Trump jumps on casino sale; Symbion prices; new Moog bonds trade up; funds see $26 million inflow

By Paul Deckelman and Paul A. Harris

New York, May 29 - Trump Entertainment Resorts Holdings LP's bonds soared on Thursday on the news that the embattled Atlantic City, N.J.-based gaming company has found a buyer for one of its three casino-resorts there. The company said that it might reduce some of its debt, presumably using part of all of the $316 million sale proceeds.

Elsewhere, Standard Pacific Corp.'s bonds were seen higher for a third consecutive session, continuing to ride the momentum generated by the announcement earlier in the week that the problem-plagued Irvine, Calif.-based homebuilder had lined up a sizable equity infusion.

Countrywide Financial Corp.'s bonds were better, investors apparently heartened by the company's setting a date for a shareholder vote on its planned acquisition by Bank of America; that action was seen as a sign that the $4 billion buyout deal will go through despite Countrywide's recent losses and the eroded value of its mortgage assets.

In the primary market, Symbion Inc. priced an issue of seven-year PIK toggle notes, though at a steep discount to par. The new bonds came too late in the session for any aftermarket activity. Among Wednesday's pricings, Moog Inc.'s new bonds were seen to have done well in secondary, rising about a point. But Cablevision Systems Corp.'s new half-billion-dollar issue was seen anchored around its par issue price.

Funds up by $26 million on week

And as trading was wrapping up for the session, market participants familiar with the high yield mutual fund flows statistics generated by AMG Data Services of Arcata, Calif., said that in the week ended Wednesday, $25.6 million more came into those funds than left them. It was the ninth consecutive inflow, following the cash infusion of $191 million seen in the previous week, ended May 21, although the inflow was the smallest seen since that winning streak began in early April. Small or not, it was still the first time that there have been nine or more consecutive weekly inflows since Jan. 29, 2004.

Over that nine-week stretch, inflows have totaled $2.681 billion, according to a Prospect News analysis of the figures, far outweighing the $409.6 million of net outflows which had been seen over the three weeks immediately before that.

The results over the past nine weeks have represented a sharp break away from the negative fund-flow trend which had dominated earlier in the year. With 22 weeks now in the books, inflows - after trailing outflows pretty much all year - have just recently pulled ahead, with 13 inflows and nine outflows seen since the start of 2008, according to the Prospect News analysis.

That sustained recent inflow surge also erased what previously had been a sizable year-to-date outflow totaling $1.067 billion as of the week ended Wednesday March 26, the last week in which a net outflow had been seen.

According to market sources, net inflows from the weekly-reporting funds since the start of the year, excluding distributions but including previous adjustments and revisions, are now estimated at $1.613 billion, up from $1.588 billion the previous week.

The market sources meantime again saw no change whatsoever this week in the total assets of funds which report on a monthly, rather than a weekly basis; for the year-to-date, net inflows to such funds continued to total $1.578 billion.

On an aggregate basis - consolidating the year-to-date net inflows of the weekly-reporting funds and the monthly reporters - high yield funds have seen nearly $3.181 billion more come into them than leave them so far this year.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, more recently, hedge funds.

Inflow leaves trader 'surprised'

A trader said that he was "surprised" to see the inflow - however modest - since he "would have expected to see an outflow by market timers, since our market has certainly done an about-face over the last three to five trading days."

He said the fact that people "weren't heading to the hills here with what I would say is our first obstacle in our upward movement of the last four to six weeks" was "impressive." Fueled by the sudden influx of cash over the last two months, junk, he said, "has been on a pretty good roll, both in the primary and in the secondary," although it has struggled for a few sessions, so the lack of an outflow to confirm that reversal was "surprising."

Symbion clears calendar

The high-yield forward calendar emptied on Thursday as terms emerged on the only deal in the market.

Symbion Inc. priced $179.93 million face amount of 11% senior PIK toggle notes due Aug. 1, 2015 (Caa1/CCC+) at 75.00 to yield 17.16%, in a deal that generated approximately $135 million of proceeds.

Merrill Lynch & Co. and Banc of America Securities were joint bookrunners for the bridge refinancing related to the LBO of the company by Crestview Partners LP.

Symbion initially planned to raise the cash in 2007, but withdrew its notes offer due to the sell off in the credit markets.

