A 10-cent plunge in a portion of Caesars Entertainment Corp. (CZR)’s secured bonds is “overdone” and buyers have a good chance of reaping gains with the casino operator likely to restructure its debt within two years, according to KDP Investment Advisors Inc.
Caesars’ $1.25 billion of 8.5 percent, first-lien notes dropped as low as 76.25 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s down from 86.25 cents on May 5, a day before Caesars announced it was selling a 5 percent stake in its operating unit to undisclosed investors, a move that it says eliminates a claim for some bondholders to assets held at the parent.
The company may exchange equity for first-lien notes as part of an eventual restructuring, and “collateral backing these bonds is the same as the bank debt so we think holders have a good case to receive a par exchange,” Barbara Cappaert, an analyst at KDP in Montpelier, Vermont, wrote today in a report that changed its recommendation on the 8.5 percent securities to “buy” from “hold.”
The notes traded at 76.5 cents to yield 14.7 percent at 1:36 p.m. in New York, Trace data show.
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