Hooters Casino boosted by asset purchase; Northwest Airlines bonds, equity fly higher

By Stephanie N. Rotondo

Portland, Ore., May 4 - It came as no surprise that Friday was as quiet - actually, the word used most often was "boring" - as the rest of the week had been, despite the hopes that a slow beginning of the week would lead to an active end.

"It's trying to be busy," one market source said. "I thought it was going to be. I kept believing in it."

But with not a lot of fresh news out to encourage investors to jump-start the distressed bond market, the trading day came and went without much excitement.

In fact, news from the rarely heard name 155 East Tropicana LLC, also known as Hooters, seemed to be one of the few news-driven movements.

The casino operator's bonds were boosted 6 points by the announcement that the company had signed an asset purchase agreement. The company has said in January that it signed an intent to be purchased, but, until Friday, little had been heard from the group.

Meanwhile, Northwest Airlines Corp.'s bonds are continuing to gain altitude. The notes went on a wild ride Thursday just one day after it had announced that it had resolved all of the issues with its bondholders relating to its reorganization plan.

A system-wide rate hike also spurred movement in the airline's equity, which closed almost 37% higher than the previous day.

Solutia Inc. is stabilizing, a trader said, after the rocky start it had earlier in the week. After hefty losses, the company's bonds were seen firming a bit come Friday.

Hooters boosted by sale

After months of waiting, the company that owns Hooters Casino Hotel announced Friday that it had signed an asset purchase agreement with Hedwigs Las Vegas Top Tier, LLC, an affiliate of the investment group led by NTH Advisory Group LLC.

The news, though expected - the company said it had signed a letter of intent to purchase in January - saw the company's 8¾% notes due 2012 spike up 6 points, according to one trader. He said the notes were trading around par.

At another desk, a market source also said the notes were "up to par," trading 100 bid, 100.5 offered, though on small volume.

Meanwhile, a trader called the notes up just 3.5 points at 98 bid, par offered.

According to the agreement, Hedwigs will acquire essentially all of the assets of the casino for $95 million in cash, as well as the payment of certain accrued royalties and the assumption of certain outstanding obligations. The group will now also be responsible for the company's debt, at $130 million in principal.

"I think the fact that they got to the next step gives it a good chance of this going through," the source said. "Obviously, somebody thinks something [is going on]."

Under the agreement, an Oct. 31 closing is expected, though that could be extended as late as June 30, 2008. Certain conditions must be met by May 7 for the deal to progress.

Northwest bonds, equity higher

A trader said that Northwest Airlines' bonds, after having been down, managed to improve later on and ended higher. He saw the bankrupt No. 5 U.S. air carrier's 10% notes due 2009 ending at 79 bid, 81 offered, up from their earlier lows around 74 bid, 76 offered.

At another desk, a trader also saw the 10s ending at 79 bid, 81 offered and called that overall a 2-point rise on the day.

A market source said that Northwest's 7 7/8% notes due 2008 got as good as 80 bid during the session but came off that peak a little to end at 79, up 2 points.

A market source quoted the 10% notes, the most active of the company's paper, at 80.5 bid, 82.5 offered, up from the previous day's 79 bid, 80 offered levels.

On the equity side, a system-wide $5 fare hike in the continental United States helped the distressed company's stock. The shares closed 4 cents, or 36.36%, better to 15 cents. Like its fellow distressed airline Delta Air Lines Inc., the stock is expected to be worthless once the company exits bankruptcy.

The fare increase comes as carrier's industry-wide are electing to follow in the footsteps of Continental Airlines Inc., which initiated the hike. The increase is attributed to softening travel demand, something Northwest can attest to.

The Eagan, Minn.-based company reported Thursday that load factors for April fell 0.5% to 83.7%, compared with 84.3% the year previous.

A trader also saw the formerly bankrupt Delta Air Lines Inc.'s stubs - issued to the former holders of its bonds upon those bonds' equitization earlier in the week when it came out of Chapter 11 - trading up perhaps 1/8 point to 7 1/8 bid, 7 5/8 offered.

Dura better

Traders saw Dura Automotive Systems Inc.'s bonds better on the news that the bankrupt Rochester Hills, Mich.-based automotive components maker is shopping its Atwood Mobile Products division around to potential buyers, with the assistance of the Miller Buckfire restructuring firm. The unit, based in Elkhart, Ind., makes components for recreational vehicles such as windows and doors, specialty glass, hardware appliances and electronics.

A trader saw Dura's 8 5/8% senior notes due 2012 push up to 35.5 bid, 36.5 offered, versus 32.5 bid, 34.5 offered. That came on top of a 2-point rise in the bonds on Thursday.

He saw Dura's 9% subordinated notes due 2009 move up to 7 bid, 8 offered from prior levels at 6.25 bid, 7.25 offered.

At another desk, a trader saw those junior bonds at 6.5 bid, 7.5 offered, which he called up half a point on the day, and pegged the seniors up 2 points at 35.5 bid, 36.5 offered.

Sea Containers mixed

Sea Containers Ltd.'s bonds were seen unchanged to a little easier as the bankrupt Bermuda-based maritime and railroad transportation company received a second notice from the United Kingdom's pensions regulator warning that the regulator might order the company to make contributions to the Sea Containers 1983 Pension Scheme and Sea Containers 1990 Pension Scheme.

According to an 8-K filing with the Securities and Exchange Commission, should financial support directions be issued, Sea Containers could be liable to make a financial contribution to one or both of the pension schemes that may be greater than the amount the company owes for pension liabilities under an existing support agreement with its U.K. subsidiary Sea Containers Services Ltd. The current estimates of the cost of winding up the schemes, including the cost of purchasing annuities to pay projected benefit obligations to scheme participants, would be roughly $201 million for the 1983 scheme and about $51 million for the 1990 scheme, according to the 8-K.

Despite that potentially negative news, a trader said he didn't see much change in Sea Containers' bonds, pegging its 10¾% notes due 2006 at 95 bid, 96 offered and its 7 7/8% notes due 2008 at 92 bid, 93 offered.

Another trader also saw the 7 7/8s unchanged at 92.

However, yet another market source quoted the 10½ notes due 2012 down about a point at 93.25 and the 12½% notes due 2009 off more than a point at 85.

Broad market mixed

Tembec Inc.'s bonds are continuing to slide after the forest products company reported a narrower loss for the second quarter. A source pegged the 8 5/8% notes due 2009 at 58.5 bid, 60.5 offered, down from the previous day's levels of 60 bid, 62 offered.

Solutia Inc., however, is "relatively stable," a trader said, after seeing wild gyrations earlier in the week. A source called the 7 3/8% notes due 2027 "a little better" at 89 bid, 90 offered.

Elsewhere, a trader said Fedders Corp. is holding steady, with its 9 7/8% notes due 2014 hovering in the 47 bid, 49 offered area.

The trader also saw Movie Gallery Inc.'s bonds slip a bit further, after getting "whacked" Thursday. The 11% notes due 2012 traded at 83.5.

At another desk, a trader saw Movie's notes at 83 bid, 85 offered, down a point.

A trader saw Le-Nature's Inc.'s 9% notes due 2013 unchanged at 39 bid, 42 offered.

Another trader saw Primus Telecommunications Group's 8% notes due 2014 up 3 points at 71 bid, 72 offered, citing favorable quarterly numbers.

He also saw Calpine Corp.'s 8½% notes due 2011 up a point at 119 bid, 120 offered, citing news that the company had lined up financing for one of its plant projects.

Paul Deckelman contributed to this article.

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