Cliffs looks to exit Bloom Lake mine, bonds ‘all over the place’; Guitar Center debt firm

By Stephanie N. Rotondo

Phoenix, Nov. 19 – Cliffs Natural Resources Inc. was again topical in Wednesday’s distressed debt market, as the company said it was looking to sell some assets.

The company had previously been looking for an investment partner in the Quebec-based Bloom Lake mine. But with no firm deals in line, the iron ore producer said it needed to shed the asset.

On the news, the company’s debt was “initially way down,” a trader said. The bonds recovered some by the end of the day, however.

Meanwhile, a trader said Guitar Center Inc. paper was “better today,” rising anywhere from 3 to 8 points. The trader said he believed the company held an earnings call on Wednesday.

After the bell, Caesars Entertainment Corp. released details to creditors regarding a reorganization plan that was agreed on with some debtholders earlier this month. Under the plan, Caesars Entertainment Operating Co. would be placed into bankruptcy by January.

According to market sources, the plan would include turning the opco into a real estate investment trust and a unit that manages the properties.

Ahead of the news, the casino operator’s debt was muted and little moved.

Cliffs trades volatile

Cliffs Natural Resources’ bonds were deemed “active” by a trader on Wednesday, as the company disclosed that it was looking to exit its iron ore operations in Eastern Canada.

On the heels of the announcement, the bonds dropped “way down,” a trader said. But they then recovered at least some of the ground lost in those early trades.

One trader said the 6¼% notes due 2040 hit a low of 56 before bouncing back up to “+/-60,” which he said was “kind of unchanged.”

The 3.95% notes due 2018 meantime hit lows in the low-70s, the trader said, but ended in a 73½ to 74½ context.

That was still “down a couple points” from the previous session, he said.

At another desk, a trader said the debt “got hit at the beginning of the day, then it came back.”

The 6¼% notes finished half a point better at 60½, the trader said. The 3.95% notes saw “tons of trades,” moving “all over the place” before finally settling around 73½, down 2½ points on the day.

In the company’s other issues, the trader said the 4 7/8% notes due 2021 ended slightly weaker at 66. But the 4.8% notes due 2020 traded up nearly 2 points to 66¼ – up from the low tick of 61 – and the 5.9% notes due 2020 put on 2½ points to close around 70½.

The latter issue hit a low of 66.

“Despite the continued interest of the prospective equity partners in Bloom Lake and in its high quality ore, the potential investment is not achievable within a time frame acceptable to Cliffs,” said Lourenco Goncalves, president and chief executive officer, in a statement. “With expansion no longer viable, we have shifted our focus to executing an exit option for Eastern Canadian operations that minimizes the cash outflows and associated liabilities.”

It is believed that a closure of the mine is likely, which could run the company $650 million to $700 million.

Guitar Center gains

A trader said Guitar Center bonds were better, noting that he believed the company held an earnings call on Wednesday.

He said the 6½% notes due 2019 rose 3 points to an 88 to 88½ context, while the 9 5/8% notes due 2020 moved up 8 points to the “higher-60s.”

Another trader called the 6½% notes half a point higher at 85½.

Guitar Center announced that its board of directors appointed a new president and CEO on Monday.

Darrell Webb – a 30-plus year veteran of the retail industry – “was recruited by the Board to lead Guitar Center as the company looks to capitalize on its growth prospects.”

Webb is replacing Mike Pratt, who was said to have resigned early Monday morning.

No reason for his departure was given.

Caesars plans to split opco

Caesars Entertainment gave creditors a look at its plan to restructure itself late Wednesday.

Leading up to the reveal, the company’s debt was little moved.

A trader said the 10¾% notes due 2016 were steady at 16, while the 11¼% notes due 2017 inched up over half a point to 77.

Under the plan that will place the Caesars Entertainment Operating unit into bankruptcy, the opco would be split into a REIT that owns the casinos properties and a unit that manages said properties. Holders of about $5.36 billion in loans would see 100% recovery in the form of cash and new debt, while first-lien bondholders would get 93.8 cents on the dollar in the form of cash, debt and equity.

Second-lien bondholders would get a lot less for their $5.25 billion in debt holdings. Those who back the restructuring plan would get more equity than those who do not give the plan the OK.

Caesars isn’t the first company to split itself into a REIT and a management company. Pinnacle Entertainment Inc. recently said that it planned to do so, following Penn National Gaming, which split itself in 2012.

The revelation of the plan’s details comes as lender Silver Point Capital begged off restructuring talks. Silver Point was the second creditor to back out of negotiations, following Perry Capital, which exited Oct. 29.

CGG gets takeover offer

CGG SA’s bonds “were flying” late in the day Wednesday, as Technip SA offered to buy the company out.

A trader said both the 6½% notes due 2021 and the 6 7/8% notes due 2022 were trading in an 81 to 83 context ahead of the news, but that both jumped to a 96 handle once the news was reported.

“I think people were short it,” he remarked.

The French seismic data services provider to the oil and gas industry reportedly rejected the initial offer, claiming that the price was too low. However, talks are said to be ongoing.

© 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.