MagnaChip numbers weigh on debt; Isle of Capri dealt a good hand; SemGroup slows down

By Stephanie N. Rotondo

Portland, Ore., July 21 - Coming off of a flurry of activity late last week, distressed bond traders called Monday's action mixed, at best.

"If you held a gun to my head, I really couldn't tell you if the market was better or worse," a trader said. "So I'll say unchanged."

The trader said things tried to get going early in the session, but there was not enough momentum to keep the ball rolling.

But MagnaChip Semiconductor Ltd.'s ball was rolling downward, regardless of what the broad market was doing. The Korean chip maker released its second-quarter numbers on Friday and come Monday the bonds fell at least 6 points. However, the rest of the tech sector seemed to hold up, like Freescale Semiconductor Inc. Freescale will report earnings on Tuesday.

Meanwhile, Isle of Capri Casinos' debt continued to drive up, gaining as much as 3 points on the day. There has been no news out on the gaming operator to explain the gains incurred since Friday. But the gaming sector as a whole - which had been beaten down of late - seems to have its lucky deck in hand.

Trading in SemGroup LP mellowed out Monday, after high levels of activity both Thursday and Friday sent the company's debt spiraling downward. But the lull in activity gave bank debt traders a chance to see through the haze and accurately quote the term loan, according to one source. On the other hand, corporate debt traders reported seeing absolutely nothing in the bonds.

MagnaChip numbers weigh on debt

Despite better revenue and decreased operating expenses, MagnaChip Semiconductor's net loss increased for the second quarter of the year, putting pressure on the chip maker's debt.

One market source said the 8% notes due 2014 fell 6 points from Friday's session - when the financial information was first released - to 33 bid.

But another trader said he had not seen the bonds during Monday trading, though he added that the senior bonds had fallen 4 points to 33 on Friday.

Another trader called the 8% notes due 2014 down 10 points at 30 bid, while its 6 7/8% notes and floating rate notes, each due 2011, were each down 14 points to 53.

The Seoul, South Korea-based company reported a net loss of 59.6 million for the quarter ending June 29. That compared to a net loss of $45.3 million the year before. The company attributed the decline to a foreign currency loss of $31.1 million.

However, revenue for the quarter increased to $194.7 million from $194.1 million in 2007. Operating expenses were $58.5 million, or 30.1% of revenue, versus $70.1 million, or 36.1% of revenue, in the same period of 2007.

"We continued to make progress in the second quarter of 2008. In spite of the tough environment, we recorded a gross margin of over 25%, and we remain focused on improving profitability as a corporate priority. Though our markets continue to be slower than expected, we believe our new products and customer relationships position us well for performance improvement throughout 2008," Robert Krakauer, the company's president and chief financial officer, said in a press release.

During a conference call held Friday, Krakauer said: "Microeconomic environment continues to have many uncertainties about consumer spending and in market demand. And accordingly, our customers have continued to tighten their inventory levels. This has been most pronounced in our wireless business.

"We forecast a reduced operating loss from the third quarter and a return to operating profits in the fourth quarter with an operating margin between 3.5% and 5%. We have obtained operating lease commitments and planned to enter into operating leases on approximately $60 million worth of equipments in the third quarter," he told investors and other market participants.

Elsewhere in the tech sector, a trader saw Freescale Semiconductor's bonds "open offered where they were on Friday," though bids seemed lower. He pegged the 8 7/8% notes due 2014 at 83 bid, 83.5 offered.

Meanwhile, NXP Semiconductors' 9½% notes due 2015 opened lower at 83.5 offered, down from Friday levels of 83 bid, 83.75 offered. But by the end of the day, the bonds got as good as 84, which the trader called "unchanged to slightly better."

Both Freescale and NXP will report their second-quarter earnings on Tuesday. Freescale will hold a conference call at 5 p.m. ET and NXP's call will take place at 9 a.m. ET.

Isle of Capri drives up

As any gambler knows, a roll of the dice can mean the difference between a steak dinner or a visit to a loan shark. After taking a decent-sized beating, casinos' luck has turned to the former.

The gaming sector at large turned positive on Friday, following several straight sessions of losses. Come Monday, Isle of Capri remained one of the big winners. One trader saw its 7% notes due 2014 "up a couple points." On Friday, the bonds closed at 68.5 bid, 69.5 offered, opening Monday at 70 bid, 70.5 offered and then ending at 72 bid, 72.5 offered.

