NewPage sector peer Catalyst Paper Corp.'s 7 3/8% notes due 2014 staying around 67½ bid, 68 offered on "not really a lot of volume at all."

Another trader agreed that he "didn't see many trades" in the Richmond, B.C.-based paper manufacturer's notes, quoting the 7 3/8s down a half point on the day Tuesday at that same 67½ bid.

He meantime saw the company's secured 11% notes due 2016 at 97 bid, 98½ offered, though on "not much" trading. Those bonds had retreated from the prior week's levels around 98¾ bid, although he saw the 7 3/8s little changed from the prior week.

Little real distressed around

A trader noted what a number of distressed-market participants have been saying in recent weeks and months: There's not very much circulating in the way of really distressed, low-dollar bonds these days.

"Oh, a lot of it [bonds trading in the distressed-debt precincts] is at or near par. Certainly in the retail sector, where so much of the stuff is CCC or maybe single-B, all of that stuff is trading up and down at par.

"Other than maybe a Harry & David," he said, referring to the battered Medford, Ore.-based mail-order retailer of gift food baskets, "or a Sbarro [Inc.]," - a reference to the problem-plagued Melville, N.Y.-based Italian-themed quick-service restaurant chain operator - "there's very little that constitutes actual distressed. Maybe Catalyst [subordinated notes] or NewPage subs - some of the sub stuff is in that zone.

"There's very, very little low-dollar-price paper trading right now - and if you keep getting runs like we're getting, it's going to stay like that for a while."

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