Investors 'nervous' about gaming sector; Delphi bonds slip, recover; Linens, Rite-Aid weaker

By Stephanie N. Rotondo

Portland, Ore., April 10 - Thursday was yet another mixed day in the distressed bond market, traders reported.

Several names saw their debt fall in early trading only to rebound by the end of the session.

Such was the case for many names in the gaming arena. A trader said "investor nervousness" brought down Harrah's Operating, Tropicana Entertainment LLC and Trump Entertainment Resorts Inc. But by the close of business, most had regained most, if not all, of their losses. The trader opined that a pending smoking ban could be the root of the problem.

Delphi Corp.'s bonds also experienced some gyrations. The automotive parts supplier's debt slipped during early trading but managed to recover. On the bank debt side, Delphi's loan edged up on the bid side. The debt might have been helped by the company's consideration of legal action against Appaloosa Management LP.

Meanwhile, weak quarterly figures were to blame for declines in Linens n'Things Inc. and Rite-Aid Corp. paper. A trader said Linens' notes fell after sector rival Bed, Bath and Beyond posted disappointing numbers, while Rite-Aid's own 10-K pushed its bonds lower. The results come on the back of the release of same-store sales figures for March, which were also lower than expected.

As the session came to a close, it seemed almost like it was already Friday.

"I wish it were Friday," one trader quipped. "Then at least you could look forward to the weekend."

Another trader said there were "not too many notables," as the market focused on a new issue from MarkWest Energy Partners LP and news out on chipmaker NXP.

Investors 'nervous' about gaming

A trader said there was some "nervousness" in the market regarding the gaming sector early in the session. However, most names managed to recoup most, if not all, of their losses.

The trader said Harrah's recently issued 10¾% notes hit a low of 84 before coming back to close at 84.75. Tropicana Entertainment's 9 5/8% notes due 2014 slipped to 50.5 bid, 51.5 offered but ended the day better at 52 bid, 54 offered.

Trump Entertainment Resorts' 8½% notes due 2015 were down as much as 1.25 points, the trader added, though the bonds closed only a half point lower at 65 bid, 65.5 offered.

At another desk, a trader pegged Tropicana's debt at 51 bid, 52 offered, noting that the bonds were trading flat with due bills.

Another source placed Harrah's 5¾% notes due 2017 up a quarter of a point at 56.

The first trader said he was not sure what was weighing on the sector, though he speculated that a pending smoking ban in Atlantic City could be the reason.

The Atlantic City Council unanimously voted to approve a total smoking ban in the Jersey Shore's casinos on Wednesday. There is already a partial smoking ban in effect, which began in April 2007. Many casino operators in that area have said the partial ban is to blame for decreasing revenues.

For March, the New Jersey casinos saw their combined revenue decrease almost 10% to $395 million, while numbers for the first three months of 2008 declined 6.4% to $1.13 billion. Tropicana's revenue fell 20% to $31.5 million - the biggest dip among the casinos - while Harrah's lost the least, sliding a mere 0.7% to about $46.6 million.

Delphi bonds slip, recover

Delphi is considering taking legal action against a key investor that pulled out of the company's exit financing deal.

As investors learned of the possible legal battle, the automotive parts supplier's debt "traded down as much as 2 to 3 points before recovering most of that back," a trader said.

The trader quoted the bonds generically at 39 bid, 40 offered, while another source said the notes were "actually up a little" at 39.5 bid, 39.75 offered.

But another trader saw the 6.55% notes that were to have come due in 2006 at 28 bid, 40 offered, down 2 points.

Delphi's debtor-in-possession second-lien term loan was quoted at 99¼ bid, 99¾ offered compared to previous levels of 98¾ bid, 99¾ offered.

Adding to its struggles to emerge from Chapter 11 protection, Delphi got smacked with more bad news Friday when Appaloosa Management pulled out of a deal to invest $2.55 billion in the company. In court filings, the private equity firm called Delphi's ability to secure the necessary financing to exit bankruptcy "tenuous," though the company said it had in fact obtained the funds by the April 4 deadline.

On Wednesday, Delphi said it might ask the bankruptcy court overseeing its case to intervene and force the investor group to follow through on the plan. Appaloosa has said that it is still interested in teaming up with the company, though under different terms.

Previously, Appaloosa objected to the large role General Motors Corp. was taking in Delphi's bankruptcy emergence. But Delphi and GM insisted that without additional assistance from the former parent, it would be difficult for Delphi to find the necessary funding to exit bankruptcy, given current credit conditions.

Delphi is a Troy, Mich.-based automotive parts supplier.

Elsewhere in the autosphere, Visteon Corp.'s 7% notes due 2014 were down half a point at 64 bid, while Metaldyne Corp.'s 10% notes due 2013 were 2 points better at 62 bid.

Poor numbers hurt Linens, Rite-Aid

Disappointing numbers led to weaker bonds for both Linens n'Things and Rite-Aid.

Linens' floating-rate notes due 2014 fell in response to quarterly figures from sector rival Bed, Bath and Beyond. The home decor retailer saw its fourth-quarter profit decline to $172.9 million from $205.8 million the previous year. The company also lowered its outlook for the first quarter.

A trader pegged Linens' bonds at 37.5 bid, 38 offered.

Rite-Aid saw its fourth-quarter loss widen as a result of a non-cash income tax charge. A trader said the company's 9½% notes due 2017 closed down half a point to around 79. Another source, however, called the company's bonds up nearly a point, its 8 5/8% notes due 2015 at 78.75.

The third-largest US drugstore chain reported a loss of $960.4 million for the fourth quarter and also opined that its sales figures throughout the year would fall below analysts' expectations.

The quarterly numbers come on the heels of weaker same-store sales for March. The Thomson Financial Same Store Sales index declined 0.7% in March, well below expectations of a 0.1% slip.

Broad market softer

AbitibiBowater Inc.'s 8.85% bonds due 2030 fell to 37 bid, 39 offered from prior levels around 40. Another market source had the bonds going out at about the 39 level, down from 42 previously, in fairly busy large-block trading. Abitibi's 7½% bonds due 2028 lost more than a point to close at 36.5.

Spectrum Brands Inc.'s 7 3/8% notes due 2015 were about a quarter to a half point easier at 66 bid.

A trader saw Delta Air Lines Inc.'s "stubs" left over from its old pre-reorganization bonds - which entitle their holders to possible future additional payments beyond what they were paid for their bonds in the restructuring - trading lower as the airline said in a regulatory filing that it would record a net loss for the first quarter and would not record a tax benefit for the quarter. He said the stubs fell to 2 bid, 3 offered from prior levels around 5 bid, 6 offered.

Neff Corp.'s 10% notes due 2015 were 2 points lower at 47 bid.

Sea Containers Ltd.'s several issues of bonds traded at 40.5 bid, 42.5 offered - well down from previous levels around the 50 area, although a trader said that he had not seen the bankrupt sea and rail transportation company's paper trading around "for some time."

Sara Rosenberg and Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.