Caesars bonds up, trade briskly; NII still busy; players ponder J.C, Penney store closings

By Paul Deckelman

New York, Jan. 15 - Caesars Entertainment Corp.'s bonds moved higher in heavy trading on Wednesday, although there was no company-specific fresh news out that might explain why the debt-laden casino giant's paper would be doing so well, other than its attractive yield, well into the double digits.

NII Holdings, Inc.'s bonds continued their recent run on the Most Actives list; those bonds have been among the busiest in the junk and distressed-debt spheres, particularly in the light of Monday's announcement that the seller of Nextel wireless service in Latin America will be able to use Telefonica SA's networks in Mexico and Brazil to reach their customers in some remote locations, thus eliminating the need for a costly infrastructure build-out.

Traders said that the announcement from J.C. Penney Co. Inc. that the underperforming department-store chain operator will close down 33 of its least-profitable stores and eliminate about 2,000 positions came too late in the day to have any impact on Wednesday's trading, but they said that once investors had the chance to digest the news and ponder whether the move would be worth it could have some impact in Thursday's action.

A bit more off the beaten track, a trader said that New Enterprise Stone & Lime Co. Inc.'s bonds were firming smartly, pushed higher by positive third-quarter results.

Caesars bonds busy

Caesars Entertainment "is always an active one," a trader said, and this was especially true on Wednesday, when more than $43 million of its Harrah's Entertainment Inc. 10% second-priority senior secured notes due 2018 changed hands, easily topping the Junkbondland Most Actives list.

A market source saw that paper up nearly 1 full point, going out at 50 7/8 bid.

A second trader pegged the bonds up ½ point, at 51 bid.

A second, smaller issue of 10% notes due 2018was meantime seen having gained ½ point on the day to go home at just under 55 bid.

There was no fresh news seen out about Las Vegas-based Caesars, one of the largest casino and lodging companies in the world, that might explain the sudden popularity of its debt.

However, one of the market sources pointed out that the bonds trading around 51 are now trading at a yield of around 29½% - an attractive level for investors not afraid to add a little risk to their portfolios.

Several recent commentaries in the financial media have argued that with the interest payments on the over $20 billion of debt on its books sopping up most, if not all, of the company's considerable cash flow, Caesars has ceased to be a viable equity market holding - and given the superior position that debt holders would have in any kind of restructuring scenario, its bonds are now a more attractive investment holding than its shares.

In the gaming world, meantime, New Jersey regulators said that the state's casino operators had taken in some $8.37 million in online gaming revenues in the first six weeks of play since its legalization in the Garden State.

Of that sum, the Borgata resort, jointly owned by Boyd Gaming Corp. and MGM Resorts International, did the best, with $3.75 million, followed by Caesars at $2.38 million.

NII among the actives

NII Holdings' 10% notes due 2016 remained among the 10 Most Active junk credits on Wednesday, a trader said, with over $15 million having changed hands.

He saw those bonds, issued by the company's NII Capital Corp. subsidiary, having dipped about ½ point, easing to 58¼ bid. But a second trader located those bonds around the 59 bid area, calling them little changed on the session.

NII was still riding the momentum generated on Monday, when the bonds and shares of the Reston, Va.-based seller of the Nextel wireless service in Latin America surged in heavy trading, on the news that it had signed an agreement with a rival, the Spanish telecommunications company Telefonica SA, that will allow NII to distribute its service to customers in Brazil and Mexico - the two largest Latin American markets - over Telefonica's 3G wireless network.

That would spare NII of the necessity of having to build out its own network in remote areas, a costly venture.

The 10% notes had zoomed more than 5½ points on Monday to end at 60 bid on the news, with over $64 million having traded.

Little impact from Penney move

Elsewhere, a trader noted the late-day announcement that troubled Plano, Texas-based retailer J.C. Penney Co. will close a total of 33 underperforming stores and expects to reduce its headcount by as much as 2,000 positions.

However, that news hit the market just after 4 p.m. ET, as the day's activity was winding down, and there was no immediate impact seen on the company's bonds.

He said that the company's 7.65% notes due 2016 were unchanged at 88¾ bid following the news, while its 5.65% notes due 2020 were steady at around the 77½ mark.

"Tune in tomorrow [Thursday]," he said, speculating that the news might have some impact - positive or negative - once investors had a chance to read the company's announcement through, hear what the analysts were saying about it and then come to their own conclusions.

He opined that the closure of the stores could attract attention to J.C. Penney "as a real estate play," since the company, like most large retailers, has at least some of its stores in stand-alone "big box" locations owned by the company.

J.C. Penney is believed to own somewhere around 300 of its more than 1,100 stores in the United States, with the remainder occupying leased space in shopping centers. The company also owns its headquarters complex in Plano, a northern suburb of Dallas. The company's real estate holdings have been estimated at as much as $3 billion.

J.C. Penney said in a statement that "these actions are expected to result in an annual cost savings of approximately $65 million, beginning in 2014. In connection with this initiative, the company expects to incur estimated pre-tax charges of approximately $26 million in the fourth quarter of fiscal 2013 and approximately $17 million in future periods."

New Enterprise moves up

A market source said that one of the names he was watching in a mostly quiet market was New Enterprise Stone & Lime Co., a western Pennsylvania construction materials provider.

He noted that its 11% notes due 2018 were up about 5 points over the past two days following the release of positive third-quarter numbers, pegging them around a 78½ bid, 81½ offered context.

Meanwhile, its 13% notes due 2013 "have been bid without [any offers] for quite some time now," around 114-115 bid.

© 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.