Land lease settlement hurts Tropicana; Linens bonds holding on; Univision debt rebounds

By Stephanie N. Rotondo

Portland, Ore., April 9 - As bad news flooded the marketplace - oil prices hit more than $110 per barrel and UPS released disappointing earnings - the stock market ended the session softer. The distressed bond market, however, managed to hang in there, traders reported.

"The market seemed to shrug off the bad news," a trader said. "You would have thought it would get killed, but it didn't. Cash bonds were pretty firm."

Another trader called the market lower, but only just.

Still, Tropicana Entertainment LLC's bonds could not shrug off the bad news. Traders said the casino operator's debt lost as much as 4 points on the session on the announcement of a $165 million settlement in the company's Nevada land lease dispute.

Meanwhile, Linens n'Things Inc.'s bonds held their own after slipping in the previous session. The notes managed to recover the losses on the news that said the company was possibly looking at filing a pre-packaged reorganization plan.

Univision Communications Inc.'s debt - bank and corporate - also regained some ground. The Spanish-language media company saw its debt slide Tuesday after announcing that it had drawn its revolving credit facility down - a move that some traders found disconcerting.

Lease settlement drops Tropicana debt

Tropicana Entertainment's debt took a hit in response to an 8-K filed Tuesday in which the company said it had reached a settlement in its Nevada land lease dispute.

One trader deemed the 9 5/8% notes due 2014 down 3 to 4 points at around 52, while another said the bonds were "knocked down a good deal," trading flat at 50.5 bid, 51.5 offered. The second trader noted the bonds had closed the previous session at around 56.

At another desk, a trader pegged the notes at 52 bid, 53 offered, though he said that was "down a little bit, but not that much."

In the filing, Tropicana, along with certain "unrestricted affiliates," said it had come to terms with Park Cattle Co. regarding litigation concerning the lease of Tropicana's Lake Tahoe Horizon Casino and Resort. Under the settlement, the "unrestricted affiliates" will pay $165 million to Park Cattle over the next three years, beginning with a $40 million payment made April 2. The company noted that Tropicana itself is not responsible for the payments directly, though that could change in the event of certain defaults.

The filing also stated that in the event of a bankruptcy filing, Park Cattle is entitled to file a claim against the company in the amount of $150 million to $175 million.

Tropicana Entertainment is a Fort Mitchell, Ky.-based casino operator with properties in Atlantic City and Las Vegas, among others.

Linens notes take a break

Linens n'Things' debt took a breather after news came out during Tuesday's session that the company was considering filing a pre-packaged reorganization plan.

A trader said activity in the name died down a bit, calling the floating-rate notes due 2014 unchanged in the high-30s. However, another trader said the bonds regained the previous day's losses, closing at 39 bid, 39.5 offered.

"That's where they were the day before [the news]," he said.

The struggling retailer's bonds slipped during Tuesday's session after a New York Post article came out stating that a pre-packaged bankruptcy filing might be on the horizon. The article also noted that private equity firm Apollo management, which had acquired the company in a leveraged buyout in 2005, had been scooping up chunks of the company's notes.

That struck a cord with many market players, given the recent gains in the name.

"Somebody's been buying them, and it is not just short covering," a trader said Tuesday.

It was also noted in the article that Linens' suppliers have cut the company off, as the company has failed to pay outstanding invoices. Just last month, vacuum-maker Dyson sued the company for neglecting to pay them, though Linens claims it did not owe any additional funds.

"Rumors that the company's vendors were delaying shipments and tightening terms do not surprise us," wrote Gimme Credit analyst Kim Noland in an afternoon report. "While we think [the company] still has some revolver availability that would allow the business to operate for some time, we think an agreed upon restructuring that alleviated the uncertainty for the company's suppliers could help to preserve long-term franchise value."

Still, Noland continued, if the company continues to have negative cash flow, stakeholders could see their recoveries dwindle.

Linens n'Things is a Clifton, N.J.-based retailer specializing in home decor and accessories.

Univision debt rebounds

Univision's strip of institutional bank debt regained some ground and stability on Wednesday as anxiety over the company's bank debt draw downs appeared to die down.

The institutional debt ended the day at 76½ bid, 77½ offered, up from Tuesday's closing levels of 76 bid, 77 offered, traders said.

The company's corporate debt also rebounded, a trader said. He quoted the 9¾% senior toggle notes due 2015 at 59.5 bid, 60 offered.

On Tuesday, the company revealed that it drew down $700 million under its $750 million revolver and initiated a draw under its $450 million delayed-draw term loan for the remaining $250 million of funds available under the tranche.

The company may use up to $250 million of the revolver borrowings to pay down its $500 million second-lien asset sale bridge loan that is due on March 29, 2009, and the delayed-draw term loan funds will be used to prepay senior notes that are due in October.

According to the company, there is no immediate need for additional liquidity, but, in light of current financial market conditions, the decision was made to make the revolver draw so as to get greater financial flexibility.

However, market participants found the news to be somewhat disconcerting as it brought up concerns over the credit in general being that it operates in the media sector and is highly levered.

Univision is a Los Angeles-based Spanish-language media company.

Broad market mixed

Freescale Semiconductors' bonds fell a couple points, its 10 1/8% notes due 2016 at 69.5 and its 8 7/8% notes due 2014 at 79.5.

Delphi Corp.'s bonds "held up," a trader said, quoting the debt generically at 40 bid, 41 offered. Another trader saw the 6.55% notes that were to have come due in 2006 holding steady at 40 bid, 42 offered.

Elsewhere in the autosphere, Metaldyne Corp.'s 11% notes due 2012 closed at 31.5 bid, 33.5 offered, while the 10% notes due 2013 ended at 58.5 bid, 61.5 offered.

Hawaiian Telcom Communications Inc.'s paper has not been very active over the last few sessions, a trader said, though he noted the 9¾% notes due 2013 could be a smidge lower. He pegged the notes at 41 bid, 42 offered.

Charter Communications Inc.'s paper was weaker, its 11% notes due 2015 at around 73.

There was little action in Idearc Inc.'s 8% notes due 2016, a trader said. He called the bonds unchanged with a 67 handle.

Thornburg Mortgage Corp.'s 8% notes due 2013 edged higher to 73 bid, 74 offered. A trader said there was a print at around 71 early in the session, adding, "I don't know who got that lucky."

Neff Corp.'s 10% notes due 2015 were down a point at 48 bid, while Spectrum Brands' 7 3/8% notes due 2015 were unchanged in busy trading at 66 bid. Its 8½% notes due 2013 held in at 85 bid.

Sara Rosenberg and Paul Deckelman contributed to this article.

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