Strength dominates distressed debt; Dex pops amid industry woes; trader: Ahern may rise again

By Stephanie N. Rotondo

Portland, Ore., Jan. 6 - Distressed debt was "chugging a little higher," a market source said Thursday.

The bond market has been on the firm side since the first trading day of the year and players have expressed surprise at the amount of activity that has been going on.

"It was fairly active," the source said of Thursday dealings.

Dex One Corp. saw its bonds pop a little, despite a downgrade from Moody's Investors Service. The company has been struggling amid declining advertising revenues, particularly in its print advertising segment. But a new report indicates that, if the company can hold on and can reposition itself, online revenues might soon make up the slack.

Elsewhere, Ahern Rentals Inc. continued to be a bit stronger, though there hasn't been any news out. One source speculated that investors are rethinking their position on the company and that it could be "a homerun" if the general economy can find its footing.

Casino credits like Harrah's Entertainment Inc./Caesars Entertainment Inc. and MGM Resorts International Inc. were among the day's more active names. Traders deemed the debt steady to just slightly better on the day.

Dex up despite industry woes

Dex One debt was "up a couple," according to a trader, even as Moody's Investors Service lowered its outlook to negative from stable.

The trader pegged the 12% notes due 2017 at 68 bid, 70 offered, up from 66 bid, 68 offered.

Another market source quoted the paper at 69 bid, 70 offered.

Moody's said the outlook change was "based on our concerns that the pace of decline in revenue and new orders - as indicated by the company's advertising sales, which is faster than we had anticipated - will persist despite a recovery in overall U.S. advertising spending," according to a statement.

The Cary, N.C.-based yellow pages publisher has seen some improvement in 2010 versus the fourth-quarter "trough" experienced in 2009. But the yellow pages arena in general is not stabilizing as much as other advertising venues - online advertising, for example - leaving Moody's to opine that "the magnitude of the structural challenges the directory industry faces is more severe than previously anticipated."

"The industry is just hated," said a market source.

However, Dex could potentially stage a comeback if it can build up its online presence.

According to a recent report put out by Simba Information, yellow pages publishers are experiencing a decline in print revenues, but online revenues gained 24.6% industry-wide during 2010. The report noted that the "green movement" and delivery capabilities were what was driving online revenues higher.

"The environmental movement has churned up massive difficulty for yellow page publishers," Simba said in a statement. "Seattle, one of the leading metro markets, faces new legislation requiring publishers to pay hefty fees, which will amount to close to three quarters of a million dollars."

Some companies are attempting to fight such ordinances, but court costs are also driving operations costs up.

"The top metro markets have always been the cash cows of the yellow pages world, topping $2 billion in early 2008 or 11.7% of total revenue; that was the high point for metro markets, as they look to settle around 10% of total revenue by 2012," David Goddard, senior analyst and lead author of the study, in the statement. "Online revenue is likely to offset the print decline in three to five years when the markets will become stable."

Still, it remains to be seen whether Dex and its peers can survive that long.

Source: Ahern a 'homerun'

A trader saw Ahern Rentals' 9¼% notes due 2013 moving up about half a point to three-quarters.

He placed the notes around 551/2.

Another source said he was seeing a 55 bid for paper.

"They are generally doing a lot better," he said of the bonds, which at one point hit a low-tick in the low-30s. "People are bidding them. Clearly, it's a GDP play on an improving economy and general construction.

"They can be a good business in normal times," he added. Still, he said some form of restructuring would probably be necessary. "But it could be a home run."

Ahern is a Las Vegas-based construction equipment rental company.

Harrah's, MGM active

In the gaming arena, Harrah's Entertainment - now known as Caesars Entertainment - and MGM International Resorts continued to be active, according to market sources.

One source deemed Harrah's/Caesars 10% notes due 2018 steady at 91 3/8. MGM's 6 5/8% notes due 2015 were also unchanged around 92.

But another source called both issues up fractionally, with Harrah's at 91½ bid and MGM at 92½ bid.

There was no fresh news out on either Las Vegas-based company.

Broad market remains firm

Among other distressed issues, Clear Channel Communications Inc.'s 11% notes due 2016 ended a point higher at 901/4, a trader said.

Another trader pegged the 10¾% notes due 2016 at 921/4, deeming that level "a touch stronger."

A trader also saw NewPage Corp.'s 10% notes due 2012 at 583/4, which he called unchanged on the day.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 were "active," a trader said at 36¾ bid, 37 offered.

And, OPTI Canada Inc.'s 7 7/8% and 8¼% notes due 2014 were seen unchanged around the 72 mark.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.