Vendor payoff helps Linens' debt; Primus Telecom's bonds decline; Gaming sector mostly better

By Stephanie N. Rotondo

Portland, Ore., April 22 - Though the equity markets took another downturn Tuesday, the distressed bond market remained on the firmer side, traders reported.

"It was kind of mixed," one trader said. "The market still feels firm, although I saw a couple things that were softer. But there is not a tremendous amount of activity."

"It was good today," said another trader. "The bond market traded, in the worst case, sideways."

Linens n'Things Inc. was one of the stronger names on the block, as a Wall Street Journal article reported the company was paying its vendors in advance. But while investors seemed pleased and therefore boosted the bonds, traders still expressed doubt as to whether the company can keep going on its present track.

But Primus Telecommunications Group Inc.'s debt bucked the overall market trend and instead continued to drift lower. There has not been any fresh news out and quarterly figures are still about two weeks out, so it is unclear what is weighing on the bonds. However, one trader is speculating that the loss of one Big Bank could be playing a role.

The gaming sector followed the pack, ending the day slightly better. Harrah's Operating's recent new issue continued to be one of the more active names and closed up just a tad on the day. Trump Entertainment Resorts Inc.'s bonds were also better.

Vendor payoff helps Linens

A Wall Street Journal report that stated Linens n'Things was paying some of its vendors before any product had even hit the stores boosted the company's bonds debt.

A trader said the floating-rate notes due 2014 "moved higher again," closing at 45 bid, 46.5 offered versus levels around 44 on Monday.

Another trader placed Linens' debt at around 46, while yet another source quoted the bonds at 44 bid, 46 offered.

The decision to pay off the vendors ahead of time is not only unusual but also can put a strain on the finances. However, according to the WSJ article, Robert J. DiNicola, chairman and chief executive officer, said the "temporary and certainly not ideal" move was necessary to keep its vendors happy.

It has been only a couple weeks since media outlets first began to report that the company was looking to restructure. Some reports have said that some of Linens' vendors have not been paid - backing up a recent lawsuit from vacuum-maker Dyson, which purports that the company has failed to pay its invoices. Linens has said that the lawsuit is unfounded, as the money Dyson claims to be owed was actually money owed to Linens. The company also recently decided to forgo paying its interest payment on the bonds.

Still, the recent news seems little more than a "temporary band-aid."

"I think they need to restructure," a trader said. "At the end of the day, they need to close some stores and get out of some bad leases."

"It makes more sense to restructure instead of putting a temporary band-aid on a big problem when it is likely just delaying the inevitable," he continued.

Another trader made no bones about that fact that he was not a fan of the name. He said that he was more comfortable with the debt when it was trading in the 20s, as there seemed to be enough liquidity to cover the bonds in the event of a bankruptcy filing. But as the filing never came, with the bonds at the current levels any potential recovery is dwindling, he said.

"That is funny," said another trader. "Pay cash to get merchandise that you can't sell. Perfect."

Linens n'Things is a Clifton, N.J.-based home goods retailer.

In other retail names, Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 closed at 81.75 bid, 82.75 offered. A trader saw Bon-Ton Stores Inc.'s 10¼% notes due 2014 up a point at 72 bid, 73 offered.

Primus bonds decline

Primus Telecommunications' debt was actively quoted during Tuesday's session, but the bonds continue to edge lower.

A trader quoted the 8% notes due 2014 at 40 bid, 42 offered and the 14¼% notes due 2011 at 94 bid, 97 offered. Another trader pegged the 8% notes at 40.5 bid, 41 offered, down 1 point.

"There were some sellers out there today," he said.

Though there has been no news recently to cause the bonds to slide, the first trader did offer up one explanation.

"It seems that a few folks think that since Bear Stearns was active in the name and are gone now that accounts are bailing," he said. "That could be."

Primus will release its first-quarter results on May 5 after the market closes. A conference call to discuss the financials will be held that day at 5 p.m. ET.

Primus Telecommunications is a Mclean, Va.-based integrated communications service provider.

Elsewhere in that sector, Charter Communications Inc.'s bonds closed unchanged after ending weaker in the previous session. A trader quoted the 11% notes due 2015 around 76.

But another trader called the bonds better, the 10% notes due 2014 at 51 bid, 53 offered, up from recent levels at 48 bid, 50 offered, while its 8 3/8% senior notes due 2014 were at 95 bid, 96 offered, up from 92 bid, 92.5 offered, recently, "so they're up a couple."

Gaming names mostly better

The gaming sector was seen firmer overall, though there was little to no news relevant to that arena.

One trader said Harrah's Operating's 10¾% notes continue to be one of the more actively traded issues. He said the bonds ended slightly better at 84.25 bid, 84.5 offered.

"That is a little better," he said. "It's not at its highs, but it is up from its lows."

Another trader also called the bonds better at 84.25 bid, 84.5 offered.

However, another source saw Harrah's 5¾% notes due 2017 down half a point to 55 bid.

Meanwhile, Trump Entertainment's 8½% notes due 2015 were a quarter- to a half-point better at 64.5 bid, 65 offered.

Trump will release its first-quarter earnings at 11 a.m. ET on May 8. The casino operator will also hold its conference call to discuss the results at that time.

Among other gaming names, Isle of Capri Casino's 7% notes due 2014 closed at 74.75, up a quarter point, while MGM Mirage's 6 5/8% notes due 2015 were likewise up a quarter at 88.5.

Tribune loan boosted on sale news

Tribune Co.'s term loan rallied on Tuesday as news reports emerged claiming that the company has agreed in principle to sell its Newsday asset, according to traders.

The company's term loan B was quoted at 71½ bid, 72½ offered, and its term loan X was quoted at 94½ bid, 95½ offered, with both tranches up about 2 points from previous levels, traders said.

"Everyone expected this thing to be sold but I guess it's one thing when it actually happens," one trader remarked.

The term loan debt reacted favorably to the asset sale rumblings because investors are hoping for a paydown, traders added.

According to the buzz, Tribune will be selling a majority interest in its Newsday newspaper to News Corp. for about $580 million.

No official word from the companies regarding the transaction came out prior to press time.

Tribune is a Chicago-based media company.

A return trip to distressed for airlines?

With what seems like an endless amount of negative news flowing from the sector, some market players seem to think that the airline industry will make its way back to distressed territory.

"I think they have to," one trader said, who noted that he was not all that active in that arena at this time. Still, he opined that as business travel declines and fuel prices rise, airlines will continue to take a hit in their earnings.

The trader gave as an example a rarely traded United Airlines issue, the 9.02% notes due 2012. He said he had seen the bonds offered in the 50s last week and are now offered in the mid-40s. According to Trace, those bonds have not traded since last summer.

Broad market mixed

Exide Technologies Inc.'s 10½% notes due 2013 "are climbing higher," a trader said, ending the session close to 98. The trader said there was no news to speak of but speculated that as the company's stock has run up over the last few months, perhaps the bonds were beginning to catch up.

Another trader, who said the debt "continued to drift lower," deemed Sabine Pass' 7¼% notes due 2013 active. He pegged the issue "south of 90," down from 92 bid, 93 offered previously.

At another desk, a trader saw Swift Transportation Co. Inc.'s 12½% notes due 2017 lower at 33 bid, 35 offered. Another trader saw the notes at 33.5 bid, 35.5 offered and called them down another 5 points, although he said the movement came in the morning and he hadn't seen anything happening with them since then. Another trader also saw them several points lower at 33 bid, 35 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.