Distressed bonds decline as week begins; CGG dives as Technip pulls deal; Caesars misses coupon

By Stephanie N. Rotondo

Phoenix, Dec. 15 – The distressed debt space was feeling the winter doldrums in Monday trading.

The market was under pressure, following in line with the broader markets. More specifically, it was following the high-yield bond market, which was seen hitting a new low, according to the KDP High Yield Index.

The index dropped to 69.4, with a 6.3% yield. The previous 52-week low was 69.79.

The big loser of the day was CGG SA. The company’s debt dropped as much as 20 points on the day after Technip nixed its $1.82 billion bid to buy CGG.

“That was quite a bit of bad news for those,” a trader said.

Meanwhile, Caesars Entertainment Corp. was said to be skipping its $225 million payment due Monday on its 10% second-lien notes due 2018, setting the company up to place its operating unit in bankruptcy by mid-January.

However, that has reportedly been Caesars plan all along and the bonds were little moved on the missed coupon.

Technip cancels CGG deal

CGG’s bonds plummeted Monday after Technip said it would not go further on an attempt to buy the French geological oil services company.

One trader said the 6˝% notes due 2021 closed at 72, down from 93 previously. The 6 7/8% notes due 2022 ended at 77˝, up from the day’s low of 73, but down from previous trades of 89.

Another market source pegged the 6˝% notes at 72 bid, down 15 points.

In November, Technip made a $1.82 billion unsolicited bid for CGG. CGG rejected the offer, but talks were said to be ongoing.

In its statement, Technip said it made many alternative offers in hopes of winning the company over. Each one “did not result in any form of agreement.”

For its part, CGG said that “none of the proposed options were creating value for the company and its stakeholders.”

CGG maintains that it can proceed as an independent company.

Caesars misses coupon

Caesars Entertainment is reportedly planning to skip a $225 million interest payment on its 10% second-lien notes due 2018.

The $4.5 billion of notes are linked the company’s largest unit, Caesars Entertainment Operating Co., which has been the topic of ongoing restructuring talks with lenders and bondholders.

Last week, it was reported that senior lenders had signed on to a plan that would put the opco into bankruptcy. Upon its emergence, it would be turned into a two-pronged real estate investment trust – one side that owns the casino’s properties and another that manages them.

Bondholders had yet to give their approval.

Missing the payment puts the company into a 30-day grace period, giving it until Jan. 15 to file for Chapter 11 protections.

But with that news already circulating, investors were likely expecting that the payment wouldn’t be made and the bonds ended the day little changed.

A trader said the 10% notes were still being bid with accrued interest at 15 bid, though he saw no trades of size in the paper. He saw the 10ľ% notes due 2016 holding steady at 11˝ and the 8˝% notes due 2020 off 3 points at 73˝.

Another source saw odd pieces of the 10% notes trading in a range of 15 to 17.

Caesars is a Las Vegas-based casino operator.

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