Caesars bonds seen active, Radiation Therapy off lows; Puerto Rico worries fluster funds

By Paul Deckelman

New York, July11 – The distressed-debt market saw a mostly quiet Friday, traders said, pretty much in line with a quiet session – outside of the new-deal arena – in the larger high-yield bond market.

Here and there, though, there was activity, although there was no overriding theme.

Traders saw relatively brisk dealings in the various bonds of Caesars Entertainment Corp., although there was no firm direction – some of the Caesars paper was up, some down, and some just went sideways.

There was little in the way of concrete developments regarding the Las Vegas-based casino giant, other than news reports indicating that the company had taken a key step in what is expected to be its eventual plan of restructuring its more than $20 billion of debt with the hiring of a law firm.

Sun Products Corp.’s bonds – drifting lower all week – were down again on Friday, with traders pointing to a downgrade in the consumer products company’s credit ratings by Moody’s Investors Service.

Radiation Therapy Services Inc.’s bonds, which were battered earlier in the week on investor worries about Medicare and Medicaid reimbursement levels for the healthcare operator, appeared to have stabilized and were ending the week up from their lows, traders said.

In the municipals market, investors were pondering the latest ominous news – that funds investing in muni debt had seen more than $790 million of outflows in the latest week, their biggest cash hemorrhage since January. Much of the redemptions were attributed to investors nervous about their exposure to debt of Puerto Rico, especially since the island commonwealth’s legislature recently passed a measure allowing its public entities to restructure their debt, leading to ratings downgrades by both Moody’s and Fitch.

Caesars seen busy

Appropriately for a day dated 7-11, a trader declared that casino powerhouse Caesars Entertainment’s bonds “have had a little action,” with its 9% notes due 2020 fairly busy in an otherwise largely becalmed junk secondary market.

He saw the bonds “a little better” at 84½ going home, which he said was ¾ point higher on the day. Turnover on the credit was $10 million to $12 million.

“It seemed like it was an active name today,” with between $150 million and $160 million having traded across the company’s whole capital structure, including the Harrah’s Entertainment Operating Co. legacy bonds.

The latter’s 10% notes due 2018 were trading around 36 or 37 bid, which he said was down about 1 point on the day – but on “not a lot of trading,” with only a few million of the bonds seen having changed hands.

He said that Caesar’s 8½% notes due 2020 were in an 84½ to 85½ bid context, “about where they were when they started the day.”

That bond too only saw a few million traded.

“The higher coupon notes were the ones who traded more,” he said, seeing the 11¼% notes due 2017 unchanged to up a little at 91 bid, 91½ offered, on volume of $5 million or so.

There was little seen in terms of concrete news about the company.

News reports, however, indicated that Caesars’ main operating division, Caesars Entertainment Operating Corp. – envisioning an eventual debt restructuring down the road – has retained the law firm of Kirkland & Ellis LLP to advise it on how to restructure its mountainous debt load.

Sun Products slips

Sun Products “was a name that seemed to be drifting from its recent levels,” a trader said.

He said that the bonds touched as low as 84 on Friday, down from 87 at the beginning of the week, “and it was down close to a point today, from 85, where it was [Thursday].”

He cited the fact that Moody’s had downgraded the Wilton, Conn.-based manufacturer of branded and retailer brand fabric care and dish care products, and kept its outlook at negative, “so that’s probably what was driving it.”

Moody’s cut the company’s ratings – including its corporate family rating – to B3 from B2, cut its probability of default rating to B3-PD from B2-PD and its senior unsecured debt rating to Caa2 from Caa1.

Moody’s said the downgrades reflected recent deterioration in the company’s credit metrics due to heavy competition in the laundry-care category that will likely cause financial leverage to remain above the 6.5x debt/EBITDA threshold for at least several quarters, after over a year above the threshold already.

Radiation Therapy partly recovers

A trader said he “didn’t see a lot today” in Radiation Therapy Services, whose bonds had been hammered down earlier in the week on investor worries that the Fort Meyers, Fla.-based healthcare company – now known as 21st Century Oncology Holdings Inc. – would be adversely affected by expected lower reimbursements from the federal government for Medicare and Medicaid patients.

The company’s 8 7/8% notes due 2017 had gotten as low as 97 bid from levels above par at the beginning of the week, and were trading around 99½ on Friday, “so they definitely rebounded some from the lows.”

The company’s 9 7/8% notes due 2017 “was the one that was trading at the lower dollar prices,” he said. While he had not seen any actual dealings in the bonds Friday, he mused that “I would think that given the other ones [i.e. the 8 7/8s] have crept back up off their lows, that one should be pegged around 80.”

The 9 7/8s had gone home at the end of the previous week trading in a 91-92 context – but after opening around those same levels Monday morning, they began dropping into the 80s, hammered down to as low as 83 bid in a series of smallish odd-lot dealings, and slid further on Tuesday, bottoming out in a 76 to 77 context, before they started creeping back up from that nadir.

Another trader said the 9 7/8s were trading in a 77-78 context and the 8 7/8s were between 98 and par with most of the latter bonds between 99 and 99¾, on volume of around $6 million.

Clear Channel up on day

A trader said that Clear Channel Communications Inc.’s 10% notes due 2018 “are one of the higher-beta bonds – so when the market had its little downdraft [Thursday], they traded as low as 95 at the lows.”

He said the issue was “a little bit better today,” trading around 95½, “so those rebounded back from their losses of the previous day.”

However, he noted that the San Antonio, Texas-based diversified media company’s issue had fallen from 97 at the start of the week, “so it was down about 1½ points on the week.”

Players ponder Puerto Rico problem

In the municipals space, the Lipper Analytics division of Thomson Reuters reported that some $790.3 million more left municipal bond funds than came into them in the week ended Wednesday – the biggest such outflow seen since the week ended Jan. 1, when nearly $1.5 billion bled from those funds.

Most of the damage came from the high-yield segment of the municipals market, accounting for nearly $700 million of the latest week’s outflows. Observers attributed the hemorrhage mostly to investor nervousness about exposure to debt issued by the island commonwealth of Puerto Rico and its various public agencies in the wake of the San Juan legislature’s recent action giving those agencies the power to restructure their debts.

That caused both Moody’s Investors Service and Fitch Ratings to issue downgrades for Puerto Rico’s general obligation bonds. S&P meanwhile downgraded Puerto Rico’s Electric Power Authority revenue debt this week.

A trader saw the Puerto Rico 8% G.O. bonds due 2035 quoted at 85-86, noting that “these things have dropped down. All this week, they’ve been beat up. There’s been a lot of pressure [on the funds] to redeem.”

© 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.