Beazer bonds come up off of lows; Technical Olympic weaker; Ply Gem, Tembec off

By Stephanie N. Rotondo

Portland, Ore., Aug. 1 - Market players focused their attention on the housing sector Wednesday as a potential bankruptcy rumor plunged Beazer Homes USA Inc.'s bonds down as much as 20 points.

However, the bonds managed to make a bit of a comeback once the company issued a statement refuting the rumors. Still, the homebuilder's debt was lower on the day.

But the Beazer news prompted risk aversion throughout the sector, prompting Technical Olympic USA Inc.'s bonds to fall as much as 10 points on the session.

The decline in the bonds came despite news that the company had settled its debt related to its Transeastern joint venture, which included paying off the senior and mezzanine lenders of the venture.

Just outside of the housing sector, names linked to housing were also seen lower. A trader deemed names such as Ply Gem Industries Inc. - a maker of windows and doors - and Tembec Inc. - a forest products company - weaker.

"I think people are concentrating on the homebuilders sector," a trader said. "They are not looking at anything else."

That statement seemed to hold weight, at least in relation to Salton Inc. That company's bonds did not trade, even with fresh news out that a merger with APN Holdco had been terminated.

"It's probably Harbinger [Capital Partners] biting off a little more than they can chew in this environment," the trader said of the dead deal.

Another trader said that investors could be shying away from the bond market, choosing instead to follow a volatile stock market.

"Things were up, then down, then up, then down," said another trader.

Beazer dips

Homebuilder Beazer Homes saw its bonds slide as much as 20 points as rumors began circulating that the company was nearing bankruptcy.

Upon hearing the rumors, however, the company issued a statement, calling the buzz "unfounded," which helped the bonds regain most of their losses.

"There is so much general risk aversion [and] shorting going on that creates a lot of volatility," a trader said, explaining the roller-coaster movement in the bonds.

A trader pegged the 6 7/8% notes due 2015 at 76 bid, 76.75 offered, back up from its lows in the high-60s.

Another trader saw the 8 1/8% notes due 2013 down 6 points at around 78, adding that the bonds traded as low as 68.

"So they are about 10 points off the bottom," he said.

"The bonds are almost back to where they started," he said, noting that overall, the bonds were down maybe 2 points toward the end of the day.

At another desk, a trader saw the 6 7/8% notes in the 76 bid, 77 offered context, the 8 1/8% notes around 78 and the 8 3/8% notes due 2012 at 78 bid, 79 offered.

"In some cases, the bonds were down just 3 points on the day, depending on which issue you look at," he said.

Elsewhere, a trader said that activity in Beazer's convertibles was rather heavy, with more than $17 million trading.

"We have become aware of rumors circulating in the market about Beazer Homes' liquidity and a prospective bankruptcy filing. We do not know where these scurrilous and unfounded rumors started," the company said in a statement addressing the rumors.

The bankruptcy rumor is one more reason for investors to be concerned, however. Its mortgage business is facing a possible federal investigation and charges of fraud. The Securities and Exchange Commission is also looking into possible violations of securities laws.

"This is a tough one, this one," the first trader said. When fraud is involved, he said, you could expect a big mess.

Still, he did not think the company was going to go down soon, given a new bank deal recently inked.

"It would be odd for the banks to let the thing fail," he said.

Beazer announced last week that it had entered into a new $500 million revolving credit facility, which would replace the company's current $1 billion facility. The four-year agreement also includes an accordion feature that allows for an increase up to $1 billion.

Wachovia Securities and Citigroup Global Markets arranged the deal.

Technical Olympic weaker

"General risk aversion" in the sector slapped down Technical Olympic's bonds, a trader said.

"Technical Olympic's bonds were off big," said another trader, who pegged the 10 3/8% notes due 2012 around 45.

Another trader saw the 10 3/8% subordinated notes at 48 bid, 50 offered, down from the previous day's levels around 58.25 bid, 59.75 offered.

"Eww," he said. "That's a big crap out."

At another desk, a trader said the subordinated paper was "weaker," with the 10 3/8% notes down 6 points at 48 bid, 49 offered and the 7½% notes due 2015 down to around 45.

The senior paper, however, "didn't move much at all," the trader said. He saw the 9% notes due 2010 close the previous session around 79.25 and then close Wednesday at 77 bid, 79 offered.

The decline in the subordinated paper comes despite the news that the company had settled its debt related to its Transeastern joint venture, using funds it secured from a $500 million term loan credit facility.

Ply Gem, Tembec off

Continuing concerns regarding the housing and subprime mortgage industries leaked into the broader market but directly affected housing-related names such as Ply Gem and Tembec.

A trader quoted Ply Gem's 9% notes due 2012 around 78.5, adding that the bonds had been at 80 bid, 81 offered at the end of the previous session.

He also saw Tembec's 8½% notes due 2011 close lower, despite a strong start at the open. He pegged the bonds at 42.5 bid, 43.5 offered at the close, opening at 44.5 bid, 45.5 offered.

Tembec has seen its bonds dip in the past, mostly related to movement in the Canadian dollar, but also due to decreasing lumber demand as a decline in new housing starts.

Elsewhere, a trader saw Accredited Home Lenders Inc.'s preferred issue off at $17.70, with a 20% yield.

Salton bonds quiet, equity bouncy

A merger termination did nothing for Salton's bonds, though a trader said the equity bounced around throughout the trading day.

According to NASD Trace, Salton's 12¼% notes due 2008 have not traded since early last week, when they last traded at 98.

On the stock side, however, shares in the company opened at 70 cents and moved as high as $1.17. Still, at market close, the stock was off 9 cents, or 12%, to 66 cents.

The Lake Forest, Ill.-based appliance maker said Wednesday that it had received notice from APN Holdco., terminating an acquisition agreement.

The company said it will "vigorously pursue" action against APN, though the company previously said that either company could pull out of the agreement if it was not completed by July 31.

Salton also said that it has entered into an interim amendment, allowing for an extension on the repayment of some outstanding debt Monday.

Sleep Innovations loan lower

Sleep Innovations' bank debt plummeted on Wednesday on what seems to be private side news, according to market sources.

The first-lien term loan was quoted at 55 bid, 60 offered, down from the high-80s, and the second-lien term loan was quoted at 17 bid, 22 offered, sources said.

"I think there was some sort of call yesterday," one source remarked.

"I think EBITDA was revised downwards, but I'm not sure," another source added.

Sleep Innovations is a West Long Branch, N.J., fabricator and marketer of foam bedding, sleep products and accessories.

Broad market mixed

A trader said Six Flags Inc.'s bonds, which have been under pressure recently due to lower-than-expected quarterly numbers, fell 4 to 5 points on the day.

He quoted the 9 5/8% notes due 2014 at 74 bid, 75 offered and the 9¾% notes due 2013 at 75 bid, 76 offered.

Meanwhile, the trader said the gaming sector held firm during the session. He saw Trump Entertainment Resorts Inc.'s 8½% notes due 2015 trade anywhere between 83 and 85 throughout the day, noting that the bonds were rather volatile. He said the closing market for the bonds was around 83.5 bid, 84.5 offered.

Sara Rosenberg contributed to this article.

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