Sea Containers higher; TOUSA dips on subprime woes; Remy continues to gain

By Stephanie N. Rotondo

Portland, Ore., June 20 - Bermuda-based Sea Containers Ltd. continued to see its bonds improve Wednesday as speculation that the company may have to take on less pension debt surfaced.

A trader said the bonds gained at least 2 points on the day, combined with about 5 points the previous day.

While the bonds have been holding their own in the 90s, an analyst believes that the bonds are currently overvalued.

"I've always thought the bonds were overvalued," a trader said, "always, always, always."

Still, the first trader said he believes the bonds could be worth more.

Meanwhile, subprime woes are flaring back up, and Technical Olympic USA Inc. (TOUSA) is feeling the pain.

A trader said the bonds, which have been very quiet of late, got a little more active, but the trader saw the debt fall about 1.5 points.

The autosphere continued to remain active as Remy International Inc.'s bonds continued to react to last week's announcement of a pre-packaged bankruptcy plan.

Sea Containers higher

Sea Containers gained another 2 points Wednesday, after earning as much as 5 points Tuesday, as speculation in the market suggested that the company's pension debt obligation may be decreased.

A trader said he saw the 10¾% notes due 2006 at 99 bid earlier in the day, while another trader saw the notes print as high as 99.25, which he said was up several points. The second trader said he also saw the 10½% notes due 2012 print as high as 97.5, about 1.5 to 2 points higher from the previous day's close.

At another desk, a trader said the 10¾% issue was at 98.5 bid, 99.5 offered, and the 10½% paper closed around 96.75 bid, 97.75 offered. He also quoted the 7 7/8% notes due 2008 at 93.5 bid, 94.5 offered.

And, at yet another desk, a trader saw the 10¾% notes with a 98.75 bid and the 7 7/8% bonds at 94.125.

The third trader, when asked why the bonds had been gaining, said it was because of speculation that, instead of being ordered to fund the equivalent of $250 million into a pension plan, a British court may relent, forcing the company to contribute only $170 million.

'That means there will be less debt to share proceeds with the bondholders," he explained.

But while he thinks the bonds are worth a lot more than where they are currently trading, an analyst disagrees.

Kevin Starke, senior analyst at Weeden & Co., said he believes the bonds are overvalued.

"I would not buy them over 80, given the risks," he said. "A lot of things have to align to produce a positive value for the bondholders and stockholders."

According to Starke, many assumed that the diversified company would liquidate assets. However, in what he called "strange attempts," the company has instead aimed at consolidating.

Starke also noted that only one of the company's many assets was really worth anything: a 50% stake in a joint venture with General Electric.

He said the company also held a 10% stake in a joint venture that is bidding for the GNER contract.

"It's hard to believe that's really worth anything," he said.

Starke also agreed with comments a trader made earlier in the week regarding the flow of information, or lack of it. That in itself is part of the overall problem with the company.

"There are too many informational disparities in this case," he said.

Still, the last trader indicated that liquidation was not out of the question and, given the variety of assets, there would be plenty to go around.

"It's not over yet," a trader said. "Nothing happens quickly with that name."

Technical Olympic dips

As subprime woes are flaring up again, Technical Olympic is feeling the burn, as its debt dropped as much as 1.5 points.

A trader pegged the 10 3/8% notes due 2012 down about a point to 75 bid, 76 offered, while the 7½% notes due 2015 fell 1.5 points to 69.5 bid, 70.5 offered.

"As the subprime market takes a plunge, homebuilders are softer naturally," the trader said, adding that mortgage rates have also gone up recently.

At another desk, the 7% subordinated notes due 2011 were deemed down a point to 69.5 bid, 70.5 offered, while its senior 8 5/8% notes due 2017 were 1.5 points lower at 97 bid, 98 offered.

The subprime fallout was triggered once again as rivals of Bear Stearns are selling their holdings in two of the group's hedge funds, which are connected to the subprime mortgage market.

