Caesars bonds busy, higher, helped by ResCap court ruling; NII slide continues; Penney better

By Paul Deckelman

New York, Nov. 15 - Caesars Entertainment Corp. bonds were among the most actively issues in the junk bond and distressed worlds on Friday, with traders seeing the bonds better by several points.

One cited the potential impact on an underperforming company such as Caesars of a ruling in another company's protracted legal battle with its bondholders - Residential Capital LLC.A bankruptcy judge on Friday sided with the company in denying certain bondholder claims. However, that ruling caused ResCap's own bonds to slide in active dealings.

Elsewhere, bonds of NII Holdings Inc.'s capital finance subsidiary remained active, as they have been all week - and were continuing their recent pattern of weakening.

However, troubled retailer J.C. Penney Corp.'s bonds were seen continuing their recent rise, rebounding along with the company's shares from the depths they had reached some weeks ago.

Caesars seen active

The legacy bonds of Harrah's Operating Co. Inc. - the predecessor company of Las Vegas-based gaming giant Caesars - were at the top of the Junkbondland most-actives list on Friday, with a trader seeing its 10% notes due 2018 "in a 48 to 48½ ZIP code," which he said was up 3 points.

A market source at another desk noted that technically, there are two separate tranches of those 2010, both trading in a 48½ to 48¾ bid range. One tranche was up nearly 4 points on the session, on tremendous volume of over $67 million. The second tranche was only up about ½ point, with over $23 million of the bonds having changed hands.

One of the traders said that he had seen no specific news about Caesars itself out that might explain the heavy trading and the robust upside movements.

However, he said that "a ruling in the ResCap [bankruptcy case] that has implications for the treatment of [creditor] claims that Caesars thought was positive."

The ResCap ruling

In that ResCap case, Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York ruled that the company's bondholders may not be able to collect all the interest and penalty fees they are demanding.

ResCap, a mortgage lender owned by Detroit-based Ally Financial Inc., filed for Chapter 11 protection from its creditors last year.

Glenn is holding hearings on various issues in preparation for a session next week at which ResCap will seek approval for its plan of reorganization.

In an opinion made public on Friday, the judge said that the collateral backing $2.2 billion of debt was only worth $1.9 billion, eliminating those noteholders' possibility of collecting post-petition interest accrued since the case was filed.

He also criticized the bondholders' group for being unwilling to compromise with the company.

In the wake of the judge's ruling, ResCap's 9 5/8% notes due 2015 fell by some 2¾ points to 107½ bid, on volume of $18 million.

NII knocked down again

A trader called NII Holdings' bonds "active again" on Friday, and continuing to trend lower.

He saw the Reston, Va.-based Latin American wireless company's NII Capital Corp. subsidiary's 7 5/8% notes due 2021 go as low as a 46-47 context, before recovering to end around 47-48.

He saw its 10% notes due 2016 dipping below 60 bid, before going home in a 60-61 context.

"They continue to be active, and weak," he said.

At another desk, a market source saw over $22 million of the 10% notes having traded by the close.

He saw over $24 million of the7 5/8% notes having traded, but called them down more than 5 points on the day at just under 47.

Its 8 7/8% notes due 2019 fell 1½ points to end at 50½ bid, on volume of over $10 million.

Penney's pop continues

Elsewhere, a trader said that "J.C. Penny's paper continues to rise - not that it was trading a lot."

He quoted the Plano, Texas-based department store retailer's paper generically up another ½ point to 1 point.

"The stock continues to trend higher, I think that's helping the bonds."

Its 5.65% notes due 2020 were ending at 77½ bid, well up from recent lows around 65 that the bonds had hit in mid-October. However, volume consisted mostly of small odd-lot trades.

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