Isle gets boost from tender offer; Neiman slips on PIK election; GM, Ford loans weaker; Tribune steady

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Jan. 13 - The distressed bond market was more active on Tuesday, traders said, though the overall tone as generally weaker.

"It started out weaker in some spots, unchanged in others," a trader said.

One major outlier was Isle of Capri Casinos Inc. The gaming company's debt got about a 7-point boost on news of a tender offer.

Meanwhile, Neiman Marcus Group Inc.'s debt dropped about 4 points on the day after the company said it would make in-kind interest payments from Jan. 15 to April 14. The luxury retailer said it chose to do so due to "dislocation in the financial markets and the uncertainty as to when reasonable conditions will return."

The generally weaker market also weighed on General Motors Corp. and Ford Motor Co.'s term loans, traders reported. One remarked that the absence of any news was not necessarily good.

In an attempt to steal market share, Tribune Co. announced that it would offer a tabloid version of its paper to commuters. But the news had little affect on the company's debt and market sources deemed the bonds unchanged.

Isle gets boost from tender offer

Isle of Capri - or as market players commonly call it "Isle of Debris" - saw its bonds gain as much as 7 points on the day after announcing a buyback.

A trader saw the 7% notes due 2014 quoted wide at 50.5 bid, 54.4 offered. He called the issue "pretty active," with about $11 million trading.

Another source pegged the bonds at 53 bid, 55 offered, up from the mid-40s, while another called the debt 6.5 points better at 53 bid.

The casino operator announced Tuesday that it had begun an offer to repurchase up to $140 million of the 7% notes, which has about $500 million principal amount outstanding. Under the terms of the deal, Isle will give bondholders $550 for every $1,000 tendered. Those who tender by the early deadline - 5 p.m. ET on Jan. 27 - will also receive a $30 early tender premium for every $1,000 exchanged.

The offer expires on Feb. 11.

Isle is not the first gaming company to participate in a tender offer. Harrah's Entertainment Inc. also recently completed a debt exchange in an effort to extend maturities.

In the rest of the sector, things were largely quiet, traders reported.

One trader saw Wynn Las Vegas LLC's 6 5/8% notes due 2014 stabilizing around 79 after hitting an intraday low of 77.5.

"Every day [Wynn] seems to be a little softer," he said.

Another source called MGM Mirage's 6 5/8% notes due 2015 down a deuce at 66 bid.

Neiman drops on PIK election

Luxury retailer Neiman Marcus said it plans to pay upcoming interest payments with more debt. As a result, the company's bonds dropped almost 4 points.

A trader said the name "continued to be active," its 9% notes due 2015 3.75 points weaker at 49 and its 10 3/8% notes due 2015 down 1.5 points to 50.5. The trader said $16 million and $13 million, respectively, changed hands.

At another desk, a trader placed the issues around 50, down from 52 bid, 53 offered previously. Yet another source saw the 9% notes decline more than 3 points to 49 bid.

But another source saw the bonds rebounding some from the day's lows, hitting around 47 before coming back to close around 50.

Neiman's term loan also traded down, with a trader quoting it at 68½ bid, 70½ offered, down from 70 bid, 72 offered on Monday.

"It was 68, 70 this morning. Down before PIK news even came out. Probably affected the bonds more," the trader added.

On Tuesday morning, Neiman Marcus revealed that it has elected to use the payment-in-kind feature of its outstanding 9%/9¾% senior notes due 2015 instead of making cash interest payments for the interest period starting on Jan. 15 and continuing through April 14.

The company said in an 8-K filed with the Securities and Exchange Commission that it made the choice to pay in-kind because of the "dislocation in the financial markets and the uncertainty as to when reasonable conditions will return."

The Dallas-based company also pointed out that it does have $576.3 million of unused borrowing available under its $600 million revolving credit facility, but current market conditions made its interest payment choice appropriate.

GM, Ford loans slip

In the autosphere, General Motors and Ford Motor were both trading weaker during market hours as the market in general felt heavier, according to traders.

One trader quoted GM's term loan at 47 bid, 52 offered and another trader saw the debt at 47 bid, 50 offered, down 2 points on the day.

Ford's term loan was quoted by both traders at 38 bid, 40 offered, down 1½ points on the day.

"General market was weak today. I don't think anything specific to autos but they keep burning through cash like nobody's business and in that space no new news is bad news and there hasn't been any new news," one trader remarked.

Among auto parts suppliers, Lear Corp.'s term loan seemed unfazed by a downgrade by Standard & Poor's on Tuesday as levels on the debt held pretty firm, according to a trader.

The term loan was quoted at 49 bid, 53 offered, unchanged on the day, the trader said.

Standard & Poor's cut Lear's corporate credit rating to B- from B and left the rating on CreditWatch with negative implications.

The rating agency said that the downgrade reflects the view that declining auto sales and production in North America and Europe during 2009 will lower Lear's profitability and cash flow generation and strain liquidity.

"Although Lear has strong positions in the auto seating market and has been expanding outside North America, its customer concentration is with automakers that are lowering production significantly," Standard & Poor's credit analyst Lawrence Orlowski, said in the rating release.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronics products.

Tribune bonds steady

Tribune's paper held steady as the Chicago newspaper announced it would offer a tabloid-size version of its broadsheet, a move aimed at stealing market share.

A trader quoted both the 5¼% notes due 2015 and the 4 7/8% notes due 2010 at 4.5 bid, 4.75 offered.

"The majority of [the issues] are wrapped around the 4 bid, 5 offered mark," he said.

The new version of the paper will be available beginning Monday, the company said. The idea to create the smaller-sized issue came as commuters wanted a more convenient publication, similar to the Chicago Sun-Times.

"Many news consumers have asked for a more convenient version of the paper that contains all of the same great news and information," Tony Hunter, top executive of Chicago Tribune Media Group, said in a statement.

Broad market under pressure

GMAC LLC's 5 7/8% notes due 2009 fell a point to 95.25, a trader said.

Freeport-McMoRan Copper & Gold Inc.'s paper remained active during the session and fell more than 3 points following news that Apex Silver had filed for bankruptcy protection.

A trader quoted the 8¼% notes due 2015 at 82.25, down 3.25 points, and the floating-rate notes due 2015 at 72, down 3.5 points.

First Data Corp.'s 9 7/8% notes due 2015 fell to a "recent low," according to a trader to around 62. The trader noted that the bonds had been trading around 70 at Christmas time.

NXP BV's 7 7/8% notes due 2014 also hit a low at 41 bid, 42 offered, the trader said. However, post-market close, the bonds dropped even more to trade at 40.5.

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