Harrah's bonds improve, loans weaken; Sprint holds steady; Nortel gets boost; financials firm

By Stephanie N. Rotondo

Portland, Ore., Sept. 22 - The distressed debt market ended with a stronger tone Tuesday, according to traders, with Harrah's Entertainment Inc. leading the way.

The casino operator's bonds gained as much as 6 points on the day following news of a tender offer. However, the company's bank debt slid as the tender offer included a new $750 million term loan.

Meanwhile, Sprint Nextel Corp.'s notes finished unchanged to a tad better. The action came after it was announced that the company had earned a military contract. Rumors also continue to circulate about Deutsche Telekom's interest in the company.

Also in the technology space, Nortel Networks Ltd. said it would auction off another asset in an effort to pay its creditors. As a result, the company's bonds improved by 1 to 2 points.

The financial sector continued to generate steam, as both American International Group Inc. and CIT Group Inc. were both seen gaining as much as 5 points on the day. E*Trade Financial Corp. also improved during the session.

Harrah's bonds improve, loans weaken

Harrah's Entertainment's debt traded actively and "significantly better," according to a trader, following news of a tender offer.

The trader saw the 5¾% notes due 2017 trade up to around the 61 level, on $15 million traded. The 10¾% notes due 2016 meanwhile traded around 84, with $20 million changing hands.

"I believe I traded that at 12," the trader quipped, speaking to the name's run-up.

Another market source called the 5¾% notes up just over 6 points at 61 bid, while another source quoted the issue at 60 bid, 61 offered.

However, Harrah's existing term loan B traded lower in the secondary market on the back of the launch of the company's $750 million incremental term loan (B-) that has the potential to be upsized, according to traders.

The company's term loan B-1 and term loan B-3 were both quoted at 82 bid, 82½ offered, down from 82½ bid, 83 offered, one trader said.

And, the term loan B-2 was quoted by one trader at 82 1/8 bid, 82 5/8 offered, down from 82¾ bid, 83 3/8 offered, and by a second trader at 82 bid, 82½ offered, down from 82½ bid, 83½ offered.

Harrah's announced it had begun a $175 million tender offer for four series of notes, the 5½% senior notes due 2010, 7 7/8% senior subordinated notes due 2010, 8% senior notes due 2011 and 8 1/8% senior subordinated notes due 2011.

Should the tendered notes go over the $175 million maximum limit, the notes will be repurchased on a pro rata basis.

For each $1,000 principal amount tendered, Harrah's will pay $997.50 for the 5½% notes, $980.00 for the 7 7/8% notes, $960.00 for the 8% notes and $955.00 for the 8 1/8% notes.

The offer expires on Oct. 21 at midnight ET.

In conjunction with the exchange, Harrah's is looking to secure a new $750 million term loan under its senior secured credit facility. The tender is contingent upon receiving the new loan.

In connection with the conference call that was held Tuesday morning to kick off syndication on the new incremental term loan, Harrah's came out with price talk on the deal, according to sources.

Price talk on the loan is Libor plus 750 basis points with a 2% Libor floor and an original issue discount in the 97 to 98 area, sources said.

For optional redemptions, the loan is non-callable for two years, then at 105 in year three, 103 in year four and par thereafter.

The deal was first announced on Monday and at that time, size was labeled as still to be determined and there was no price talk.

Harrah's is using proceeds from the incremental term loan to refinance existing debt, to provide additional liquidity and to fund note tender offers.

Bank of America and Citigroup are the joint lead arrangers and joint bookrunners on the incremental loan, and JPMorgan, Credit Suisse and Deutsche Bank are also bookrunners.

The loan, due in October 2016, is being obtained under the accordion feature of the company's existing credit facility.

Covenants under the term loan are similar to those under the existing credit facility.

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

Sprint bonds end steady

Sprint Nextel's bonds finished the day unchanged to "marginally better," according to a trader.

The trader saw about $10 million of the 8 3/8% notes due 2012 trade around 103.5. Another trader said the paper was "all over the lot," also placing the notes around the 103 mark.

"It's kind of unchanged," the second trader said. "That's where they were trading yesterday."

At another desk, the 6% notes due 2016 were seen gaining just over a point to 89.25 bid.

Late Monday, the U.S. Navy announced that it had awarded Sprint - and two other wireless providers - a $60 million contract for nationwide cell phone service.

Also, rumors continue to circulate about whether or not T-Mobile parent Deutsche Telekom will buy the company.

The newest buzz is that Deutsche Telekom is instead looking at gaining access to airwaves controlled by Clearwire and MetroPCS. Sprint is also said to be possibly looking at Clearwire, as picking up the company would be easier than adding a new network to its system.

Sprint Nextel is an Overland Park, Kan.-based wireless telecommunications provider.

Nortel notes firm

Nortel Networks' notes improved by 1 to 2 points on news that company was once again selling off assets at auction.

At one desk, the 10¾% notes due 2016 and the 10 1/8% notes due 2013 were seen ending around 57 bid, 58 offered. At another desk, the 10¾% closed around 57.5 bid, while the 10 1/8% notes ended around 57 bid.

The floating-rate notes due 2011 finished at 56.5 bid.

Bankrupt Nortel said late Monday it would sell software assets from its carrier division. The sale follows the company's successful off-loading of its enterprise business to Avaya Inc. for $900 million.

Financials gain ground

The financial arena continues to gain steam, as trader reported American International Group, CIT Group and E*Trade Financial all ended the day higher.

A trader called AIG's 8.175% notes due 2058 up "4 to 5 points" around 60.

He also saw CIT's "real short paper" - the 4¼% notes due February 2010 - moving actively, with about $20 million changing hands. He said the bonds opened around 70.5, then traded up to 72, then 74, and so on, until the end of the day when the bonds closed around 76. He noted that the issue hit a high of 78 before coming back down to its closing level.

Another market source pegged the notes at 75.5 bid.

Also, E*Trade's 12½% notes due 2017 "continues to move up," seeing the bonds end at 107.5 bid, 108 offered.

"So that name continues to fare well," he said.

Broad market ends better

In the rest of the distressed market, Blockbuster Inc.'s 9% notes due 2012 continue to lose ground, another trader remarked, quoting the issue at 67 bid, 68 offered.

In the autosphere, General Motors Corp.'s benchmark 8 3/8% notes due 2033 held steady at 15.5 bid, 16.5 offered, while Ford Motor Co.'s 7.45% notes due 2031 improved by about a point to 82 bid, 84 offered.

Also, Visteon Corp.'s were seen "up a couple points," a trader said, generically placing the debt around 22.

Elsewhere, a trader said Spansion Inc.'s notes gained anywhere from 2 to 5 points. The trader said the 11¼% notes improved 2 to 3 points to around 85.5, while the 2¼% notes due 2016 jumped 4 to 5 points to 28 bid.

Sara Rosenberg contributed to this article.

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