Trump bonds slip on earnings; Tropicana capital structure mixed; Idearc, R.H. Donnelley firmer

By Stephanie N. Rotondo

Portland, Ore., March 5 - Gaming names dominated the distressed bond market Tuesday, traders reported.

Trump Entertainment Resorts Inc. took over the limelight that had previously shined on Tropicana Entertainment LLC. Trump's debt slipped during trading after the company posted what one trader called "disappointing" numbers.

Meanwhile, Tropicana's term loan continued to grow ever weaker after Moody's Investors Service cut its ratings on the casino. The downgrade was attributed in part to a recent court ruling in which the company was charged with being in default if it did not cure a title transfer within 60 days.

On the corporate debt side, Tropicana's bonds continued to edge higher, though trading in the name was not as active as it had been early in the week.

A simple case of overselling and the ensuing correction could be what have propelled Idearc Inc.'s bonds upward. The debt was seen gaining at least 4 points during mid-week trading - on top of the gains it posted since Monday. Elsewhere in the sector, R.H. Donnelley Corp.'s bonds also closed better on the day.

Trump bonds slip on earnings

"Disappointing" numbers were blamed for a 1- to 1.5-point decline in Trump Entertainment's debt.

A trader, who commented on the earnings results, pegged the 8½% notes due 2015 at 67.5 bid, 68 offered. He noted that the actively traded name got as low at 66 bid, 66.5 offered during the session.

Another trader said the bonds hit a low of "67 and some change" before closing the day around 68, down 1 point.

"In general, gaming is weaker," one trader said. He noted that the sector has historically been considered "recession resistant."

"But it is proving not to be the case, based on their numbers," he said.

The Atlantic City casino and hotel posted a $183.2 million net loss for the fourth quarter, compared to a loss of $9.7 million the previous year. Revenues also declined to $228.6 million versus $244.2 million in the last quarter of 2006.

Still, the company remained upbeat, stating that it has sufficient liquidity.

"We don't see liquidity as being an issue for all of 2008," said John P. Burke, the interim chief financial officer, during a quarterly conference call.

The New Jersey gaming arena has struggled over the last year, due in part to a partial smoking ban that took effect in April 2007. New gaming centers in New York and Pennsylvania have also put some strain on the Jersey Shore casinos.

Trump Entertainment is an Atlantic City, N.J., gaming company that is separate and distinct from Donald J. Trump's real estate and other holdings.

Tropicana structure mixed again

In other Atlantic City gaming names, Tropicana Entertainment's operating company term loan was once again weaker as Moody's downgraded the company's ratings.

The opco term loan was quoted at 95¾ bid, 96¾ offered, down from Tuesday's levels of 96½ bid, 971/2, traders said.

On Wednesday, Moody's cut Tropicana Entertainment's corporate family rating to Caa3 from Caa1, revolver and term loan rating to Caa2 from B2 and senior subordinated notes to Ca from Caa3.

In addition, Tropicana Las Vegas Resort and Casino LLC's corporate family rating was downgraded to Caa1 from B3 and its term loan was downgraded to Caa1 from B3.

According to Moody's, the downgrade reflects the Delaware Court of Chancery's ruling that Tropicana did breach the asset dispositions section of the senior subordinated note indenture as it relates to the transfer of title of Adamar - the entity that holds the Atlantic City property.

Failure to cure this technical default within a 60-day period will constitute an event of default and will allow the noteholders to accelerate payment of their claim.

If Tropicana is unable to cure the default, a bankruptcy filing is possible, Moody's said.

Moody's also said that even if the company can avoid default under the senior subordinated note indenture and sell its Atlantic City, Evansville, Ind., and Vicksburg, Miss., properties as planned, its credit profile will deteriorate significantly.

The ratings will remain on review for possible further downgrade. Moody's said its review will focus on the company's ability to cure the default, its progress with respect to planned asset sales, and the company's ability to maintain adequate liquidity and operating performance.

Still, the downgrade did little to hurt the casino operator's corporate debt. The bonds posted gains both Monday and Tuesday in active trading, as the court ruling was considered a boon for bondholders.

