Clear Channel gives up gains; Caesars debt slips on Fitch analysis; Mexican builders pressured

By Stephanie N. Rotondo

Phoenix, May 23 - The distressed debt market took a hit Thursday as the broader market was beset with weakness.

"The market definitely opened up weak and some stuff didn't rebound," a trader said.

Clear Channel Communications Inc., for instance, dropped a couple points on the day. The company's LBO bonds have been steadily climbing higher recently, helped in part by news of an exchange offer announced earlier this week.

Meanwhile, Caesars Entertainment Corp. was softer. The dip came as Fitch Ratings said the casino operator's new Caesars Growth Partners entity was bad for the operating company.

Clear Channel gives up gains

Clear Channel Communications' LBO debt saw its recent climb halted in Thursday trading.

A trader said the 10¾% and 11% toggle notes due 2016 were off "a couple points" at 99.

"They're just giving back gains," he said. "They have had a huge run-up recently."

Earlier in the week, the San Antonio-based multimedia company announced a tender offer for the LBO debt in exchange for 14% notes due 2021. There had been chatter of some sort of refinancing on the bonds for awhile, which had helped the notes climb higher.

Caesars takes a hit

Fitch Ratings said Thursday that Las Vegas-based Caesars' recent creation of Caesars Growth Partners was a negative move for the operating company.

As a result, the company's debt was down.

One market source called the 10% notes due 2018 off nearly 3 points at 62½ bid. Another trader also placed the debt around 621/2, which he deemed down a deuce.

Caesars recently unveiled its latest entity, Caesars Growth Partners, in which it intended to transfer certain unrestricted assets, including its online gaming platform. Fitch said the move was bad for the operating company, as it could stretch the parent company thin in the event of a default at the operating company.

Fitch also said the new enterprise would have a negative impact on the operating company's long-term credit profile, which would make it even harder for it to find funds in the event of a default.

Mexican homebuilders decline

Mexican homebuilders continued to feel the pain in Thursday trading, as investors speculate that Desarrolladora Homex SAB de CV could be the next one to enter some form of restructuring.

Homex's 7½% notes due 2015 fell to 37 bid, 38 offered, down from levels around 433/4. The paper hit a low of 36 5/8 before rebounding slightly.

The 9¾% notes due 2020 dropped to 38 from 40.

Among its struggling sector peers, Urbi Desarrollos Urbanos SAB de CV's 8½% notes due 2016 held in around 20. But Corporacion GEO SAB de CV's bonds were down 3 to 4 points, the 9½% notes due 2020 at 39¾ bid, 40¼ offered and the 8 7/8% notes due 2020 at 40 versus previous levels of 433/4.

Homex said on Wednesday that recent rating downgrades combined with lawsuits over derivatives contracts resulted in a default on its peso-denominated bonds. Many believe a dollar-bond default is just around the corner, as the company has a coupon coming due on June 11.

Housing report helps Fannie, Freddie

Fannie Mae and Freddie Mac preferreds were flying Thursday on the back of a positive housing report from the Commerce Department.

Freddie's 8.375% fixed-to-floating noncumulative perpetual preferreds (OTCBB: FMCKJ) rose 74 cents, or 14.51%, to $5.84. Fannie's 8.25% series S fixed-to-floating noncumulative preferreds (OTCBB: FNMAS) improved by 52 cents, or 10.28%, ending at $5.58.

And, Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) increased by 70 cents, or 11.29%, to $6.90.

In the report released Thursday, the Commerce Department said new single-family home sales rose 2.3% during the month of April, bringing the total annual pace of sales to 454,000 units. The median sales price jumped 14.9% to $271,000.

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