MGM Mirage debt stronger on earnings; Bon-Ton steady, Neiman improves following October sales

By Stephanie N. Rotondo

Portland, Ore., Nov. 5 - All eyes were focused on the equity markets Thursday, leaving little room for distressed debt investors.

"I think this was the lightest volume of the week," one trader said, estimating total high-yield volumes around $1.2 billion. Volume was about $1.4 billion on Monday.

"The stock market took center stage," the trader added. "About 90% of things that were active were at an 85 or higher dollar price."

But there was some movement in the distressed realm. MGM Mirage, for one, was among the day's most active traders, as the company put out its third-quarter report. The bonds traded up a few points, though they came off their highs by the end of the day. The term loan was also quoted stronger.

Meanwhile, Bon-Ton Stores Inc. and Neiman Marcus Group Inc. reported October sales. For the most part, the sector as a whole was higher, though Bon-Ton was largely unchanged.

MGM stronger after numbers

Las Vegas-based casino operator MGM Mirage reported its third-quarter earnings during the day's session, which resulted in its debt trading higher, according to traders.

In the bonds, a trader said, "Everything [MGM] was up a point or two," placing its 8½% notes due 2010 around 99.75, on $20 million traded.

The trader also saw about $20 million of the 6¾% notes due 2013 trading around 83.5, while the 10 3/8% notes due 2015 closed at 89.5 bid, 90 offered, also on $20 million traded.

At another desk, a trader said MGM "traded up a few points in the morning, but I think it came back in this afternoon."

The trader said the 6¾% notes due 2012 started around 83, moved up as high as 86, before coming back to end around 85.

He said it was a "similar story" with the rest of the structure. The 7 5/8% notes due 2017, for example, hit a high of 77 before closing at 75.5 bid, 76.5 offered. That compared with levels around 73.5 on Wednesday.

The 7½% notes due 2016 meanwhile ended at 76 bid, 77 offered.

MGM's term loan was also better in trading following the company's quarterly earnings announcement.

One trader had the term loan quoted at 90 bid, 91 offered, up about half a point on the day, and a second trader had the term loan quoted at 90.75 bid, 91.75 offered, up from 89.25 bid, 90.25 offered.

For the third quarter, MGM Mirage reported a net loss of $750 million, or $1.70 per share, compared with net income of $61 million, or $0.22 per share, in the prior year.

The company said that results were affected by non-cash impairment charges totaling $1.17 billion, or $1.72 loss per diluted share net of tax, including a pre-tax non-cash impairment charge of $956 million related to its investment in CityCenter and a pre-tax non-cash charge of $203 million related to impairment of CityCenter's residential real estate under development.

Revenues for the quarter were $1.53 billion, compared with $1.79 billion in the third quarter of 2008.

Property EBITDA was $415 million in the quarter, down 12$ from 2008, and EBITDA was negative $793 million, compared with positive $442 million last year.

"We continue to show sequential improvement in our operating results over the course of 2009," said Jim Murren, chairman and chief executive officer, in the earnings release. "Property EBITDA on a comparable basis increased from $379 million in the second quarter to $415 million in the third quarter with sequential improvement in our margins as well - 25% in the second quarter increasing to 27% in the third quarter.

"We continue to earn occupancy through our superior assets and focus on the customer, resulting in increased market share."

Also on Thursday, MGM Mirage revealed that it amended its senior credit facility on Wednesday to allow for the issuance of additional unsecured debt and equity.

Proceeds from the unsecured debt will be used to refinance certain existing debt so long as the maturity of the newly issued debt is not earlier than the maturity of the debt being refinanced or six months after the date the senior credit facility is set to mature.

In addition to the refinancing debt, the company can issue up to $1 billion of other unsecured debt, provided that 50% of the net cash proceeds over $250 million be used to permanently reduce outstanding credit facility balances.

With any equity offering, 50% of the net cash proceeds over $500 million must be applied to reduce outstanding bank debt.

At Sept. 30, the company had approximately $4.3 billion of borrowings outstanding under its credit facility with available borrowings of $1.4 billion. The company's cash balance was $897 million.

MGM Mirage is a Las Vegas-based gaming, hospitality and entertainment company.

Retailers moving higher

Retailers were largely higher across the board, according to market sources.

Bon-Ton Stores' bonds, however, were holding their ground, a trader said, as the company released its October sales results.

The trader said there were 82.5 bids on the 10¼% notes due 2014, which he called "kind of unchanged-ish." He noted that there was not any "real activity" in the name.

For the four weeks ending Oct. 31, the York, Pa.-based retailer saw its comparable store sales improve 3.1%. Total sales increased 2.5% to $224 million, versus $218.4 million in 2008.

For the third quarter - which also ended Oct. 31 - comparable store sales fell 2.6%. Total sales came to $703.9 million, a 2.9% decline from the year before.

Year-to-date comparable sales were also down, dropping 6.9% year-over-year. Total sales thus far this year hit $1.96 billion, compared to $2.09 billion in 2008.

Still, despite the quarterly and yearly declines, company management expressed some optimism.

"We are very pleased with October sales, which exceeded both our expectations for the month and last year's results," said Tony Buccina, vice chairman and president of merchandising, in a press release announcing the results. "We are encouraged by the sustained improvement in our sales trend, which began in August.

"We believe we are well positioned for the holiday shopping season," he added.

Bon-Ton ended the month with $246 million available under its revolving credit facility.

The company will release its third-quarter earnings on Nov. 19. A conference call is scheduled for 10 a.m. ET.

Elsewhere in the retail arena, Neiman Marcus Group's 10 3/8% notes due 2015 improved by 2 points to 89.5 bid, while Dillard's Inc.'s 7 1/8% notes due 2018 were likewise 2 points firmer at 81 bid.

Dallas-based Neiman also posted its monthly sales report, which showed comparable store sales falling 6.2%.

Total sales fell 4% to $274 million.

Neiman will report its first-quarter results on Dec. 9.

And Little Rock, Ark.-based Dillard's saw its total sales fall 11% to $1.31 billion.

Broad market stays steady

Among other credits in distressed territory, a trader said that among the bonds of the former TXU Corp., the 10¼% notes due 2015 of Texas Competitive Electric Holdings Co., LLC and the Energy Future Holdings Corp. 10 7/8% notes due 2017 were "somewhere right around 70.

"There's always activity in that name," he said, but said the bonds were pretty much unchanged on the day.

Tronox Worldwide LLC's 9½% notes due 2012 were mostly in a 62 to 63 range, going out around the 63ish level, but on "one trade of significance - that's it. It's been pretty quiet."

A trader saw Norske Skog Canada's 8 5/8% notes due 2011 - which trade under the name of Catalyst Paper Corp. - trading around 59 to 60, calling them "a little active," despite there not having been "that much trades today." He noted that the company's bonds "have tailed off this past week," from the 60s earlier on, to the high-50s.

A separate market source said the issue fell more than 8 points on Wednesday, to around the 58 mark, on brisk volume, after the company released third-quarter numbers showing a $19.8 million loss after special items.

Sara Rosenberg and Paul Deckelman contributed to this article.

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