Equity sell-off pressures distressed bonds; NewPage first-liens lose ground; Caesars holds on

By Stephanie N. Rotondo

Portland, Ore., Aug. 10 - It was "another adventurous day" in the distressed debt market, a trader said Wednesday.

"The market was lower, then it started coming back," he said. Then, as the Dow Jones Industrial Average dropped nearly 520 points by the end of business, distressed bonds came in.

NewPage Corp.'s debt remained under pressure, though there hasn't been any fresh news out. But the recent volatility in the broad markets has resulted in a flight from riskier paper such as the struggling papermaker.

Meanwhile, Caesars Entertainment Corp.'s bonds - which had been falling rapidly in recent trading - managed to hold their ground during midweek trading. Volume remained high.

With the overall market losing value, so did energy names such as Edison Mission and Dynegy Holdings Inc.

NewPage pressured again

NewPage's first-lien paper continued to fall in midweek trading, though there wasn't any news out on the Miamisburg, Ohio-based papermaker.

A trader pegged the 11 3/8% notes due 2014 around 80, which he called down "another 2½ points."

The 10% notes due 2012 were "kind of unchanged" around 14.

According to Trace, however, the 10% notes hit a low of 12 on the day before coming back up.

The company is working on refinancing or repurchasing the second-lien notes by the end of the year. If it fails to do so, other debt could be accelerated. That could mean a heavy debt burden for a company that has not been profitable since 2006.

Caesars holds its ground

After several days of declines, Caesars Entertainment's 10% notes due 2018 "kind of hung in there," a trader said.

He said the notes traded between 78 and 79 most of the day, briefly hitting a high of 81 before coming back to that 78-79 context.

A second trader said that the bonds "held in pretty well. They kind of faded at the end, but they were unchanged to better for most of the day until stocks really crapped out this afternoon." He saw the company's paper going home down a half point, "which is really not a bad day for them."

He also noted that the just-released June performance numbers for the casinos in Las Vegas, where Caesars has a very sizable presence, "looked very strong, so that clearly helped" the company's paper.

The Las Vegas-based casino operator reported its second-quarter results Tuesday. For the quarter, the company posted a net loss of $255.5 million. By comparison, Caesars reported a loss of $274 million for the same quarter of 2010.

Net revenues were 0.4% higher at $2.3 billion. Higher hotel revenues and revpar - revenue per available room - offset declines in visits as well as the temporary shuttering of five Midwest properties due to flooding.

Energy names falter

Distressed energy credits fell in line with the overall market, traders reported.

Edison Mission's 7% notes due 2017 were about unchanged on the day, according to one trader, but down 10 points in recent trading. He pegged the issue around 65.

Dynegy's 7¾% notes due 2019 meantime dropped 2½ points to 60 bid, according to another market source.

Oilsand producer OPTI Canada Inc. saw its 7 7/8% and 8¼% notes due 2014 falling a deuce to end around the 62 level.

For its part, oil prices gained $2.79 to close at $82.09.

Paul Deckelman contributed to this report

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