Boyd bonds mixed on earnings, MGM active; United Rentals' debt steady ahead of numbers; VeraSun hit

By Stephanie N. Rotondo

Portland, Ore., Oct. 28 - Boyd Gaming Corp. released its quarterly results Tuesday and the numbers resulted in a mixed bag.

The weaker-than-expected profit hurt some issues of the company's bonds, but others ended the day higher. Also in the sector, MGM Mirage's bonds were actively quoted, if not traded, ahead of its earnings release Wednesday.

Meanwhile, United Rentals Inc.'s bonds essentially held their ground during Tuesday's session. Traders called the debt slightly better to sideways, but definitely up from recent lows as investors prepared to see how the company fared in the last quarter.

VeraSun Energy's Corp.'s bonds took a hit in trading. Furthermore, some sources said at least one issue was trading flat, even though the company has not filed for Chapter 11 protections.

But even as the stock market rebounded significantly, distressed bond traders said bid lists and redemptions were still weighing on the market.

"Technicals are driving our market," said one market source.

"The market overall is better bid, but it's not running away with itself...yet," a trader said.

Still, "it was not a very inspiring day," he added. "It was all about equities."

Boyd mixed, MGM active

Boyd Gaming released its quarterly earnings Tuesday and the results came in weaker than expected. Still, the gaming operator's debt finished the day mixed.

A trader said the 6¾% notes due 2014 were "a little lower, bracketing 60," compared with levels around 62 previously. But the 7¾% notes due 2012 gained about a point to the 78 context. Another source placed that issue at 78.5 bid, up nearly 2 points.

Boyd's third-quarter income dropped to $8.7 million from $31.9 million the year before. Revenue decreased 13% to $426.5 million, just more than $10 million below analysts' expectations.

Adjusted EBITDA fell 25.5% to $45.7 million in the Las Vegas area, while in the Midwest and South, EBITDA dropped to $39.1 million from $56.4 million. In Atlantic City, Boyd's Borgata joint venture with MGM saw its EBITDA fall 18% to $59.8 million.

After the numbers, Standard & Poor's placed the company's rating on Creditwatch negative.

Boyd, like other casino operators, has seen its numbers decline amid an economic crisis that is keeping some would-be gamblers at home. The hurricane season also placed pressure on the company, which owns four casinos in Louisiana and Mississippi.

During the company's conference call, management told investors that it would halt its Las Vegas Echelon project due to problems with securing financing. The company said the delay would last at least nine months.

"Given what has happened in the market since we announced the suspension of our Echelon project on Aug. 1, it is unlikely we will resume construction in 2009," chief executive Keith Smith said during the call.

In the rest of the sector, MGM's bonds traded rather actively ahead of the earnings release Wednesday.

One trader said the bonds were "still at the lows," its 7 5/8% notes due 2017 and its 7½% notes due 2016 at 59 bid, 60 offered and its 8 3/8% notes due 2011 at 58 bid, 59 offered.

Another trader said the activity in the name was due to a debt-for-debt swap the company is planning. Under the proposal, holders of 2009 paper could exchange their debt for new existing bank debt paper. He called the 6½% notes due 2009 up 5 points in the mid-80s.

Meanwhile, Wynn Las Vegas LLC, which will report on Thursday, saw its 6 5/8% notes due 2014 trading actively at its lows around 70.5 bid, 71.5 offered. Harrah's Entertainment LLC's 5¾% notes due 2017 inched up to 16 bid.

URI steady ahead of earnings

United Rentals' debt was "up from recent lows but kind of sideways" on the day, a trader said.

The trader quoted the 6½% notes due 2012 at 68 bid, 69 offered and the 7¾% notes due 2013 at 59 bid, 61.5 offered. Another trader placed the 6½% notes around 68.5, which he called up half a point.

The first trader said that the construction equipment rental company's bonds had been weaker last week, when the entire market was "throwing up." But, he added, many of the names that got hammered during that time have pared their losses.

United Rentals will hold a conference call at 11 a.m. on Wednesday to discuss its quarterly results.

Among other rental companies, Rental Service Corp.'s 9½% notes due 2014 fell about a point to the 57.5 level.

VeraSun takes hit

VeraSun Energy's bonds were not looking good this morning, a trader said, with the 9 3/8% notes due 2017 at 10.5 bid.

The trader said that it was just one $1 million trade and "the bid was flat," or trading without the accrued interest, "and the offer was with [interest] this morning. It isn't marked as flat, or anything, but I'm going to assume it is flat," the trader said.

The senior paper, the 9 7/8% notes due 2012, were meantime trading around 39 bid, 40 offered, versus levels around 43 on Monday, and last week's levels not far from 50. It was the trader's assumption that the senior bonds were trading with the interest.

A second trader also saw the 9 3/8% notes at 10.5, unchanged from recent levels, and said that while he had not heard specifically that the bonds were trading flat, and "they haven't filed [for bankruptcy] yet - but of course, if both sides agree, they can trade flat." He noted that while the bonds were still showing a yield on the Bloomberg terminals, "that's only because per the company, they're still trading plus accrued. When you have two sides of a trade agreeing to trade without accrued, it's fine."

Another trader said that he "did not see much trading," with the 9 3/8% notes at 10.5, noting that trading in the company's shares had been halted on Monday on the sub-penny rule when they dipped below $1 in reaction to news that VeraSun had shut one of its plants, but he said that he did see the shares again trading Tuesday; in fact, they zoomed 33 cents, or nearly 46% Tuesday to close at $1.05, likely on investor short-covering of the beleaguered name.

Broad market mixed

Hertz Corp.'s 8 7/8% notes due 2014 saw "a fair amount of trading" at 72 bid, 73 offered, a trader said. He called that market down a touch as the company announced global price increases.

Meanwhile, Washington Mutual Inc.'s subordinated holding company debt rallied to 20.5 bid, 21 offered.

A trader said there was "not much in retailers" as consumer confidence fell to an all-time low. He saw Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 at 37 bid, 38 offered, "close to their lows."

In the autosphere, both General Motors Corp. and Ford Motor Co. were up 2 to 3 points. GM's 7 1/8% notes due 2013 moved up to 33.5 bid, while Ford's 7% notes due 2013 gained nearly 3 points to 49.75 bid. Ford's upward drive came despite news that Tracinda had sold off more of its stake in the carmaker.

Paul Deckelman contributed to this article.

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