The trader said he had not seen any news out to propel the debt upward.

At another desk, a source saw the bonds at 72.75 bid, up 3 points.

Meanwhile, a trader called Trump Entertainment Resorts Inc.'s 8½% notes due 2015 a point better at 54.

Station Casinos' 6% notes due 2012 inched higher to 78.5 bid, while Harrah's Entertainment's 5¾% notes due 2017 lost nearly a point to 44.75 bid.

SemGroup loan clears up, bonds stagnant

There was "not much of anything" going on in SemGroup's bonds Monday, a trader said, following the debt's 60-plus point decline toward the end of last week.

The term loan B levels became clearer, a trader said, with quotes seen in the area of 55 bid, 59 offered.

When asked where the debt went out at the end of last week, the trader responded, "Levels weren't real on Friday. Nobody knew where this stuff was. Thursday it was really unclear [too]. Last real levels were Wednesday when it was in the 70s."

Another trader placed the company's corporate debt - the 8¾% notes due 2015 - around 15 bid, 20 offered, the same as Friday.

Another source saw the notes holding steady around the same 21 bid, 23 offered context, trading flat, at which they were seen on Friday

The debt began tumbling Thursday, with the bonds moving from around 90 to around 40 by the close of business. Market sources were unable to explain the dive, though some noted they had heard there was a lender call on Tuesday.

The contents of that call remained uncertain until late Thursday, when the company said its parent company was facing liquidity issues that could lead to a Chapter 11 filing. On Friday, the company's debt continued to deteriorate.

The company has been holding a bunch of private lender calls lately with the most recent one taking place late Monday afternoon, and a long one that took place on Friday. The content of these calls is unavailable.

On Monday, the company's subsidiary, SemGroup Energy Partners LP announced that holders of a secured loan to SemGroup Holdings LP have acted on their rights under their loan documents to vote as the sole members of SemGroup Energy Partners GP LLC.

The loan holders, Manchester Securities and Alerian Capital Management, were able to exercise this right as a result of an event of default taking place under the Holdings' credit facility.

As part of assuming controlling ownership, Manchester Securities and Alerian Capital Management have reconstituted a five-member board of directors at SemGroup Energy Partners' general partner to include two representatives from Manchester, one from Alerian, and two existing independent directors.

"These actions are necessary to protect SGLP [SemGroup Energy Partners LP] and allow SGLP to focus on its future and best interests. Despite the challenges faced by SGLP given the uncertainty at its main customer, Semgroup LP, the board and management are enthusiastic about the company's strategic assets and future in a robust energy market," Kevin Foxx, chief executive officer, said in a news release.

The change-of-control of the general partner resulted in an event of default under the SemGroup Energy Partners amended and restated credit facility, meaning that lenders may, among other remedies, declare all outstanding amounts under the facility immediately due and payable.

SemGroup Energy Partners said that it is in productive dialogue with the agent for the lenders regarding this matter.

SemGroup is a Tulsa, Okla.-based oil transportation and storage services company.

Broad market better

Charter Communications Inc.'s 11% notes due 2015 were "up slightly" around 75.

Six Flags Inc.'s 9 5/8% notes due 2014 went "up a bit in the morning, then went silent," a trader said. He pegged the issue in the 51-52 range.

Idearc Inc.'s 8% notes due 2016 firmed to 60 bid, 61 offered, a trader said, while at another desk, a source saw the bonds at 60.5, but said that was only marginally higher.

Swift Transportation Co. Inc. - whose 12½% notes due 2017 shot up over several sessions late last week - were up another 1½ points to 40 bid.

In the autosphere, a trader saw General Motors Corp.'s 8 3/8% benchmark bonds due 2033 unchanged at 58 bid, 59 offered, while GMAC LLC's 8% bonds due 2031 gained 2 points to 65 bid.

Another trader also called the GM bonds unchanged at 57.5 bid, 58.5 offered, while Ford Motor Co.'s 7.45% bonds due 2031 were a point better at 57.5 bid, 58.5 offered.

However, another trader quoted the GM benchmarks up more than a point on the day at 58, and saw the Fords get as good as 58.75 before ending at 57.5, still up nearly 2 points.

Sara Rosenberg and Paul Deckelman contributed to this article.

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