Caesars debt extends Thursday gains; Dynegy, Edison paper surge; Cengage loan up with numbers

By Stephanie N. Rotondo

Portland, Ore., Feb. 3 - Distressed debt ended the week higher as unemployment declined for the fifth consecutive month and the Dow Jones industrial average hit its highest close since 2008.

"Everything just crept up a little higher," a trader said.

Still, he noted that most of the day's activity was centered around new high-yield issues.

"A bunch of new deals priced today," he explained.

Caesars Entertainment Corp. paper continued to rise after the company reported plans on Thursday to amend and extend its term loans and also gave initial pricing on a planned initial public offering.

In the energy space, Dynegy Holdings LLC was again stronger. The bonds have been climbing higher all week, though there hasn't been any fresh news out. One trader opined that a rumor circulating about the company's investors might be cause.

Also in the energy realm, Edison International Inc.'s debt was gaining ground, on no fresh news.

Caesars extends gains

Caesars Entertainment bonds again posted gains, just one day after the Las Vegas-based casino operator said it was seeking to extend the maturity of its term loans.

The company also announced that it had commenced proceedings for an IPO. Caesars had planned to launch an IPO in 2010, but decided against it when market conditions deteriorated.

A trader called the 10¾% notes due 2016 up a point at 86¾ and the 10% notes due 2018 up nearly a point to "almost 80."

Another market source pegged the 10% notes at 80¼ bid, up 1¾ points on the day.

The company's Caesars Entertainment Operating Co. unit hopes to get lender approval to extend the maturity of almost $4 billion in term loans to January 2018 from January 2015. Additionally, the unit wants to amend the terms of the loans in order to increase the interest rate.

The unit also intends to launch a new issue, the proceeds of which will be used to pay down existing debt.

Caesars also said that it had begun the process for a previously delayed IPO. The company intends to sell 1.81 million common shares at a price between $8 and $10 per share.

"Caesar's [sic] is still highly levered but has shown great skill in capital structure management helped by a buoyant market," wrote Gimme Credit LLC analyst Kim Noland in an afternoon comment. "Both MGM and Caesar's [sic] are both looking to extend their bank loans and improve their capital structure, likely an opportune time in the high yield market."

Dynegy, Edison surge

Dynegy Holdings' debt has been powering up all week and that trend continued into Friday's session, traders reported.

One trader called the 7½% notes due 2015 and the 8 3/8% notes due 2016 "up a couple" at 64, compared to 62 previously.

"I think it's mostly just the market [strength]," he said of the gains.

Another trader also saw the bonds ending "stronger" around 64.

However, the second trader said he had heard that Appaloosa Management - a big investor in Dynegy - "had sold out and two new hedge funds got involved."

Though he could not confirm if it was true or not, he said that could explain recent activity.

Meanwhile, Edison International paper was on the rise. Like Dynegy, there was no specific news out to act as catalyst.

A trader saw the 7¾% notes due 2016 gaining 2½ points to close at 721/2, while the 7% notes due 2017 moved up a deuce to 621/2.

Dynegy is a Houston-based power producer. Edison is based in Rosemead, Calif.

Cengage loan improves

Cengage Learning Holdings II LP's term loan B moved to 90 1/8 bid, 90 5/8 offered on Friday, from 88½ bid, 89½ offered in the prior session as the company announced favorable results for the quarter ended Dec. 31, according to a trader.

For the second fiscal quarter, Cengage reported a net loss of $11 million, versus a net loss of $23 million in the previous year.

Revenues for the quarter were $456.2 million, up 3.2% from $442.2 million in the second fiscal quarter of 2011.

Adjusted EBITDA for the quarter was $175 million, up 2.7% from $170.4 million last year.

And, unlevered free cash flow for the six months ended Dec. 31 increased by $79, or 16.8%, to $549.8, with the company attributing the improvement to increased income from continuing operations and higher contribution from working capital.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Clear Channel rises

A trader said Clear Channel Communications Inc.'s debt was up with the market, gaining as much as 2½ points on the day.

The 10¾% notes due 2016 were up the most at 791/2. The 11% notes due 2016 put on 2 points to end around 76 1/2.

And, the 9% notes due 2021 inched up a point to 881/2.

There was no fresh news out on the San Antonio-based multimedia company.

Sara Rosenberg contributed to this article

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