Transeastern debt off on Technical Olympic comments; InSight plunge continues

By Paul Deckelman and Sara Rosenberg

New York, Oct. 5 - Transeastern's term loan dropped a few more points on Thursday, traders said, after half-parent Technical Olympic USA, Inc. had some negative things to say about its joint-venture problem child at the Deutsche Bank High Yield Conference in Arizona.

In the junk bond market, InSight Health Services Corp.'s bonds - which have been cascading steadily downward over the past week on recently reported poor results - continued that slide unabated Thursday, even though there was no news out on the struggling Lake Forest, Calif.-based diagnostic imaging company.

Transeastern tanks

Transeastern's term loan was heard by market participants to have closed out the day at 64 bid, 67 offered - down from Wednesday's levels of 67.5 bid, 69 offered.

"No specifics, but I heard that Technical Olympic didn't have a lot of good things to say about the Transeastern joint venture," one trader remarked.

Antonio B. Mon, the chief executive officer of Technical Olympic, a Hollywood, Fla.-based homebuilder, told attendees at the conference that Transeastern has an unsustainable capital structure at the annual sales levels that are now anticipated of around 1,200 to 1,500 homes - well down from the 3,500 to 4,000 that the company was projecting when Technical Olympic and The Falcone Group bought the company for an undisclosed sum last year.

He also again talked openly about the possibility that Technical Olympic might have to write-off its whole investment in the joint venture, which he further said has unique problems that the company's other joint venture operations don't (see related story elsewhere in this issue).

The Transeastern fall actually began last week after news emerged that, because of the weak Florida housing market, the company can not support the existing capital structure, which includes $600 million of debt.

The company said that it is exploring various options to fix the liquidity problem, including requesting waivers from its lenders regarding potential defaults and to permit future advances under the revolver, and restructuring land bank obligations.

Since the announcement was made, the term loan has dropped by over 30 points over the course of the last week, moving to the upper 60s from the upper 90s. Levels started to move up into the low 70s at the start of this week, but that positive momentum was short lived as the debt has spent the past two days spiraling lower again.

The Sept. 27 revelations about the problems Transeastern was facing have also roiled Technical Olympic's bondholders and shareholders since then - its 7½% notes due 2015 at 75 are about 6 points off their pre-news levels and its 9% notes due 2010 at 95 are off 2½ points - while its New York Stock Exchange-traded shares fell have fallen about $2 from prior levels above $12.

The Techncial Olympic bonds were seen unchanged in Thursday's dealings.

InSight in trouble again

InSight Health Systems' bonds "got crushed," a trader said, quoting its 9 7/8% subordinated notes due 2011 at 23 bid, 25 offered, down 4 points on the day.

He noted that the company's bonds had been getting clobbered for a week, ever since it reported a week ago that it lost $186.747 million in the fiscal fourth quarter ended June 30 versus year-ago red ink of $23.286 million, while its full-year loss widened out to a yawning $210.218 million from a $27.217 million loss the previous year.

"The bleeding hasn't stopped," the trader opined, although he added "but it looks like there was some support down there at the end of the day" that kept the downturn from getting even wider.

InSight's floating-rate notes due 2011 were also seen lower at 78.25 bid, 79 offered.

Distressed auto loans off

Elsewhere, auto names came under some pressure on Thursday in the bank debt market, as negative sentiment towards the sector continues to weigh heavily on issuers like Dura Automotive Systems Inc. and Tower Automotive Inc. Each company saw its second-lien loans drop by about a point on the day, according to a trader.

Dura, a Rochester Hills, Mich.-based automotive parts maker, saw its second-lien loan close out the day at 84 bid, 86 offered, the trader said.

Tower Automotive, a bankrupt Novi, Mich.-based vehicular frames maker, saw its second-lien paper close out the day at 83 bid, 85 offered, the trader added.

A bond trader saw Dura's 8 5/8% senior notes due 2012 fall another 1½ points on the session to 36.5 bid, 37.5 offered, while its 9% notes due 2009 were actually up ½ point at 4.5 bid, 5.5 offered.

He saw Tower's 12% notes due 2013 languishing at 18.5 bid, 20.5 offered.

The traders also saw bankrupt Troy, Mich.-based parts maker Delphi Corp.'s 6½% notes due 2009 up 1¼ points at 95 bid, 96 offered, while its 7 1/8% notes due 2029 were 2 points better at 89.5 bid, 90.5 offered.

He also saw bankrupt Toledo, Ohio-based parts maker Dana Corp.'s 6½% notes due 2008 up ¼ point at 71.5 bid, 72.5 offered, while its 5.85% notes due 2015 were ¾ point better at 67.5 bid, 68.5 offered.

Traders split on Metaldyne movement

A trader saw no further erosion in the bonds of Metaldyne Corp., which had fallen back on Wednesday after the Plymouth, Mich.-based parts maker warned that earnings would be lower going forward because of production cuts by its main customers, Detroit's Big Three.

At another desk, however, a trader saw the company's 11% notes due 2012 down 1½ points at 85.5 bid, 86.5 offered, while its 10% notes due 2013 were ½ point lower at 99.5 bid, 100.5 offered.

After the lower expectations were announced on Wednesday, the 11s had fallen about 3 or 4 points on market concerns - acknowledged by Metaldyne's management - that the anticipated lower earnings could affect its pending deal to be bought out for $1.2 billion by Japanese parts manufacturer Asahi Tec Corp.

Elsewhere in the auto names, the second trader saw American Axle & Manufacturing Holdings Inc.'s 5¾% notes due 2014 unchanged at 83.25 bid, 83.75 offered. The Detroit-based partsmaker on Wednesday announced that it would offer incentives of up to $100,000 to about 6,000 unionized hourly workers at five plants to get them to retire, in hopes of cutting its labor costs. The company also said it was withdrawing its 2006 financial guidance of about $1 to $1.10 in earnings per share because of the cost of the buyouts.

Adelphia up

Bonds of Adelphia Communications Corp. were seen better, traders said, although they saw no news out on the Greenwood Village Colo.-based cable operator, which recently completed the sale of all of its assets to Time Warner and Comcast Corp. for about $17 billion.

Adelphia's 10¼% notes due 2006 moved up to 65 bid, 67 offered from 62 bid, 64 offered. Its 10¼% notes due 2011 likewise gained 3 points to finish at 69 bid, 71 offered.

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