Station Casinos enters bankruptcy; Sprint posts lower results, bonds improve; Spansion better

By Stephanie N. Rotondo

Portland, Ore., July 29 - Wednesday's distressed debt market saw one more casino being added to the roster of bankrupt gaming names, as Station Casinos Inc. announced it had officially filed.

The troubled company said the move to bankruptcy was due to talks with unsecured creditors, which has essentially failed. The news caused the company's debt to trade some, losing nearly 3 points.

In earnings news, Sprint Nextel Corp. released its second quarter results, showing a wider loss for the period. However, the company's bonds still managed to move higher through the day.

Also, bankrupt Spansion Inc. released some selected bits of its second-quarter results, which showed that the company has a better cash position than originally thought. That news helped some of the convertible debt move upward.

Elsewhere, General Growth Properties Inc.'s notes ended somewhat improved as well. The U.S.'s second-largest mall owner won an exclusivity extension from the judge overseeing its case, though whether or not that caused the move was not clear.

Station Casinos enters bankruptcy

Despite all its efforts to avoid it, Station Casinos has officially filed for bankruptcy.

The news caused some action in the company's debt, though light. One trader pegged the 7¾% notes due 2016 at 30.5 bid, 30.75 offered. Another trader placed the issue at 30 bid, 31 offered, calling it the "first [market] in a while."

The filing came after talks with the casino operator's unsecured creditors - which includes Goldman Sachs Asset Management and Oaktree Capital Management - failed to bring about a prepackaged bankruptcy proposal. The parties had entered into negotiations in February to discuss restructuring the company's debt. The company had secured forbearance after it failed to make interest payments, to no avail.

The last forbearance expired July 17.

According to court papers, Station has $5.7 billion in assets, along with $6.4 billion in debt.

Following the news, Moody's Investors Service cut Station's probability-of-default rating to D from Ca and affirmed the rating on outstanding bonds. Standard & Poor's lowered Station's $900 million senior secured bank facilities to D from CCC and revised the recovery rating on the company's senior unsecured notes to 5 from 4.

Sprint posts lower results

Sprint Nextel paper managed to end "fractionally better," in the words of one market player, despite posting a wider-than-expected quarterly loss.

A trader saw the 7 5/8% notes due 2011 trading just over par, while the 8¾% notes due 2032 ended around 85. The 6% notes due 2016 closed in the 87 context.

For the second quarter, the Overland, Park, Kan.-based wireless telecommunications provider posted a net loss of $384 million, or $0.13 per share. Consolidated net operating revenues came to $8.1 billion.

The larger loss was attributed to the loss of subscribers on the company's post-paid side, which one analyst previously told Prospect News was part of the company's "core struggles."

Sprint said it lost about 991,000 post-paid customers during the quarter.

Looking ahead, Sprint said losses on both sides - both post-paid and prepaid - should improve over 2008 figures.

On Tuesday, Sprint said it would acquire Virgin Mobile USA Inc. in an all-stock deal valued at $483 million.

Spansion heads higher on financials

In other earnings news, Spansion moved higher again after filing late Tuesday quarterly financial information that revealed the bankrupt Flash memory provider has a much stronger cash position than previously supposed.

Spansion 2.25% exchangeables due 2016 jumped Wednesday to about 20, which was up about 5 points from Tuesday, when the high point was 15.5, and up from 7.75 bid, 8.75 offered a week ago.

The paper had a high point of 20 bid, 20.5 offered on Wednesday, with the market ending at 19.75 bid, 20.75 offered, a sellsider said.

At one point, the paper was at 0.125. "Everybody thought they were worthless, and that the equity was going to go to the seniors," a New York-based sellside trader said.

But late Tuesday, Spansion announced select financial results for its second quarter ended June 28, revealing an increased cash position to $220 million.

"They are going to generate $220 million cash, up from $150 million, and if they can generate that much, then it's likely the seniors and subs will get reinstated and the convertibles will get the equity," the sellsider said, referring to the company's straight senior and subordinated debt.

"We've seen every valuation from 0 to 80. At this point, even the stock might get something," the sellsider said.

Spansion filed for bankruptcy in March and is currently expected to emerge from bankruptcy at the end of the fourth quarter, the sellsider said.

"All the hedge funds are paying attention to this name," he added.

General Growth notes gain

Over the objections of lenders, General Growth Properties' received a six-month exclusivity extension, allowing it more time to work on its restructuring plan.

Whether caused by the news or not, the mall operator's bonds moved up 2 to 4 points on the day, albeit in light trading.

A trader quoted the 5 3/8% notes due 2013 at 70 bid, 70.25 offered, with "a couple million" changing hands. At another desk, the company's various issues were quoted generically at 70 bid, 71 offered.

The extension could prove fruitful for General Growth. The company could find additional financing from alternative sources within that timeframe. And, it could give shareholders more of a say in the restructuring process.

Among other retail-related names, Rite Aid Corp. continued to inch its way upward.

A trader called the name up a point on the day, the 10 3/8% notes due 2016 at 96.5, 97.5.

Another trader said the ever-active 9½% notes due 2017 moved up to 75.5 on "$30-odd million" traded, while the 9 3/8% notes due 2015 closed at 76.

Broad market mixed

Among other distressed names, CIT Group Inc.'s floating-rate notes coming due in August were "still trading below the exchange offer," a trader said, placing the issue at 76.5 bid, 78 offered.

"So they are trading way lower than what they are theoretically worth," he said.

Catalyst Paper Corp.'s 8 5/8% notes due 2011 "traded for the first time in awhile," a trader said.

The trader saw the notes at 58.25 bid, 58.5 offered, which he called "pretty much the same."

"They only trade like once a week," he said. "And they don't often trade in round lots."

Becky Melvin contributed to this article.

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