SemGroup settles in lower, trades flat; gaming names get lucky, Six Flags rides upward

By Paul Deckelman and Sara Rosenberg

New York, July 18 - SemGroup LP's bonds continued their fall on Friday, moving moderately lower on top of the titanic plunge which the Tulsa, Okla.-based energy transportation company suffered the previous day. Investors who had been kept in the dark during Thursday's session were now mulling the company's Thursday night announcement that it has liquidity issues and might even have to file for Chapter 11 to solve them.

Bonds and bank debt of gaming-sector names like Harrah's Entertainment Inc., Penn National Gaming Inc., Isle of Capri Casinos Inc., Station Casinos Inc. and MGM Mirage were seen better, as the recently badly beaten sector rode the upside momentum of the overall high yield and bank debt markets.

Also taking an upside ride, for a second straight session, were the beleaguered automotive issues like General Motors Corp. and Ford Motor Co.

And speaking of rides, Six Flags Inc. - whose bonds have seemed to be on a roller-coaster all year on alternate fits of investor optimism and pessimism - were definitely better Friday for a second straight day, pushed upward by the New York-based theme park operator's projection that it is on track to finish the year cash flow-positive, for the first time in its history.

SemGroup settles in lower

Junk bond traders saw SemGroup's 8¾% notes due 2015 - which on Thursday had plunged to levels around 30 bid from prior levels in the mid-to-upper 90s - continuing their fall, with one seeing the bonds "continuing to get hammered" down to as low as 17 bid, 22 offered and another seeing them at 19 bid, 23 offered.

Yet another trader said that the bonds were being quoted bid around 23 late in the day, "better than where they were" earlier on, but still well down from Thursday's levels straddling 30. The traders were all quoting the bonds as trading flat, or without their accrued interest, in the wake of the Thursday night warning that a bankruptcy filing could be in the cards.

The company's SemGroup Energy Partners LP subsidiary's New York Stock Exchange-traded shares, which on Thursday had lost more than half of their value in incredibly heavy trading - nearly 85 times the norm - were beaten down again on Friday, dropping a further $2.70, or 24.55%, to end at $8.30. Even with the average volume figure having been bloated by Thursday's unusually heavy dealings, Friday's volume of 9.1 million shares was still about 63 times that average.

Several bond traders on both Thursday and Friday questioned the disparity between the company's bond prices and its share price, with one on Friday saying that "something is off" when a bond is trading around 20 flat and the stock around 7 - it actually hit a low of $5.98 before coming back from that nadir to end where it did.

"I am surprised," he said, "considering a stock trading at 7 as a potential bankruptcy candidate." He said that "with a bond trading at 20 flat," - a fairly potent indicator that a bankruptcy filing is only a matter of time -"the stock is way too high at 7. But we'll see."

The SemGroup Energy Partners unit had announced late Thursday, well after that day's market carnage in the name had mercifully come to an end, that it had been informed by its parent that the latter company "is experiencing liquidity issues and is exploring various alternatives, including raising additional equity, debt capital or the filing of a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code."

SemGroup - which trades, stores and transports petroleum via pipelines and trucks as well as providing oilfield services to various energy producers - did not elaborate on the nature of the company's problems, which it discussed with its bank lenders in a closed-door meeting on Tuesday, the details of which have not been publicly released. However, is generally believed that the sharp rise in petroleum prices over the past several months has greatly adversely impacted its hedged trading business, a factor cited prominently by Moody's Investors Service when the ratings agency downgraded SemGroup's debt on Thursday.

In addition to trying to make sense of the company's daunting enough financial problems, investors were further rattled on Friday by news stories indicating that Terry Ronan had been appointed to a senior management post at SemGroup Energy Partners, replacing its president and chief executive officer, Kevin Foxx; the company later noted that some of those reports were incorrect, and reiterated that Ronan had been appointed as acting president and CEO of the parent company, SemGroup LP, with Foxx staying on in his positions at SemGroup Energy Partners.

Gaming gets better

Elsewhere, the gaming sector - one of the hardest hit sectors in high yield so far this year, down around 10% or 11% as a whole according to the major market performance indexes - took full advantage of the perceived better tone in the junk market the past two sessions to come bouncing back, at least a little.

A trader saw Station Casinos' 6 7/8% notes due 2016 at 50 bid, up from 48.5 on Thursday, although he also pegged Boyd Gaming Corp.'s 6¾% notes due 2014 about ½ point lower at 70.25.

At another desk, a trader saw Isle of Capri's 7% notes due 2014 "looking active, up a little bit," while seeing Trump Entertainment Resort Holdings Inc.'s 8½% notes due 2015 moving up to 53 bid from 51.5 bid, 52 offered previously.

A market source at another desk saw the Station, Isle and Trump bonds as being among the most active issues on a generally lackluster day - all three recorded over $20 million of bonds traded, while most other names were down in the seven-figure range - with the Station 6s having gained 3 points to end at 51 and the Isle 7s up nearly 3 points at just below 70.

Another market source likewise had the Isle bonds at just under 70, and saw MGM Mirage's 6 5/8% notes due 2015 at 80, up nearly a point,

In the bank-debt market, the sector felt better on Friday with names like Harrah's, Penn National, Venetian Macao Ltd. and Las Vegas Sands all heading higher, according to a trader.

Harrah's, a Las Vegas-based provider of branded casino entertainment, saw its term loan B-2 and B-3 quoted at 87¼ bid, 87¾ offered, up from 86 7/8 bid, 87 1/8 offered, the trader said.