Though not as active as it was the first two sessions of the week, one trader reported that the 9 5/8% notes due 2014 "continued to creep up." He quoted the bonds at 56 bid, 56.5 offered.

At another desk, a trader called the bonds "pretty much unchanged" in the mid-50s, while another placed the notes at 56.25, up three-quarters of a point.

As was previously reported, Tropicana received a notice of default and acceleration on its 9 5/8% notes last month as a result of the New Jersey Casino Control Commission's refusal to renew its license to operate the Tropicana Casino and Resort in Atlantic City - which the company is now appealing.

Tropicana disagreed with the bondholders, saying that no default had occurred and therefore, the acceleration was invalid, which is how the disagreement ended up in court.

A forbearance agreement from senior credit facility lenders regarding the Atlantic City license issue was obtained in December.

The Atlantic City property is on the market, as are the casino properties in Evansville, Ind., and Vicksburg, Miss. Asset sale proceeds are expected to be used to repay outstanding senior credit facility debt.

Tropicana Entertainment is a Fort Mitchell, Ky.-based gaming entertainment provider.

Elsewhere in the sector, Herbst Gaming's 8 1/8% notes due 2012 lost nearly 2 points to finish at 26.5.

Idearc, R.H. Donnelley moving up

Idearc bonds continue their upward climb, which began Monday.

Traders said early in the week that the rise in the debt was due to a Barron's article published over the weekend. In the article, Barron's cited Idearc's stock as a risky play with the company's high debt, but that it could pay off if market conditions improved.

However, some market players are now saying that the directory publisher's bonds were simply oversold in recent weeks, and now the market is correcting that.

A trader called the 8% notes due 2016 up another 4 points on the week at 66 bid, 65 offered.

Another trader also saw the bonds 4 points better at 66 bid, 67 offered. A second market source again called the notes up 4 points at above the 66 area, in active trading, including some big-block trades.

Another market source, also seeing them at 66, called that a 3-point-plus gain on the day.

Sector peer R.H. Donnelley, which owns Dex Media, also saw its debt gain on the day. A trader quoted the 8 7/8% notes due 2016 at around 61 and the 8% notes due 2013 at around 73, both up a couple points.

Another trader also noted that R.H. Donnelley's bonds "have been tagging along, up or down" with Idearc. He pegged the 8% notes up 2 points on the day to 72 bid, 73 offered.

At another desk, a source saw R.H. Donnelley's 6 7/8% notes due 2013 up nearly 2 points at 59.5 bid, while the Donnelley-owned Dex Media West 9 7/8% notes due 2013 gained nearly 4 points to the 88.5 mark.

Both companies produce telephone directories. Idearc is based in Dallas, and R.H. Donnelley has headquarters in Cary, N.C.

Broad market: Some up, some down

Thornburg Mortgage Corp. is continuing its descent. The bonds started to fall Monday after news of more margin calls startled investors.

A trader said the 8% notes due 2013 were once again weaker in Wednesday's session, closing near 64.

Late in the day, Thornburg filed an 8-K with the Securities and Exchange Commission stating that the company was in default due to its non-payment of $28 million in margin calls.

Linens n'Things Inc. floating-rate notes due 2014 got "beat up," a trader said, ending the day at around 37. He said the loss was likely "in anticipation of bad quarterly numbers."

Among other retailers, Claire's Stores Inc.'s 10½% notes due 2017 lost 1.5 points to edge below 50. But Bon-Ton Stores Inc.'s 10¼% notes due 2014 pushed up to the 69 area, a 2.5-point gain. Finlay Fine Jewelry 8 3/8% notes due 2012 gained 1.5 points to 41.5.

True Temper Sports Inc. 8 3/8% notes due 2011 gained nearly 3 points to close at around 55.

AbitibiBowater Inc.'s 8.55% notes due 2010 (originally issued by Abitibi-Consolidated) gained about 3 points to finish at 62 bid, while the company's 6½% notes due 2013 (originally issued by Bowater Inc.) were up better than 2 points to the 63.5 level.

Sara Rosenberg and Paul Deckelman contributed to this article.

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