Caesars, ATP give up gains; Levi slips after earnings; Kodak loses big; funds add $635 million

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 13 - A somewhat disappointing earnings report from J.P. Morgan Chase & Co. pushed the high-yield bond market down first thing Thursday, but some credits managed to "claw their way back," as one trader put it.

Market mainstay Caesars Entertainment Corp., for example, fell off right out of the gate after gaining ground in the previous session. By the end of business, the bonds had come back somewhat, though were still down from Wednesday levels.

ATP Oil & Gas Corp., another recently battered name that had been rebounding this week, saw its gains shuttered as the bonds dipped a couple of points.

In the world of retail, most credits continued to see strength. Levi Strauss & Co., however, did not see improvement as investors reacted to the company's Wednesday earnings release.

Eastman Kodak Co. was also weaker, losing anywhere from 4 to 6 points on the day. A trader said the declines were based on several news articles, one indicating the company has hired FTI Consulting Inc. and another on widening credit default swaps.

High-yield funds see inflows

As Thursday's session was finishing up, market participants familiar with the weekly high-yield fund flow statistics said that the funds saw a robust $635 million of inflows in the week that ended Wednesday, according to a weekly report by Lipper-AMG.

That inflow follows the previous week's $363 million of outflows.

For the year as a whole, inflows have been seen in 26 weeks versus 15 outflows, according to a Prospect News analysis of the data. The cumulative inflow for the year is now $1.325 billion.

Meanwhile EPFR Global reported $145 million of inflows to high yield funds for the week to Wednesday.

That inflow follows the previous week's $1.36 billion of outflows.

Emdeon for Friday

No issues were priced in the primary market.

As expected, Emdeon Inc. cut short its roadshow and set price talk for its $375 million offering of eight-year senior notes (expected ratings Caa1/CCC+) on Thursday.

Yield talk is 11% to 11¼%.

The order books close at 11 a.m. ET on Friday, except for Boston accounts. The deal is set to price after that.

Initial timing for the roadshow specified stops on the U.S. West Coast in the week ahead.

Demand for the Emdeon senior notes is expected to be intense, and allocations are expected to be tough, buy-side sources say.

Barclays, Bank of America Merrill Lynch, Citigroup, Goldman Sachs and SunTrust are the joint bookrunners.

The notes, which will be issued via special purpose vehicle Beagle Acquisition Corp., will rank pari passu with the $375 million of 11¼% senior notes due 2020 that affiliates of Goldman Sachs have agreed to purchase, as previously reported.

The wide end of Thursday's 11% to 11¼% price talk is equal to the coupon set on those privately placed notes.

Market indexes end mixed

Market statistics were mixed on the day, according to different sources.

The CDX North American Series 17 High Yield index came in nearly half a point to 90 3/8 bid, 90 5/8 offered, a market source said.

The KDP High Yield index meantime rose to 70.61, with an 8.31% yield, from 70.55, with an 8.35% yield, on Wednesday.

"We're generally just kind of going with the stock market," a trader said. "It was down, then it clawed its way back."

Caesars, ATP retrace

A trader said Caesars' 10% notes due 2018 were down "right off the bat" Thursday, falling from 69 bid on Wednesday to 671/2.

"So they gave back most of the gains [from the previous session]," a trader said.

By the end of the day, the bonds had managed to climb back up "on pretty heavy volume" to end around 681/2.

Meanwhile, ATP Oil & Gas' issue of 11 7/8% notes due 2015 got "almost as high as 80 this morning, then it backed off a bit," a trader said.

Another trader said the debt was "off a couple" around 77, also on "high volume."

Levi dips post-earnings

While most retailers were continuing to improve, Levi Strauss' bonds were declining - albeit modestly so - after the company warned of a tepid upcoming holiday season.

A trader said Levi's 7 5/8% notes due 2020 were "down a little bit, but tons of quotes" around 96 3/8.

Another market source placed the issue at 96 bid.

The San Francisco-based jean maker said that stores such as J.C. Penney Co. and Kohl's Corp. had bought less inventory from it in the last quarter. That resulted in excess stocks, which then required Levi to cut prices it had been raising to cover increasing costs for cotton. As a result, gross margins narrowed to 47%. Revenues, however, gained 8.6% to $1.2 billion.

Most retailers firm

In the rest of the sector, a trader said there was "something going on" in Toys 'R' Us Inc.'s bonds.

The trader said he was seeing "funky prints" in the 8½% notes due 2017. The debt had been bid for in the high-90s, he said, but then a 101¼ trade hit and a 102 bid came in. The paper then traded up to 1021/4.

"That makes it up 3½ points," he said. "It's just some odd price action."

Limited Brands Inc.'s 6 5/8% notes due 2021 meantime "hit a new high for them," a trader said.

He saw the issue trading around 103, up from 99 just a week ago.

"Stronger retailers are coming almost all the way back," he said.

Kodak loses ground

A trader said Kodak's debt was "all over the map" as negative news was hitting the tape.

The trader said there was a report that Kodak had hired FTI Consulting to help it restructure, adding to the crew that already includes attorneys from Jones Day. He also said the CDS was widening "dramatically."

He called the 7¼% notes due 2013 down 4 to 6 points around the 38 level.

Another trader quoted the issue at 37½ bid, 38½ offered, down from 41 bid, 43 offered on Wednesday.

He also saw the 9¾% notes due 2018 at 74 bid, 76 offered.

Times have been tough on the Rochester, N.Y.-based company. Kodak has attempted to turn itself around for the last decade and has not been able to. Its bonds, as well as its equity, have lost most of their value in the last month or two.

Broad market mixed

Elsewhere in the marketplace, Springleaf Finance Corp.'s 6.90% notes due 2017 "gave a little back," according to a trader.

He called the notes down ½ point at 721/2, while the 5 3/8% notes due 2012 slipped to 93¼ bid, 93½ offered, down from 94 previously.

At another desk, a trader said Dex One Corp.'s 12% PIK notes due 2017 gained "a point or so," ending around 221/2.

He noted that the issue is trading flat, or without accrued interest.

NewPage Corp.'s debt was deemed down ½ point, the 11 3/8% first-lien notes due 2014 at 73 and the 10% second-lien notes due 2012 at 11.

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