Moog moves; Cablevision is static

Traders said the new Symbion 11% PIK toggle notes due 2015 priced too late in the day for the smallish deal to have any kind of secondary market impact.

Looking at Wednesday's new issues, a trader said that they were "a big focus" in the market in the morning, when they freed for trading. He saw that the new Moog 7¼% notes due 2018 traded as high as 101 bid before heading home at 100.75 bid, 101.25 offered, versus their par issue price. Another trader said the Moog bonds "did OK," trading around the 101 level. "They hung in there."

Meantime, the new Cablevision 8½% notes due 2015 traded into a 100.5 bid initially, a trader said, before coming down from that level to finish around par to 100.25. Another trader saw the bonds bid at par to 100.125. Yet another said that the new bonds "didn't go anywhere" and was stuck around that same par-100.125 level.

That trader said that Moog's move notwithstanding, "the [new] issues aren't as robust as they used to be. The buyers aren't as rambunctious as they were a couple of weeks ago. The caution flag is up again, a little bit."

While the recently improved market still "has a foundation," he said, the new deals "aren't going to go up a point or two points right now. It's still a buyers' market. A lot of [the accounts] are flying the caution flag, a lot are still hoarding cash and are trying to get out of some weak sisters."

He said that he knows the latter assertion to be a fact because at his shop, "we're being asked to bid on a lot of names we haven't seen for a while. If the bonds are up a couple of points, [the investors] are just getting out."

Market indicators trend lower

Back among the established issues with no new-deal links, a trader said, the widely followed CDX junk bond performance index was up maybe 1/8 point at 96 3/8 bid, 96 7/8 offered. The KDP High Yield Daily Index meantime declined by 13 bps to 75.66 while its yield widened by 4 bps to 9.30%.

In the broader market, advancing issues continued to trail decliners by about a five-to-four margin. Activity, represented by dollar volume levels, was up some 28% from Wednesday's levels.

Trump jumps on casino-hotel sale

Trump Entertainment Resorts' 8½% notes due 2015 were easily the most active issue of the session, with over $150 million of the bonds seen having changed hands by mid-afternoon, nearly four times the volume level of the next busiest issue, spurred on by the news that it will sell its Trump Marina hotel and casino for $316 million. One trader estimated that "hundreds of millions" of dollars of the $1.25 billion issue were trading around.

The bonds - which had finished around 59.375 on Wednesday, opened a little above that level on Thursday, and then zoomed as high as above 69 bid in busy round-lot trading, before coming off that peak to finish around 67. Most large-sized trades were in a 66-67 context, a market source said, with only smaller odd-lot pieces trading much higher than that.

A trader, who saw the bonds going out at 66.75 bid, 67.25 offered, which he called a pickup of 6 to 7 points on the day, said that the paper had in fact traded as high as a 68.5-69 range "and then they came back [to around the closing levels] - but don't forget: the day before, they traded as low as 59.5-60."

Trump's Nasdaq-traded shares meantime climbed 67 cents, or 23.18%, to $3.56, on volume of 1.55 million, nearly seven times the norm. At one point, the stock was up as much as 26% from Wednesday's close at $2.89.

Trump adds to 'flexibility'

Trump and the prospective buyer, Coastal Development LLC, jointly announced the sale Thursday morning. The 27-story, 728-room hotel and casino property is located on 14 acres in the city's Marina District, not far from Boyd Gaming Inc. and MGM Mirage's newer, larger and glitzier Borgata casino-resort joint venture. Besides the $316 million price tag on the deal, the two companies also agreed to end prior, unrelated litigation, with prejudice, upon the closing of the transaction.

In announcing the transaction, Trump's chief executive officer, Mark Juliano, said that the deal "will provide us with additional financial flexibility to effectively master plan the future path of our company in the midst of an overall transformation which has already been marked by many successes." He further said that the company is "closely evaluating the variety of options before us to create value for our shareholders, including additional development in Atlantic City, reducing the company's debt, and potential projects to diversify our interests outside of Atlantic City."

Debt-laden Trump - which restructured under Chapter 11 about two years ago - has been seeking one or more buyers for assets, or even for the entire company, for at least the better part of a year.

