Further erosion for Transeastern; Iridium gains as Motorola trial nears

By Paul Deckelman and Sara Rosenberg

New York, Oct. 11 - Transeastern's term loan slide continued into the Wednesday session, as the beleaguered joint-venture homebuilder's paper gave up yet another point in trading, bringing its levels down to the lower 60s - a far cry from the near-par levels that paper held until slightly more than two weeks ago.

In the junk bond market, Iridium LLC's bonds were seen better, as creditors anticipate having their day in court against the failed satellite telecom company's erstwhile corporate parent, electronics giant Motorola Inc.

Elsewhere, Adelphia Communications Corp.'s bonds were several points better across the board, although traders could point to no specific fresh news that might explain the rise. Sea Containers Ltd.'s bonds meantime continued to erode, with the deadline for paying off its 10¾% notes now just days away and still no definitive word coming from the company as to how - or if - it will pay them.

Homebuilder hammered again

Transwestern's bank debt closed out the day quoted at 62 bid, 64 offered, a fund manager said, down from Tuesday's levels of 63 bid, 65 offered.

Nothing new has emerged on the company's troubling financial situation, which became public knowledge about two weeks ago, when it was announced that the existing capital structure can't be supported due to Florida housing market conditions. Ever since that disclosure hit the market, the bank debt has been in virtual freefall.

Prior to that news, the debt had been quoted in the high 90s.

During a presentation last week at the Deutsche Bank High Yield Investors Conference in Scottsdale, Ariz., Antonio B. Mon, the chief executive officer of Technical Olympic USA Inc., Transeastern's 50% owner, said that while the company - formed by a joint venture between his company and The Falcone Group - had been expected to sell 3,500 to 4,000 homes per year, it is now not expected to sell more than 1,500. At those levels, he said, the company's $600 million of debt, and $60 million annual carrying costs, were "unsustainable."

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.

In his presentation, Mon reiterated the previously announced information that neither Technical Olympic, a Hollywood, Fla.-based homebuilder that invested $90 million in Transeastern, or Falcone Group, plan to put any more equity capital into the company until the capital structure problems are resolved.

A trader saw Technical Olympic's 7½% notes due 2011 up 1¼ points on the day at 81.25 bid, 82.25 offered, though on "no specific news - just strength in the homebuilding sector." A recent pullback in some of the homebuilder bonds from their higher levels that they held earlier this year, produced some "buying on weakness," the trader said.

Iridium up ahead of trial

Elsewhere, the trader said, Iridium's bonds were up about a point "across the board," apparently as a result of investor confidence as their court date with Motorola nears.

The company's 14% notes that were supposed to have matured last year moved up to 29.5 bid, 30.25 offered.

Iridium's bondholders and other unsecured creditors are suing Motorola for $4 billion, alleging breach of contract and other financial misdeeds connected with the 1999 collapse of the once high-flying satellite communications venture. Motorola denies any wrongdoing, and points to its own substantial losses from the Iridium collapse, which total several billion dollars.

Earlier this month, the U.S. bankruptcy court in New York ruled that the five-year-old suit could go forward, and set an Oct. 23 trial date.

The Iridium bonds have recently firmed as a result.

The bonds had already nearly doubled in price between the spring of 2005 and this past spring, and then continued to rise in the wake of the court scheduling a hearing on the lawsuit, which raises the possibility that Motorola might decide to settle the suit for less than the $4 billion that it would cost should it defend the lawsuit and lose in court.

Adelphia gains

Adelphia Communications' bonds were clearly better, prompting one trader to surmise - in the absence of any real news - that "something is going on behind the scenes, something that we don't know about," which he said had pushed the company's bonds up as much as four points, across the board.

But not everyone was in a conspiracy theory mode. Another trader, who saw the bankrupt Greenwood Village, Colo.-based cabler "up a couple" of points, with its 10¼% notes due 2011 at 74.5 bid, 75.5 offered, a 2 point gain, suggested that "they're nearing a court ruling on their plan for distribution of their assets" as a possible explanation for the rise.

Adelphia over the summer sold most of its assets to Time Warner Cable and Comcast Corp. for about $17 billion, in an unusual scenario which saw the bankruptcy court sign off on the asset sale before a plan of reorganization was filed and approved, reversing the usual order of things. The court acted at Adelphia's request, in order to sidestep the infighting between different classes of creditors over who would get what.

Sea Containers continues to weaken

Sea Containers - whose bonds fell as much as 8 points on Tuesday on investor angst about its upcoming bond maturity - continued to sink lower, investors still on edge about the lack of any fresh news from the Bermuda-based maritime transportation and railroad company about what it intends to do about the 10¾% notes that are slated to mature on Oct. 15.

"There was no news about [the 103/4s], so the bonds were weaker," said a trader, quoting them down another point, at 71 bid, 73 offered.

However, while another trader agreed that the bonds were weaker on the day, yet a third trader quoted the bonds as having opened at 71 bid, 73 offered, then having pushed as high as 74 bid, 76 offered, in an attempt to regain Tuesday's lost ground, before coming off that peak to finish at 72 bid, 74 offered, up a point on the session.

Dura up on interest technicals

In the automotive realm, troubled Rochester Hills, Mich.-based parts manufacturer Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were seen up about 2 points on the day to around the 38 bid, 39 offered area, a trader said, noting that rather than trading on any kind of fundamentals, the price was affected by the fact that "the settlement date is the 16th, so you don't have to pay the 2 points of accrued [interest] anymore, and the bonds popped to reflect that.

"They were trading 2 points lower yesterday [Tuesday] because people were adding in the accrued. It's the same price [Wednesday] - except it's without the accrued."

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