Leap, Sprint weaker on MetroPCS news; Clear Channel steady despite upgrade; Six Flags moves up

By Stephanie N. Rotondo

Portland, Ore., Feb. 12 - The distressed debt market ended the week on a negative note, as traders reported that the whole marketplace was weaker.

"The market was weaker and the equities going down didn't help," a trader said. Also, with some players vacating their desks early ahead of the three-day weekend - "cheating," he called it - there were less people around to make things happen.

"In general things were definitely softer," said another source.

Leap Wireless International Inc. and Sprint Nextel Corp. were among those losing ground. Sources saw both names ending the day cheaper, even as MetroPCS was reported to be looking at purchasing prepaid provider Leap.

But Clear Channel Communications Inc. was not on the day's losing list. It wasn't on the gainers list either, as the company's bonds held their ground. In a statement put out Friday, Moody's Investors Service said it had upgraded the cable services provider.

The market will be closed Monday in honor of President's Day.

Leap, Sprint weaker on MetroPCS news

Leap Wireless International's debt ended "a little cheaper," a trader said, as news outlets reported that MetroPCS had hired advisers regarding a potential purchase of the prepaid wireless company.

The trader saw the 9 3/8% notes due 2014 at 97½ bid, 98 offered, "probably a recent low."

Another source pegged the issue around 973/4.

Sprint Nextel bonds were also a bit softer on the news. The first trader said the 7 3/8% notes due 2015 "got a little beating," ending "down a few points" at 86 bid, 86½ offered, versus 88 bid, 89 offered previously. He also saw the 8 3/8% notes due 2017 around 94, which he deemed unchanged.

"I think there might be a reason for that," he said of the discrepancy between the two issues, adding that the 8 3/8% notes were "old Nextel bonds" that get treated differently from the rest of the capital structure.

The second source quoted the 7 3/8% notes at 86 bid, 87 offered and called the 8 3/8% notes "down marginally" to around 94.

Earlier this month, Leap Wireless said that it was actively seeking a buyer and while many market players thought MetroPCS was the prime candidate, it had previously said it was not interested in the buy. Sprint was then considered the next possible buyer - that is, if they weren't bought out themselves.

"I don't think Sprint could buy Leap," a source said. "I think people are looking for somebody to buy Sprint."

But apparently MetroPCS had a change of heart, as it reportedly hired JPMorgan Chase & Co. and Credit Suisse Group AG to look at the potential acquisition.

The two companies had attempted to merge in 2007, but could not agree upon a price. Since then, the industry has faced massive competition and both Leap and Sprint have felt the burn, mainly from subscriber losses.

Clear Channel steady despite upgrade

Elsewhere in the technology arena, Clear Channel Communications' bonds seemed little fazed by news that Moody's had upgraded its rating.

A trader called both the 10¾% notes due 2016 and the 11% notes due 2016 unchanged, at 69 bid, 70 offered and 59½ bid, 59¾ offered, respectively.

At another desk, the 11% notes were seen around 60, while the 10¾% notes were around 70.

Moody's upped Clear Channel's corporate family rating to Caa2 from Caa3. Its probability-of-default rating and senior 2016 notes were affirmed at Caa3.

The agency said that the upgrade reflected its belief that, while its capital structure is still overleveraged, a full restructuring or bankruptcy filing did not seem likely at this point.

"In turn, recovery levels will likely improve moderately over time as compared to the low 2009 levels as cyclical pressures subside and valuation multiples and EBITDA increase, which is the primary driver for the upgrade," stated Neil Begley, a Moody's senior vice president, in a press release.

"The maturities of the legacy notes that mature through 2013 are likely to possess higher recoveries or be repaid in full to avoid bankruptcy - the primary objective of the current equity owners."

Moody's also revised its outlook on the San Antonio-based cable services provider to stable.

Six Flags moves up

A trader said that Six Flags Inc.'s bonds "did see some activity" around a 29½ bid, 30½ offered context, adding that "30 and change is up 1½ [points]." He saw some trading in its 8 7/8% notes that were to have come due on Feb. 1, though "not much activity" in its 9 5/8% notes due 2014, all in that same 29 bid, 31 offered area.

A shareholder has meanwhile requested that the bankruptcy court overseeing the New York-based theme park operator's restructuring replace current management with a trustee, alleging that the management team led by Washington Redskins owner Daniel Snyder had breached its fiduciary duty to Six Flags shareholders and claiming that it had drained Six Flags resources to benefit other companies controlled by Snyder.

Broad market loses weight

Also in distressed territory, "a bunch" of Harrah's Entertainment Inc.'s 10% notes due 2018 traded "down another point" to 73 bid, 74 offered, according to a source. He added that about $50 million of the bonds changed hands.

First Data Corp.'s 9 7/8% notes due 2015 were "also a little softer," he said, at 83 bid, 84 offered, with about $15 million in turnover.

Paul Deckelman contributed to this article.

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