Besides its Marina property, Trump - one of the bigger gaming operators in the city - has two other casino-resorts there, the Trump Plaza and its larger Trump Taj Mahal, both located on the celebrated oceanfront Boardwalk, several miles from the Marina District.

Standard Pacific still stands out

Traders generally saw Standard Pacific's bonds continuing to push up, still getting a boost from Tuesday's announcement of its big equity investment by MatlinPatterson Global Advisors LLC. A trader saw its 7% notes due 2015 get as good as 80, ending in a 78-80 context, although there was "not a lot of trading".

He saw "a lot of trading" in the 6½% notes due 2010, in a 90-92 range, with the bonds going out at 91 bid, 92 offered, up from their previous level around 88-89. There was "good size trading" in the credit.

He also saw the company's 6¼% notes due 2014 ending at 81 bid.

Another said Standard Pacific "continued to show strength," quoting its 9¼% notes due 2012 at 79 bid, 80 offered, up 2 points.

Another market source called its 7¾% notes due 2013 up almost 4 points to just below the 86 level.

But another trader opined that it looked to him like Standard Pacific's bonds had "leveled off today; they were actually off ¼ point in very light trading."

He said that there had been "a lot of short-covering" in the company's bonds, and wondered aloud "how much [of the rise this week] is for real [on the equity-infusion news] and how much was just technical."

Standard Pacific announced on Tuesday that MatlinPatterson had agreed to invest $530 million in the homebuilder. MatlinPatterson's affiliates will receive $381 million in preferred stock convertible into 125 million shares of common stock at a price of $3.05 per share. MatlinPatterson will also exchange about $128.5 million of senior and subordinated debt it holds for warrants to purchase additional preferred stock that is convertible to 89.4 million shares at a price of $4.10 per share. Further, Standard Pacific is issuing an additional 50 million shares of common stock at a price of $3.05 per share to raise $152.5 million more. MatlinPatterson will backstop the deal, purchasing any unsold shares. The New York-based private equity firm will also name three members to an expanded 11-member Standard Pacific board of directors.

Despite the favorable news about the cash infusion, the trader said, "a lot of people feel that [the ongoing credit crunch that has hurt homebuilders like Standard Pacific] is far from over. When we speak to institutional buyers, they'd still rather be in larger, more liquid names."

Elsewhere in the homebuilding sector, Hovnanian Enterprises Inc.'s 6 3/8% notes due 2014 were up 2 points, around 70 bid, several traders said.

Countrywide moves up on meeting date

Calabasas, Calif.-based mortgage lender Countrywide Financial 's 6¼% notes due 2016 were seen having pushed as high as 88 bid from prior levels around 85.5 in active large block trading, although a source saw the bonds come off those highs and fall back to 86, up about ½ point to a point. However, after trading all day in an 85-86 context, there were several sizable trades as low as 80 late in the session.

The company's 4% notes due 2011 were meantime seen up more than 4 points on the session, going out just below 91. Trading in both issues was seen as quite active.

The bonds, and Countrywide's New York Stock Exchange-traded shares, which were up 41 cents, or 8.23% to $5.39, were seen by market observers to have gotten a boost from the announcement Wednesday that its shareholders will vote on the proposed $4 billion buyout of the company by Bank of America in a special meeting on June 25 at the company's headquarters. Shareholders of record as of April 28 will be eligible to vote.

The act of setting a date for the vote appears to calm investor fears - at least for now - that B of A may decide to pull out of the deal, or at least try to renegotiate the purchase terms, based on the mounting losses which Countrywide has racked up and the deterioration in the value of its mortgage assets in the midst of the ongoing credit crunch. The giant bank has reiterated a number of times that despite those negatives it was still determined to acquire Countrywide on the same terms that it announced in January.

However, B of A did reverse itself in another matter, announcing on Wednesday that Countrywide president and chief operating officer David Sambol will not be in charge of the combined companies' consolidated mortgage business after all. Sambol has come under fire from Countrywide critics, including politicians and advocacy groups, who see him as the poster boy for the kind of aggressive sales of risky mortgages that are blamed in large part for the industry's problems.

News that a voting date had been set and the controversial executive would be jettisoned helped to push Countrywide's debt-protection costs down to about the 230 bps level on Thursday, versus 295 bps at the close Wednesday and about 100 bps wider than that before the news of Sambol's upcoming exit.

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