Calpine notes active; Technical Olympic unchanged; Dura seniors move higher

By Stephanie N. Rotondo

Portland, Ore., Oct. 4 - As the distressed bond market prepared for the upcoming holiday weekend, traders reported little notable activity.

Many market players are away from their desks, attending a Deutsche Bank high-yield conference in sunny Scottsdale, Ariz. Others are making plans for Friday, as the bonds market will close early.

"I know it has been slow, but I expected it to be with the holiday week," a trader aid. "Tomorrow is a half day, if that."

"I know I have a tee time," he quipped.

Calpine Corp. - one of few names that have remained relatively active in the recent market lag - saw at least one of its issues move up, which one trader attributed to short covering. The trader also noted a widening spread between two of the company's more active issues.

Despite a surge in activity after the market closed the previous session, Technical Olympic USA Inc.'s bonds were called quiet. Traders said the senior bonds were mostly unchanged, though the subordinated issues were seen weakening.

On Wednesday, Dura Automotive Systems Inc. received court approval on its disclosure statement and related reorganization plan. Come Thursday, the senior bonds - which will receive at least a 55% recovery - moved higher, while the subordinated notes - which are currently slated to receive zero recovery - slipped.

Comments from Delphi Corp.'s chairman related to potential financing prompted gains not only in that name, but in Federal-Mogul Corp.'s bonds as well. Both companies have been concerned with getting exit financing deals in the current credit market, but it seems that things are looking more positive in that area. Obtaining financing will clear the path for both companies to exit bankruptcy by the end of the year.

Calpine paper spread widens

A trader said the spread between Calpine's 8½% notes due 2011 and 2008 was widening, which he said could be due to a short squeeze.

The trader said the 2001 issue "keeps moving up," gaining a point during the session to close around 118. The rest of the structure, he said, "was sideways." He deemed the 2008 paper unchanged at 112 bid, 113 offered.

At another desk, a trader saw both issues gaining a point, the notes due 2001 at 117 bid, 118 offered and the 2008 issue at 112 bid, 113 offered.

The power producer's equity committee's motion for a stay - which would have delayed soliciting votes on the company's recently approved reorganization plan - was denied by the bankruptcy judge overseeing the case. One trader was not all that surprised.

"They were the only ones out there that thought they had a chance," the trader said. "They are lucky to get what they are going to get...at all."

While the bondholders will receive about 95 cents on the dollar in recovery, equity holders will get just under $2 per share. But, according to the trader, stockholders should be grateful.

"If I am a bondholder, I still got 5 points that I am not getting back," the trader said. "I am giving it to the equity."

Technical Olympic mostly unchanged

After a flurry of post-market close activity sent its bonds lower by as much as 5 points, Technical Olympic's bonds were relatively quiet - and unchanged - on the day.

"Believe it or not, they are really not changed after the news yesterday," a trader said, citing the announcement that the company had withdrawn its guidance for 2007 and 2008.

In fact, the trader said the 9% notes due 2010 were "up, actually" at 63 bid, 64 offered. The 10 3/8% subordinated notes due 2012, however, were "down a little" at 27 bid, 29 offered.

Another trader called the debt "kind of unchanged," the 9% notes at 62 bid, 64 offered - "about where they were," he said.

The trader did note that the 10 3/8% bonds were "a little weaker" at 26 bid, 27 offered. He also saw there were some prints in the 20 level on the 7½% notes due 2011 and 2015.

Elsewhere, a trader said the bonds opened the day at the lower levels seen after the previous session, but they moved higher by the end of the day. He quoted the 9% notes around 63 and the 7½% notes due 2015 in the low-20s. He added that the bonds "didn't trade that much."

The first trader said the withdrawn guidance was "not surprising."

"It is more buy the rumor, sell the fact," he said of the reaction prompted by the news.

But the news did solidify his belief that homebuilders are not necessarily a good risk.

"Until we see third-quarter numbers, I wouldn't touch a homebuilder at all," he said.

The second trader said that the news was not really that big of a deal.

"They haven't really given any guidance," he said, noting that the only thing the company has talked about was cash flows, not earnings. "They hadn't told you much to start with."

And really, he added, "How much lower are they going to go?"

Dura bonds move higher

Dura Automotive Systems' senior bonds moved "up a little," according to one trader, just one day after a bankruptcy judge approved the automotive parts supplier's disclosure statement.

The trader said the 8 5/8% notes due 2012 closed at 49 bid, 50 offered. The subordinated notes, the 9% notes due 2009, however, closed down at 1 bid, 2 offered. The trader said the bonds had been 2 bid, 3 offered recently.

Another trader saw the senior notes up at 50 bid, 51 offered, attributed to the reorganization plan's approval.

"As long as it is moving along, moving forward, that's got to be encouraging," he said.

As for the subordinated notes, which will be left with nothing in the current plan, the fight will continue.

"It is not over," the first trader said. "There is some type of battle there."

The trader said he believes the subordinated debt holders have some chance but added that the junior holders will still want the bankruptcy to get done.

"Everyone knew it would take some time," he said.

A confirmation hearing is scheduled for Nov. 26.

Delphi, Federal-Mogul up

A Delphi executive's comments that a financing deal would be ready "very shortly" were the likely cause of the bonds' gains, a trader said.

The trader called the bonds "a little better," its 6.55% notes that were to have come due last year and its 6½% notes due 2009 around 93.5.

On Wednesday, Delphi chairman Robert Miller said that he was "confident" a financing deal would be inked soon, stating that recent credit market troubles were "settling down." The company recently lowered the amount it was looking to finance from the original mount of $7.1 billion.

Delphi's imminent financing news also helped fellow struggling parts supplier Federal-Mogul. Those bonds, which have been increasing of late, were better yet again in Thursday's session.

A trader pegged the bonds around 88, while another placed the notes at 87.5 bid, 88.5 offered. The second trader did note that there was "not a whole lot of volume."

The trader also said that recent comments from the judge overseeing Federal-Mogul's bankruptcy case were "overblown." Last week, the judge said a bankruptcy exit by year's end seemed to be an impossibility, which could put the company's exit financing in jeopardy.

According to the trader, however, as market participants realize that Delphi could get financing soon, it seems likely that Federal-Mogul - considered by many to be a better company - will have no trouble in that department, especially as it requires less cash to emerge from Chapter 11 protection.

Distressed bond market tidbits

Fedders Corp.'s 9 7/8% notes due 2014 were called unchanged by one trader, who placed the notes at 15.5 bid, 16.5 offered. He said that only odd lots traded during the session, some with prints of 17. He said that price, however, was "not indicative" of the bonds real value.

But trading has been light in the notes recently, and the trader speculated that the market is "waiting for DIP approval," expected early next week.

Meanwhile, Movie Gallery Inc.'s bonds have also been quiet recently, and a market source deemed the 11% notes due 2011 unchanged at 36.

But market players are speculating that a potential reorganization plan created by Aspen Advisors is not winning favor with the first-lien term loan holders. Second-lien holders, however, are reportedly not altogether against the plan.

A new equity investment did little to prompt movement in Wise Metals Group LLC's 10¼% notes due 2012. In fact, a trader said the bonds have not traded since early August, when they traded around 90.

The company announced that it reached an agreement with Retirement Systems of Alabama to invest $75 million - RSA will receive convertible preferred equity in return.

"That is the same bunch of clowns that ran US Air into the ground," a trader said of RSA.

Wise Metals and its subsidiaries are leaders in the aluminum can production sector.

"Great," the trader quipped. "And we are all going to biodegradable plastic."

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