Sea Containers ends off about 8 points; Transeastern bank paper drifts lower; Dana up, Dura eases

By Ronda Fears and Sara Rosenberg

Memphis, Oct. 10 - Sea Containers Ltd. bonds were buffeted to and fro as the maturity date for its 10¾% notes looms in the coming weekend and, meanwhile Tuesday, the company announced that one of its units has completed a $160.7 million term debt securitization.

Fears that the troubled Bermuda-based maritime and rail transportation company may not be able to pay off the 10¾% notes when they mature on Oct. 15 have pressured the entire capital structure, and news of the securitization was met with skepticism.

After a three-day weekend away from bond trading, the Sea Container 10¾% bonds opened Tuesday at 79 bid, 81 offered, according to one distressed trader, and the issue drifted as low as 68 before bobbing back up to end the day at 71 bid, 73 offered.

"It was an ugly ride" for the Sea Container bonds Tuesday, as one distressed bond trader put it.

Traders said the debt securitization for a Sea Containers unit at first buoyed the parent's bond issues. But, on review, as the market absorbed the news it was observed that the announcement does not mean the parent would be successful in refinancing the 10¾% notes, which caused a pullback.

Bondholders remain at sea

In the face of the news, the upshot was that many traders still think the horizon for a Sea Containers pay off is very rocky.

"It doesn't look like they will pay that," the distressed bond market source added, referring to the 103/4s.

"No one is for sure what this [debt securitization] means. No one knows. The trouble with this company is that if you look at their asset base, it's pretty decent, something like 80 to 90 cents on the dollar. But the company tends to shoot from the hip. You could talk to them, but you never know what you're dealing with."

Sea Containers indirect majority owned subsidiary Sea Containers SPC Ltd. completed a $160.66 million term debt securitization, including a refinancing of $106.92 million principal amount of its series 2001 senior notes and the issuance of $53.75 million in new series 2006 senior notes, according to an 8-K filing with the Securities and Exchange Commission on Tuesday.

The 2006 notes were purchased by Wachovia Bank, NA and Abelco Finance LLC and are secured by marine and intermodal containers owned by SPC, including an additional $53.35 million net book value of containers purchased from the company on Oct. 3.

According to the filing, Sea Containers used the proceeds from the sale of the containers sold to SPC as part of the securitization for working capital purposes.

Transeastern off again

Transeastern's term loan fell by about another 1 or 2 points during market hours as investors continue to fret over the company's capital structure and participation in the weak Florida housing market.

The term loan closed out the day at 63 bid, 65 offered, down from 64 bid, 67 offered, a trader remarked.

The term loan's descent began early on in the week of Sept. 25 after an announcement was made that because of housing market conditions the company can not support its existing capital structure. Prior to that news, the debt was being quoted in the high 90's.

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

Neither Hollywood, Fla.-based Technical Olympic USA Inc. nor Falcone Group, the participants in the Transeastern joint venture, plan to put any more equity capital into the company until the capital structure problems are resolved.

Dana gains momentum

Meanwhile, back on distressed bond desks, traders said there was momentum building for a more positive outcome for bondholders involved in bankrupt Toledo, Ohio-based auto parts maker Dana Corp.

"Somebody did some research that on the '09s recovery could be 100%," said a market source. "So the bonds are up about 10 points from the lows last week."

Dana's 6½% bonds due 2009 gained about 3 points on Tuesday to 75 bid, 76 offered.

Juxtaposed to the Dana situation, however, is Toledo-based auto parts maker Dura Automotive, Inc.

While Dura is not in bankruptcy, many players think it's a matter of when, not if, and the Oct. 15 date for the semi-annual interest payment on its 8 5/8% notes may be the trigger event for a filing.

"It's Russian roulette," said a bond trader, referring to the Dura situation.

Dura's 8 5/8% notes were described as "a little weaker" but still hovering in the area of 37 bid, 38 offered, while its 9% notes due 2009 were stalled at 5 bid, 6 offered.

"It's game over for Dura," said another distressed bond trader. "The only question remaining is whether they will they ride the 30 day grace period or file bankruptcy immediately. The bonds are roadkill. Get out the shovel and scrape them off the pavement."

He said analysts have been saying more frequently that the United States automotive industry, with reduced production from the major automakers like General Motors Corp. and Ford Motor Co., could survive and perhaps thrive with fewer component suppliers.

"Dura may just disappear," he said. "GM's Rick Wagoner [chief executive] doesn't seem to think GM needs an alliance in order to survive. They have not made a lot of noise about this situation."

Delphi better by 1 point

GM has shown a lot of concern about its former subsidiary, Delphi Corp., however. Several heavyweight investors - hedge funds and private equity firms - have shown a great deal of interest, as well, and that continued to prop the Delphi bonds up Tuesday.

Troy, Mich.-based Delphi said Tuesday it is considering a sale of its power products business, having deemed it a non-core operation. The company said it will evaluate all strategic alternatives for the division and, in the meantime, management responsibility for the business will move to its Automotive Holdings Group.

Delphi's benchmark 6.55% bonds moved up from 95 bid, 97 offered on Friday to 96 bid, 97 offered on Tuesday.

The former parts division of GM filed for Chapter 11 bankruptcy protection almost a year ago and there has been considerable positioning for ownership of the company as it comes out of bankruptcy.

On Friday, there was chatter that private equity firm Cerberus Capital Management LP is considering joining a group of investors led by Appaloosa Management LP in acquiring a controlling interest in Delphi.

Appaloosa is 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.

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