Caesars posts earnings, bonds pressured; Logan's swings to loss, debt jumps; NII spreads widen

By Stephanie N. Rotondo

Phoenix, March 12 - Earnings drove down Caesars Entertainment Corp.'s debt on Wednesday, but helped Logan's Roadhouse Inc. put on a few points.

Caesars reported a loss, as was expected. The company had said earlier in the month that it would likely post a loss between $1.7 billion and $1.8 billion.

The loss came in right in the middle of that range.

Meanwhile, Logan's parent company, LRI Holdings Inc., swung to a loss in its fiscal second quarter - and still, the bonds were up 4 to 7 points on the day.

In other distressed credits, NII Holdings Inc.'s spreads "continue to widen," a trader said, given that the 8 7/8% notes due 2019 were trading about 20 points higher than the 7 5/8% notes due 2021.

He said the 8 7/8% notes moved up "a few more points" to 55.

Another trader saw the 8 7/8% notes at 553/4, up 3 points, while the 10% notes due 2016 increased almost half a point to 50 7/8.

Caesars posts earnings

As was expected Las Vegas-based Caesars reported a loss for the fourth quarter.

Though the company had already warned that the numbers were going to be weak, investors pushed the company's debt down anyway.

One trader said the 10% notes due 2018 dropped over 1½ points to 421/2, while the 8½% notes due 2020 slipped almost a point to 87 3/8.

Another market source pegged the 10% notes at 43½ bid, off over a point on the day.

A third trader called the 10% notes "down another point or so" at 42 bid, 42½ offered.

For the fourth quarter, Caesars reported a net loss of $1.76 billion, which compared with a loss of $480.3 million the year before. Net revenues, however, were up over 2% at $2.08 billion.

For the full year, the casino operator posted a loss of $2.95 billion, versus a loss of $1.51 billion in 2012.

Yearly revenues declined slightly to $8.56 billion.

On March 3, the company announced it was selling four of its properties to an affiliate for $1.8 billion, though the assets were valued at around $2.2 billion. In the same announcement, Caesars issued preliminary fourth quarter results, estimating a loss of $1.7 billion to $1.8 billion on revenues of $2.05 billion to $2.11 billion.

Logan's rises despite loss

Logan's Roadhouse's 10¾% notes due 2017 were gaining ground Wednesday, even as the restaurant operator's parent company reported a loss.

One trader placed the notes at 743/4, up over 4 points. Another trader said the issue had gained 6 to 7 points, seeing the paper close in a 74 to 75 context.

For the 13 weeks ending Jan. 26, the Nashville, Tenn.-based company posted a loss of $8.99 million.

The company had reported a profit of $5.52 million the year before.

Net sales dropped 4.7% to $153.1 million amid a 5.3% decline in same-store sales. While customer traffic declined by 8%, the average check amount increased 2.9%.

For the year, net loss was $21.06 million versus $4.55 million in 2013. Sales dropped 3.5% to $300.1 million.

Fannie, Freddie take a hit

Investors continued to focus on Freddie Mac and Fannie Mae Wednesday in the wake of a new plan put forth by a bipartisan Senate group.

The agencies' preferreds were "jumping all over," a trader said, seeing the $25-par securities down about $1.00 early in the session.

"It's still an ugly picture for them," another market source said. "I think the phrase would be 'ouch.'"

The source said that the most actively traded issues were down 7.75% to 8.4%. On average, he said the preferreds had dropped 8.5% to 9.5%.

Others, he said, were down "only a touch - like not quite 2%, which is still a lot."

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped 95 cents, or 7.76%, to $11.30. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined a dollar, or 8.4%, to $10.90, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) lost just a quarter, or 1.85%, to $13.25.

On Tuesday, a group of senators said they had a new bipartisan plan to wind down the mortgage giants. Though the preferreds initially turned higher, the market eventually pushed the paper downward and those declines continued into Wednesday trading.

However, a trader said he doesn't think the deal will get very far, opining that it was simply a way to remove the Freddie/Fannie issue from the ballots come this election cycle.

"This plan has no legs," he said.

Though investors are obviously concerned that they will reap nothing from their investment, there could still be hope. In a letter to Jacob Lew, Treasury Secretary, Sen. Pat Toomey, a Republican from Pennsylvania and a member of the Senate Banking Committee, said he thought investors should not be shut out.

"While I strongly support GSE reform that protects taxpayers, such efforts should also be mindful of investors in addition to other considerations," Toomey wrote to Lew. "Taxpayers should be fully compensated, but once they are, investors, such as the York County pension fund in Pennsylvania, should not be denied their fair share of any remaining value."

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