Hertz notes improve despite weak numbers; GM structure mixed; MGM Mirage bonds moving higher

By Stephanie N. Rotondo

Portland, Ore., April 29 - Hertz Global Holdings Inc.'s paper closed higher Wednesday, despite posting a wider first quarter loss.

Traders saw the debt gaining at least 2 points on the day. Company management said that it was continuing to look for ways to improve profits, in addition to the job cuts already in place.

Meanwhile, General Motors Corp.'s bonds were relatively stable, but its bank debt continues to gain momentum. The structure had begun to move up on Monday, when the company announced a debt-for-equity swap.

MGM Mirage bonds were seen firmer, as one market player said owning the company's assets would be "a good thing." Late in the day, the company also announced that it had inked a new agreement with Dubai World and a source speculated that the news would result in more gains on Thursday.

Hertz improves despite numbers

Car rental company Hertz saw its bonds improve at least 2 to 3 points despite posting a wider loss for the first quarter of 2009.

A trader said about $21 million of the 8 7/8% notes due 2014 traded at 77.25, a gain of nearly 3 points. Another trader deemed the paper better by more than 3 points at 77 bid, 78 offered.

For the quarter ending March 31, Hertz posted a loss of $163.5 million, or 51 cents per share. That compared with a loss of $57.7 million, or 18 cents per share, the year before.

Revenue dropped 23% to $1.6 billion. Sales were affected by turmoil in the economy, which has led to higher unemployment and declining home values.

"We continue to generate strong cash flow and maintain significant liquidity in the midst of the global recession," said Mark P. Frissora, the Park Ridge, N.J.-based company's chairman and chief executive officer, in a statement. "Additionally, we are improving profit retention sequentially, mitigating the effect of declining revenues on adjusted and GAAP earnings... We are maintaining our focus on yield-managing high-quality revenue with tighter fleets to optimize cash flow and liquidity."

GM structure mixed

General Motors' bonds closed the day either down some or unchanged, depending on whom you asked, but its bank debt continued to firm.

A trader called the 7.7% notes due 2016 down half a point at 9 1/8. That was also the level at which the 7.2% note due 2011 closed, though those were weaker by nearly a point.

The trader also saw the benchmark 8 3/8% notes due 2033 at 8.5, nearly 2 points softer.

Another trader, however, called the paper unchanged at 8.25 bid, 9.25 offered.

At another desk, a trader quoted the Detroit carmaker's debt generically at 9.5 bid, 11 offered. Specifically, he placed the 7.2% notes at that level, deeming it unchanged on the day.

In the bank debt, the term loan was quoted at 64 bid, 65 offered, up from 63½ bid, 64½ offered, a trader said. Last Friday, the debt was quoted at 58 bid, 59 offered.

The company's revolver was quoted at 54½ bid, 56½ offered, up from 53 bid, 55 offered, the trader added. On Friday, this tranche had been seen at 47½ bid, 49½ offered.

General Motors' bank debt has been going strong since Monday when the company announced that it is commencing offerings to exchange $27 billion of its unsecured public notes for equity. Bondholders would receive 225 new shares for every $1,000 in debt tendered.

The exchange offers will expire on May 26.

If, prior to June 1, the company does not receive enough tenders of notes to consummate the exchange offers, it expects to file for bankruptcy.

But while the bonds - like the bank debt - had initially moved higher, the paper began to come back as bondholders have not embraced the exchange. In an Associated Press report Wednesday, smaller individual noteholders are planning to rally in protest at what they consider unfair treatment under the company's most recent reorganization plan.

Elsewhere in the autosphere, Ford Motor Co.'s benchmark 7.4% notes due 2031 closed a point higher at 49 bid, 51 offered, according to a trader.

MGM paper moving up

MGM Mirage paper closed the day stronger, as one analyst speculated that investing in the company would at some point be "a good thing."

A trader saw the bonds gaining anywhere from half a point to 3 points on the day, the 6 5/8% notes due 2015 at 50, the 8 3/8% notes due 2011 at 30 3/8, the 6% notes due 2009 at 73 and the 6¾% notes due 2012 at 53.

Another source deemed the 6 5/8% notes more than 3 points better at 51 bid.

Yet another trader called the 6% notes up a point at 70 bid, 72 offered.

Daniel Och, founder of Och-Ziff Capital Management Group LLC, said at the Super Return private-equity conference in Miami that "at some point coming out of the cycle, owning the best assets on the Las Vegas Strip would be a good thing to do."

Och was referring to MGM's near-monopoly of the gaming center and how, once the recession hits bottom and recovery begins, that will mean more money to the company.

Still, it is no secret that MGM, like its counterparts, have struggled amid a weakening economy. As such, the company has sold assets and is considering selling off more, including potentially its Las Vegas properties. Steve Wynn has reportedly expressed interest in the Bellagio.

Furthermore, late Wednesday, the casino operator announced that it had reached an agreement with its CityCenter joint venture partner Dubai World. Under the new deal, the project is fully financed and Dubai has agreed to drop its lawsuit against MGM. The suit was originally filed as Dubai said that auditor comments regarding the state of MGM's ability to continue as a going concern constituted a breach of contract.

Also, trading in MGM's equity was halted, according to several market sources. One source noted that he expected the Dubai news would result in an upturn in Thursday's session.

Meanwhile, Harrah's Operating Co. Inc.'s term loan B debt was higher once again as people looking at their recent numbers continued to react favorably to the news, and the overall strength in the cash market factored in as well, according to a trader.

The term loan B debt was quoted at in 69¾ bid, 70¾ offered context, compared with Tuesday's levels that were in the 68½ bid, 70½ offered context. On Monday, the debt was seen around 65½ bid, 67½ offered.

On Tuesday, Harrah's Operating came out with first quarter numbers that showed adjusted EBITDA of $407.3 million, down 8.3% from $444.3 million in the first quarter of 2008. Sources previously explained that although EBITDA was down year-over-year, it had not dropped by as much as people were expecting.

Revenues for the quarter were $1.756, down 10.4% from $1.955 in the prior year, and loss from operations was $218.2, down 24.6% from income from operations of $289.2 million in 2008.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

Broad market mostly better

Elsewhere in the land of distressed bonds, CIT Group Inc.'s bonds regained some ground it had lost during Tuesday trading.

A trader said the 5.6% notes due 2011 moved up more than 2 points to 65, while the 5.8% notes due 2011 gained just under 2 points to around the same level. The 5.65% notes due 2017 jumped 4 points to 50.75.

There was no news to explain the move, as was the case in the previous session.

Among retailers, Rite Aid Corp.'s 9½% notes due 2017 "just continues to rally," a trader said, pegging the issue around 51.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 closed around 31 and Neiman Marcus Group Inc.'s 9% and 10 3/8% notes due 2015 ended around 50.

TXU Corp.'s 10 7/8% notes due 2017 firmed by 3 points to 64.25, a trader said.

Sirius XM Radio Inc.'s debt ended unchanged to higher, possibly as investors prepare for the company's earnings next week.

One trader called the 9 5/8% notes due 2013 unchanged at 60.5, while another saw the 13% notes due 2013 jump more than 4 points to 65.25 bid.

The company will release its quarterly results on May 7.

Sara Rosenberg contributed to this article.

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