MGM, Boyd bonds down; Bon-Ton quiet ahead of numbers; American Axle debt activity levels off

By Stephanie N. Rotondo

Portland, Ore., Aug. 19 - It was a subdued trading day in the distressed debt markets Wednesday, according to market sources, and there was "definitely weakness in some names."

MGM Mirage and Boyd Gaming Inc., for example, both saw their debt dipping. MGM was one of the day's more active issues, traders reported. But Boyd was rather quiet, even as it received a ratings downgrade on some of its debt.

Even Bon-Ton Department Stores Inc.'s notes declined slightly ahead of the company's earnings release on Thursday.

American Axle & Manufacturing Inc.'s debt declined too - at least in trading volume. The debt had taken one of the top trading spots Tuesday on news the automotive parts supplier had inked a financing deal with General Motors Corp. But trading volume in the name - as well as the larger marketplace - fell by Wednesday. Still, the company's capital structure was largely unchanged.

The energy and refining sectors saw some action, however. But across the board, securities were quoted lower, including those of Western Refining Inc. and Chesapeake Energy Corp.

MGM, Boyd bonds down

MGM Mirage's bonds traded in decent size, according to traders, and one market source said "that makes sense."

"They are in the news everyday," he explained as reasoning for his statement.

The source said $10 million of the 6¾% notes due 2012 traded around 781/4. Another source quoted the issue at 78 bid, 79 offered and the 6 5/8% notes due 2015 at 69 bid, 70 offered.

At another desk, a trader said the 6¾% notes were the name's "most active," also seeing the debt at 781/4, down from 79 on Tuesday and 80 last week.

"That's really the only one that was trading a lot," he said of the bonds under the MGM moniker.

On Tuesday, news reports said that MGM's properties were losing value, which had contributed to the casino operator's more than $200 million loss in the second quarter. Earlier in the month, it was announced that MGM got slapped with a shareholder lawsuit over its Macau operations.

Elsewhere in the gaming arena, Boyd Gaming's debt was little affected by news of a ratings downgrade on some of its debt.

One market player deemed the 6¾% notes due 2014 down a deuce at 83¾ bid, 84¼ offered. Another said the bonds had traded at 88 on Tuesday but were relatively quiet on Wednesday.

Standard & Poor's cut Boyd's recovery rating to 5 from 3 and placed its issue-level rating on its senior subordinated debt at B+, down from BB-. The outlook is negative.

The rating agency said its actions were due to declining property values, as well as challenging conditions within the sector at large. S&P noted that Boyd - which has expressed interest in purchasing bankrupt Station Casinos - is highly leveraged and has limited covenant cushions.

Bon-Ton quiet ahead of numbers

Bon-Ton Department Stores is expected to release its quarterly earnings Thursday, but there was little activity in the bonds ahead of the release.

"I would guess that people will wait" to see what the numbers are before trading in the name, a trader said.

The trader noted that most trades during Wednesday's session were "scrappy, nothing real." He called the 10¼% notes due 2014 a point lower from Friday levels at 52 3/8 bid, 52 ½ offered.

Another trader saw a 51 bid, 53 offered market for a "small piece."

"So that's not much changed really," he said.

Yet another source pegged the debt in the low-50s, "down a couple."

On Aug. 6, the York, Pa.-based retailer reported a 9.8% decline in comparable-store sales for the four weeks ended Aug. 1. Total sales dropped 9.6% to $178.8 million from $197.9 million the year before.

Bon-Ton will hold a conference call to discuss its results at 10 a.m. ET Thursday.

American Axle loan levels off

American Axle & Manufacturing's term loan was unchanged to stronger, depending on who was asked, with levels continuing to be affected by news of a payment agreement and second-lien term loan, both with General Motors Co., according to traders.

The term loan was quoted by one trader at 86 bid, 88 offered, up from Tuesday's levels of 85½ bid, 87½ offered, and from Monday's levels of around 79½ bid, 81½ offered.

However, a second trader saw the term loan at 86½ bid, 88½ offered, unchanged from Tuesday. This trader had the loan quoted at 80½ bid, 82½ offered on Monday.

Meanwhile, a trader said that "the [auto] suppliers were big movers and groovers" on Tuesday. On Wednesday, he said there was still "a lot of volume," although much of it was in odd-lot trades.

He saw the company's 5¼% notes due 2014 go on "a little wild ride," dipping down to about 66 after closing Tuesday around 69 - although Tuesday's final trading that took the credit up to that level was in small pieces. The credit then headed back up to 69. He said most of the trades came between 67 and 69, "but on good-sized trading. They ended pretty close to where they were [Tuesday]."

Under the agreements, GM will make a $110 million payment to American Axle to, among other things, cure costs associated with Motors Liquidation Co.'s bankruptcy cases and resolve outstanding commercial obligations between the parties.

In addition, GM will provide American Axle with a new $100 million second-lien term loan due Dec. 31, 2013 that will be available in multiple draws, with a minimum draw size of $25 million, through Sept. 30, 2013.

The payment and second-lien loan are subject to American Axle amending its credit facility and negotiation and execution of definitive agreements.

American Axle is a Detroit-based producer of driveline and drivetrain systems and related components and chassis modules for the automotive industry.

Energy, refining debt drops

The energy and refining sectors took a hit in relatively active trading Wednesday, though there was no real news - name specific or otherwise - to have caused the dip.

A trader said Western Refining's 5¾% notes due 2014 "traded a decent amount" around 861/2, a 3-point loss from last week.

Chesapeake Energy's 9½% notes due 2015 also lost weight, closing at 101½ from 1021/2.

Also, Energy Future Holdings Corp. - also known as TXU - saw its 10¼% notes due 2015 drop a point to around 681/4.

Sara Rosenberg and Paul Deckelman contributed to this article.

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