On Thursday, Moody's downgraded the Harrah's bank debt to Ba3 from Ba2 and corporate family rating to B3 from B2 citing the expectation that, given the material softness in the Las Vegas and Atlantic City gaming markets, the company's credit metrics will deteriorate from already weak levels as the reason behind the move.

Penn National, a Wyomissing, Pa., owner and operator of casino and horse racing facilities, saw its term loan B quoted at 95 3/8 bid, 95 7/8 offered, up from 95 1/8 bid, 95 5/8 offered, the trader continued.

Venetian Macao, a subsidiary of Las Vegas Sands, saw its term loan quoted at 96¼ bid, 97 offered, up from 96 bid, 96¾ offered.

And, Las Vegas Sands, a Las Vegas-based developer of multi-use integrated resorts, saw its term loan quoted at 86½ bid, 87¼ offered, up from 86 bid, 86½ offered, the trader remarked.

On Thursday, Moody's put Las Vegas Sands' ratings on review for possible downgrade because of the softness in the Las Vegas gaming market. The ratings of Venetian Macao were not affected by the rating action.

The trader explained that even though there has been some bad news surrounding the gaming names, such as the downgrades/rating watch negative, the debt has been trading up likely on some opportunistic buying.

The trader went on to say that early on in the week, the gaming names "got hammered" and then by mid-week they started to pop back up as guys started to view the paper as cheap.

Masonite loan recovers lost ground

Elsewhere in the bank-debt market, Masonite International Inc.'s term loan B moved higher during the session, regaining a good amount of the losses that the debt experienced in the first half of the week, according to a trader.

The term loan B was quoted at 89½ bid, 91½ offered, up about ½ point on the day, the trader said.

On July 14, Masonite - a Tampa, Fla.-based manufacturer of residential and commercial doors - held a call to discuss an amendment with lenders under which the credit agreement's total leverage and interest coverage ratios would be replaced with a minimum adjusted last 12 months EBITDA test.

The amendment would also change pricing on the term loan to be based on a grid that can range from Libor plus 350 bps to 500 bps. Currently, the term loan is priced at Libor plus 200 bps.

In addition, a 3.25% Libor floor would be added to the loan.

Lenders would get a 50 bps amendment fee in return for their consents.

Shortly before launching the amendment, the company had said that, based on a preliminary evaluation of its financial performance, it expected to be unable to comply with financial covenants for the quarter ended June 30 as a result of challenging conditions in the U.S. housing industry.

With the appearance of the amendment proposal, Masonite's term loan B went on a bit of a rollercoaster ride, observers said, as some investors were not pleased with the amendment terms.

For example, on Wednesday, the term loan B had been quoted at 87½ bid, 88½ offered and a couple of big blocks had traded in the 86s. On Tuesday, the debt was seen at 88½ bid, 89½ offered and on July 14 the debt was at 90¾ bid, 91½ offered.

When asked why the paper traded up on Friday, the trader said he wasn't sure, but offered a few guesses, such as lenders coming in and buying more paper so they could block the amendment, or maybe it was up on an assumption that the amendment would not get the required consents and lenders will get better terms.

Six Flags keeps climbing

And speaking of roller-coasters, one of the biggest U.S. operators of such devices - Six Flags - continued its own up-and-down ride Friday, a session which, like Thursday's saw its bonds headed almost straight up.

A trader said that Six Flags' 9 5/8% notes due 2014 pushed up to 51 bid, 52 offered from 49 bid on Thursday - which itself was up 4 or 5 points from the levels the bonds had held earlier in the week.

He also saw its 9¾% notes due 2013 at 52.5 bid, up from 49.5 offered.

Another trader saw the 93/4s closing at 53 bid, 54 offered, noting they had come roaring back from lows earlier in the week of 43 bid, 44 offered, "so they've made up a full 10 points."

"SIX," another trader said, using the company's stock ticker, "has been moving up into the lower 50s. They've had a good run the past two days."

The first trader chalked the sharp two-session rise up largely to short covering, noting that the amusement park operator's paper had "been getting pounded the last month or so."

However, he also said there probably were "some new investors jumping in with the news that's recently come out."

Company executives at mid-week touted the results of a customer-satisfaction survey done among park-goers by an independent market research organization, which found that well over 70% would "definitely" come back to a Six Flags park themselves or recommend going there to a friend, giving the company high marks on things like park cleanliness and ride safety.

The company said that with the summer season, its busiest time of the year, now in full swing - even despite higher gasoline prices and tighter discretionary spending by consumers - Six Flags was on track to post its first free cash flow-positive year in the company's history.

GM, autos continue to cruise

GM's benchmark 8 3/8% bonds due 2033 were seen up 1½ points by a trader at 58 bid, 59 offered, while its 49%-owned auto finance unit, GMAC LLC's 8% bonds due 2031 were a point better at 63.

At another desk, a trader saw the GM bonds "gaining traction" at 57 bid, 58 offered, and pegged domestic arch-rival Ford's 7.45% bonds due 2031 around the same level.

Yet another trader saw GM's widely traded issue finishing at 56.75 bid, off a bit from its high of 57.5, but still up a point on the day, while seeing the Ford issue up 2 points Friday at 57.

Also continuing to drive higher for a second straight session, no doubt helped by this past week's softening of oil prices, was Phoenix-based freight-hauler Swift Transportation Co. Inc., whose 12½% notes due 2017 had gained 6 points on Thursday to finish at 34. On Friday, a trader saw the bonds at 38.5.

Another saw the bonds at 38, and the company's floating-rate notes at 36.

Besides the impact of lower oil prices - crude dropped nearly $20 per barrel on the week from its previous highs above $147 and gasoline prices also came down - he attributed the gains to the recently taken-private company's earnings.

© 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.