NII paper mostly better on heels of new plan; Cliffs notes weaker again; Caesars closes mixed

By Stephanie N. Rotondo

Phoenix, Nov. 25 – Liquidity in the distressed bond market was dwindling Tuesday, as players prepare for the upcoming Thanksgiving holiday.

The bond market will close early on Wednesday due to the holiday.

While liquidity was thin, NII Holdings Inc.’s paper managed to react to the company’s announcement of a restructuring plan.

The news came out late Monday and traders said the bonds had little time to react at that time.

Come Tuesday trading, the “luxco” bonds were “up some,” according to a trader, though they were down from the intra-day highs.

The trader pegged the 11 3/8% notes due 2019 in the mid-70s.

The 10% notes due 2016 meantime ended better around “+/-40.”

The trader noted that most of the company’s bonds were up on the day, but the 7 5/8% notes due 2021 fell to a 17½ to 18 context.

In a press release put out Monday after the market closed, NII Holdings announced it had reached a restructuring agreement with major stakeholders, “including their two largest creditors and the official committee of unsecured creditors.”

Under the terms of the agreement, $4.35 billion of unsecured debt will be converted into equity interests in the reorganized company. Liquidity will be enhanced with $500 million of new capital funded via a fully backstopped $250 million rights offering of equity available on a pro rata basis to senior noteholders and another $250 million of debt for exit financing.

The Reston, Va.-based provider of Nextel wireless services in Mexico and Latin America also intends to implement a settlement for all claims “related to certain complex intercompany and inter-creditor disputes.”

Cliffs continues to weaken

Cliffs Natural Resources Inc. debt remained under pressure in Tuesday trading.

A trader said the 4 7/8% notes due 2021 were the most active, falling nearly 1½ points to 67 1/8. The 5.9% notes due 2020 ended off almost half a point at 69 5/8.

Both the 4.8% notes due 2020 and the 6¼% notes due 2040 were half a point weaker, the trader said, at 63 and 65, respectively.

The 3.9% notes due 2019 fell a quarter-point to 78 in a single trade, according to the trader.

The company said late Wednesday that it was launching a tender offer for its 6¼% notes due 2020, the 3.95% notes due 2018, the 4 7/8% notes due 2021, the 4.8% notes due 2020 and the 5.9% notes due 2020.

News of the tender followed news that the company was looking to exit its operations at its Quebec-based Bloom Lake mine, which it had previously been looking for an investment partner for.

The company said that while it had interested investors, it could not get a deal done in a time frame that was acceptable to the company.

There is a likelihood that the mine could be shut down while the iron ore producer pursues its options. That could result in costs of up to $700 million.

As such, the company has said it might consider placing its Canadian operations into creditor protections in order to facilitate its exit.

Caesars slammed with default

Caesars Entertainment Corp. received a notice of default from senior bondholders on Monday and come Tuesday, the casino operator’s debt was mixed.

A trader saw the 10% notes due 2018 falling half a point to 12½. However, he said the 11¼% notes due 2017 were a touch higher at 79¾, while the 8½% notes due 2020 held steady at 80.

Another market source deemed the 10% notes up almost a point at 14 bid.

The Las Vegas-based company announced late Monday that Caesars Entertainment Operating Co. had received the default notice. The senior bondholders that sent the notice allege that the company’s transfer of assets – including properties and intellectual property – to a separate affiliated entity violated debt agreements and placed the assets out of the reach of creditors.

The group also said that they did not get fair market value for the transferred assets.

For its part, Caesars is denying a default occurred.

This is the second time Caesars has had to defend the actions taken back in May. In August, another group of bondholders sued the company, citing a fraudulent transfer.

The latest obstacle comes as the company is looking to set in motion a restructuring plan that would separate the operating company into a real estate investment trust and a management company. The plan would likely be set into motion via a bankruptcy filing, which could come in January.

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