Remy better, autos mixed

Traders continued to see upside movement in Remy International's bonds in the wake of last Friday's announcement that a strong majority of the bondholders had signed on to the terms of its proposed restructuring plan, which will leave the bondholders with full ownership of the company, while current stockholders are frozen out.

In Wednesday's dealings, a trader saw the Remy 8 5/8% notes slated to mature this Dec. 15 at 111 bid, 112 offered, up 4 points from 107 bid, 109 offered on Tuesday, while its 11% notes due 2009 advanced to 102 bid, 104 offered from 97.25 bid, 99.25 offered Tuesday.

Another trader saw the 8 5/8s up 2 points on the day at 109.5 bid, 110.5 offered.

Elsewhere among the distressed automotive names, a trader saw Delphi Corp.'s bonds down 0.25 point - apparently not given much lift from the latest round of news stories indicating that the bankrupt Troy, Mich.-based automotive parts company may be nearing an agreement on a labor pact with the United Auto Workers union, a tale that's been told before.

The trader said that Delphi's 6.55% notes due last year were at 118 bid, 119 offered.

He also saw little change in recent levels for Dana Corp. - the bankrupt Toledo, Ohio-based parts maker's 6½% notes due 2008 are around 106 bid, 107 offered. The trader also saw Dura Automotive Systems Inc.'s bonds "doing nothing," the bankrupt Rochester Hills, Mich.-based parts maker's 8 5/8% notes due 2012 staying at 63 bid, 64 offered while its 9% subordinated notes due 2009 remained at 14.25 bid, 15.25 offered.

Federal Mogul Corp.'s bonds were seen up a point at 103.5 bid, 104.5 offered.

Broad market mixed

Bon-Ton Stores Inc. saw its bonds off 3 points, as one trader pegged 10½% notes due 2014 at 103 bid, 104 offered, noting that the issue worth $510 million in principal was more like 105 bid, 107 offered.

A trader saw Bally Total Fitness Holding Co.'s 9 7/8% subordinated notes due 2007 up at 101. Another trader saw the company's 9 7/8% notes half a point better at 99 bid 101 offered, while its 10¾% notes due 2011 were about unchanged at 109 bid, 110 offered.

The trader also said that MedQuest Inc.'s bonds were weaker. The 0% notes linked to its holding company were down a point at 29, while the 11 7/8% notes due 2012 fell 2 points to 83.5.

"I don't know why but there's got to be a reason," he said.

Another trader said the 11 7/8% notes were down 1.5 points at 83 bid, 84 offered.

Movie Gallery Inc.'s 11% notes due 2012 were seen off 0.75 point at 81.25 bid, 82.25 offered.

A trader saw Spectrum Brands Inc.'s 7 3/8% notes due 2015 down a point at 81 bid, 82 offered. Tekni-Plex Inc.'s 12¾% notes due 2010 lost a point to 92.75 bid, 93.75 offered on "no news" about the Sommerville, N.J.-based packaging maker.

The trader also saw American Color Graphics' 10% notes due 2010 fall 4 points on the day to 80 bid, 82 offered after the company announced that its amended credit facility would include tougher leverage ratios that it will have to meet.

Sirva loan down

Sirva Inc.'s term loan continued its negative momentum in active trading as investors are still reacting to Monday's lender call and the market in general felt weaker, according to a trader.

The term loan ended the day at 95 bid, 96 offered, down from Tuesday's levels of 95¾ bid, 96½ offered, the trader said.

When asked whether the company's amendment request was the primary driver behind the downfall, the trader responded "it's more the budget that's pushing it down but that's private side information."

As was previously reported, the company is looking to get covenant relief through 2008 because of the weaker-than-expected domestic real estate market, and the amendment is necessary for it to present auditors with an acceptable covenant outlook for 10-K's and 10-Q's.

Sirva is a Westmont, Ill.-based relocation services provider.

Sara Rosenberg and Paul Deckelman contributed to this article.

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