NII Holdings debt remains weak as investors wait for bankruptcy; Caesars bonds under pressure

By Stephanie N. Rotondo

Phoenix, Aug. 13 – NII Holdings Inc. remained a notable name in the distressed debt market on Wednesday, as investors continued to react to the company’s earnings announcement.

The release came out late Monday and in it the company warned that its liquidity was not sufficient to cover its debt obligations – $119 million comes due Friday – and that a bankruptcy filing was likely. On Tuesday, the bonds dropped as much as a dozen points and were weaker still come Wednesday.

Meanwhile, Caesars Entertainment Corp. – another company that put out earnings on Monday – was “getting hit,” a trader said, as investors grew concerned about the state of Atlantic City and singer Celine Dion canceled her Las Vegas shows.

On Tuesday, Caesars announced a refinancing of nearly $550 million of debt.

Still, the distressed space finished the session with a mostly firm tone, following the trend of the broader markets.

The coal space was seen benefiting from the positive tone. Walter Energy Inc.’s 8½% notes due 2021 ended a point better at 50, while the 9 7/8% notes due 2020 put on 2 points to end around 55¼, a trader said.

Arch Coal Inc.’s 7% notes due 2019 and 7¼% notes due 2021 were both a quarter-point higher, the trader added, seeing the notes at 70¼ and 65¾, respectively.

In Alpha Natural Resources Inc. paper, the 6¼% notes due 2021 rose half a point to 67½, as the 9% notes due 2019 gained a like amount to 69¼.

NII’s downhill slide

A trader said he believed NII Holdings’ debt “went flat” on Wednesday, given the high likelihood that a bankruptcy filing is imminent.

In fact, creditor Aurelius Capital Management is claiming the company is already in default as it will likely not make a $119 million coupon payment on Friday.

The trader saw the 7 7/8% notes due 2019 falling just over half a point to 67 1/8, but the 7 5/8% notes due 2021 declined 6½ points to 13.

The 10% notes due 2016 ended off 3 points at 17½. The 11 3/8% notes due 2019 managed to end slightly higher at 67½, though the trader noted that just a couple trades occurred during the session.

The company noted in its earnings release Monday that its declining financial performance combined with the likelihood that it will not be able to meet its debt obligations make a bankruptcy filing foreseeable in the near future. In a 10-Q filed with the Securities and Exchange Commission, the company said that it has been speaking with interested parties in regard to acquiring some or all of its assets.

The company has also engaged in talks with bondholders.

As of June 30, NII Holdings was not in compliance with several of its indentures, including on Nextel Brazil’s local bank loans.

On Wednesday, Standard & Poor’s dropped its credit rating on the company to CC from CCC. That followed a downgrade from Moody’s Investors Service on Tuesday.

Caesars ends lower

Though Caesars Entertainment is trying to clean up its balance sheet, there continues to be many concerns surrounding the Las Vegas-based casino operator.

Late last week, Revel Hotel and Casino in Atlantic City said it would be shutting its doors by Sept. 10, after just two years in business – a portion of that spent in bankruptcy court. Caesars also owns property at the Jersey Shore but the area as a whole has been on a downhill slide – which could put more pressure on Caesars’ bottom line.

Also, Celine Dion, who has been selling out shows at the Colosseum at Caesars Palace for the last three years, has canceled the remainder of her residency on the Strip in order to care for her cancer-stricken husband. Dion has been a huge draw for visitors, so investors might be wondering how the company will fill that void.

Whatever the reason, a trader said Caesars’ debt was “getting hit” in midweek trading, seeing the 9% notes due 2020 down “2 and change points” at 81. The 10¾% notes due 2016 fell a deuce to 48 and the 11¼% notes due 2017 dropped 1½ points to 85.

On Tuesday, Caesars said it had inked a refinancing deal aimed at reducing the debt load at the operating company by nearly $550 million. That news came on the heels of the company’s earnings release on Monday, which showed a wider loss year over year.

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