Sea Containers buoyed by buyers; Transeastern bank paper steadies; Delphi steers Dura, Dana upward

By Ronda Fears and Sara Rosenberg

Memphis, Oct. 6 - It was a shortened bond session Friday with many players taking off altogether or earlier than even the early bell for an extended long weekend, as the bond market will be closed Monday. Thus, it was no surprise that trading was thin and rather uneventful. Yet, traders said the market felt firmer.

Sea Containers Ltd. was mentioned heading north after a series of declines as some investors bailed out on fears that the troubled Bermuda-based maritime and rail transportation company may not be able to pay off its 10¾% notes that mature Oct. 15.

The bonds reversed from earlier in the week to add 2 points on Friday to 81 bid, 83 offered from 79 bid, 81 offered, and Sea Containers stock (Pink Sheets: SCRA) was lifted by 15 cents on the day, or 17.65%, to $1 flat.

Traders said there was not any concrete news or even any juicy rumors about the Sea Containers situation, but they wagered that the troubled ship operator would manage to stay afloat beyond the due date on the 103/4s.

Transeastern term loan steady

In bank circles, Transeastern's term loan held in Friday at levels of 64 bid, 67 offered after spending a good portion of the week losing ground, according to a trader. However, this stability was not attributed to any specific feelings for the credit, but rather as a result of limited investor participation in the secondary as whole due to the early close, the long weekend and Deutsche Bank's High Yield Conference.

The Transeastern slide began early on in the week of Sept. 25 after news emerged that because of the weak Florida housing market, the company cannot support its existing capital structure. Prior to that announcement, the debt was being quoted in the high 90s.

Transeastern was organized last year as a joint venture between Technical Olympic and Falcone Group. Technical Olympic is a Hollywood, Fla.-based builder and seller of single family homes.

The company said that it is exploring various options to fix liquidity problems, including requesting waivers from lenders regarding potential defaults and permitting future advances under the revolver, and restructuring land bank obligations. But neither Technical Olympic nor Falcone Group plan to put any more equity into the company until the capital structure problems are resolved.

Then this past Thursday, at the Deutsche conference, Traneastern parent Technical Olympic reiterated the idea that its joint venture Transeastern could not support its capital structure saying that the venture has about $600 million in debt at annual carrying costs of roughly $60 million and current business conditions only anticipate Transeastern selling between 1,200 and 1,500 homes next year - translating to at least $40,000 of debt service for each home sold.

Technical Olympic went on to say at the conference that the Transeastern situation is expected to take several weeks to sort out.

Autos shift into fast lane

Despite news Friday that Tracinda Corp. will not be looking to put any more money into General Motors Corp., flagging auto parts supplier Delphi Corp. got a boost from chatter that Cerberus Capital Management LP - the private-equity firm that is buying part of General Motors Acceptance Corp., GM's finance unit - may toss some money in with the group rumored to be looking at bringing Delphi out of bankruptcy.

"Big money is moving into the auto sector," said one distressed trader. "Sentiment is turning."

Cerberus was reported to be in talks about joining a group of investors led by Appaloosa Management LP in acquiring an interest in bankrupt Delphi, the biggest U.S. auto parts supplier and a major GM supplier. Cerberus executives met with union leaders last month seeking their support for a possible bid, according to one report.

Delphi debt was better by about 2 points Friday with the 6.55% benchmark bonds due 2006 closing at 97 bid, 98 offered and the 6½% bonds due 2013 at 92.5 bid, 93.5 offered. The stock (Pink Sheets: DPHIQ) gained 19 cents on the day, or 10.98%, to settle at $1.92.

Meanwhile, GM's bonds were higher Friday but eased back to a negative post on news that Kirk Kerkorian - via Tracinda - has made it known that it doesn't plan to pursue the purchase of another 12 million shares of GM stock after the automaker terminated its alliance discussions with Renault and Nissan. GM's 8 3/8% bonds due 2033 ended the day off by about a half-point at 86.5 bid, 87.5 offered.

New York-based Appaloosa is Troy, Mich.-based Delphi's largest shareholder, with a 9.3% stake. It, along with hedge fund Harbinger Capital Partners and investment banks UBS AG and Merrill Lynch & Co., are speculated to end up with the bulk of Delphi equity as the company exits bankruptcy. For a couple of weeks, market chatter has put Appaloosa possibly near an agreement that could give it up to a one-third equity stake in Delphi when it emerges from bankruptcy.

Dura visibility still murky

The Dura Automotive, Inc. view is still not clear, but the paper tracked Delphi and other auto-related bonds higher.

Dura's 6½% subordinated bonds due 2009 gained about 1 point from the 4/5 area to end Friday at 5/6 while the senior 8.625% bonds due 2012 gained from 36 bid, 37 offered to 37 bid, 39 offered, showing more optimism among sellers than buyers.

Still, traders said the paper reflected a better feel for the sector.

A credit report out Friday from Gimme Credit noted that if Rochester Hills, Mich.-based Dura files bankruptcy, as it probably will, then the company would probably keep its North American operations, which could improve recovery rates from the 50% neighborhood to around 50% to 75% in new debt securities. But, the credit research shop said it wouldn't expect the post-bankruptcy debt to trade well and wouldn't be surprised if Dura filed a second time.

Moreover, Gimme Credit analyst Shelly Lombard said in the report, "Given Dura's murky long-term prospects, we would still avoid the bonds."

Dana, Collins & Aikman up

Traders attributed gains in other auto-related bonds mainly to short covering, as sentiment improves.

"Visibility isn't clear yet, but it seems the fog is clearing a bit," said a trader. "No one wants to wait too late to make their move."

Bankrupt Toledo, Ohio-based parts maker Dana Corp.'s 6½% notes due 2009 were quoted up about 1 point at 72.75 bid, 73.75 offered by one distressed bond trader but another said the issue eased back late in the shortened session to settle unchanged at 72 bid, 74 offered.

Collins & Aikman Corp.'s 10¾% senior notes due 2011 improved sharply from 1.5 bid, 2.5 offered to close Friday at 3.5 bid, 4.5 offered.

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