Tousa bonds weaker, loans better; Settlement talk helps Iridium; Dura dips, Delphi up

By Stephanie N. Rotondo

Portland, Ore., Oct. 24 - New housing data hurt Technical Olympic USA Inc.'s bonds Wednesday, along with a rating downgrade by Standard & Poor's.

In its monthly report, the National Association of Realtors said existing home sales fell 8% in September, the largest decline since 1999. The median home price also saw a record drop, falling to $211,700 in September. That equaled a 4.2% decreased from a year ago and was the 13th time in the last 14 months that the year-over-year price has dipped.

Across the board, traders pegged the homebuilder's bonds down 1 to 1.5 points on the day. The company's bank debt, however, moved higher as the company announced it would seek amendments on its first-lien and revolver indentures.

It started out as a rumor, but by the end of the day it was confirmed: Iridium LLC's unsecured creditors and former parent Motorola Inc. are in settlement talks. The rumor, then the fact, pushed the bonds up about a point on the day.

Meanwhile, traders were not sure why Dura Automotive Systems Inc.'s bonds continued to decline, and were likewise unclear why Delphi Corp.'s bonds were better. One trader said it was difficult to explain the move, especially on a day when the stock market was rather volatile.

Separately, Tembec Inc.'s bonds rebounded after posting losses in the last two sessions. There was no news out to drive the bonds, but as some traders have noted in the past that name has a tendency to move without a solid reason.

Tousa bonds weaker, loans better

Technical Olympic's bonds were deemed weaker, weighed down by new housing data.

"It was about as bad as you could imagine," a trader said of the report that showed existing home sales took the biggest dip in the last eight years. "That weighed on the sector, for sure."

The trader said the Hollywood, Fla.-based homebuilder's bonds were down 1 to 1.5 points across the board, its 10 3/8% notes due 2012 at 16 bid, 17 offered, its 9% notes due 2010 at 62 bid, 63 offered, its 7½% notes due 2015 at 16 bid, 17 offered and its 8¼% notes due 2011 at 61 bid, 62 offered.

Another trader also saw the bonds softer, its 8¼% notes down to 61.5 from 63.5 bid, 64.5 offered.

At another desk, a trader said Technical Olympic's bonds were "definitely weaker." He pegged the 9% notes at 60.5 bid, 62 offered and the 7½% notes at 16.5. He also saw the 10 3/8% notes trade at 15.

"It looks like paper traded toward the low end of the context," he said.

The homebuilder's bank debt got a bit of a pop after details of a proposed amendment were released.

The first-lien term loan went out at 98½ bid, 99½ offered, up from 98 bid, 99 offered, the trader said.

The revolver went out at 98½ bid, 99½ offered, up about a quarter to a half a point on the day, the trader continued.

And, the second-lien term loan went out at 94 bid, 95 offered, up from 93 bid, 94 offered, the trader remarked.

The company said it is seeking an amendment because it anticipates that recording certain asset impairment charges, deposit write-offs and abandonment charges will cause it to breach one or more of the covenants under the first-lien term loan and revolver.

Asset impairment charges are expected in the third quarter due to weaker-than-anticipated net sales orders and declining prices, and write-offs and abandonment charges are expected in the third quarter since the company is exercising its right to abandon a number of homesite option contracts due to deteriorating market conditions.

Under the amendment, pricing on the first-lien term loan would be increased to Libor plus 500 basis points and the revolver pricing grid would be changed so that pricing can range anywhere from Libor plus 250 bps to Libor plus 525 bps depending on ratings and leverage.

"Seems like it will pass from what I've heard," the trader said, explaining that people don't want the company to have to file for bankruptcy protection. "I would guess they will eventually file but this will stave it off for a little while."

Another trader also believed that the company would get approval on the amendments, but for different reasons.

"[The debt holders] are going to give it to them," he said. "They do not want these guys to file."

If the company were to file, he explained, there could be a case involving fraudulent transfer in regards to the second-lien notes. And, in his opinion, the debt holders would win.

Settlement talk helps Iridium

Talk of a potential settlement between its unsecured creditors and its former parent company boosted Iridium's bonds, traders reported.

One trader said he saw a 2.5 bid on the notes, which are trading in line with each other.

"I've never seen a bid without an offer in these ones," he said. He added that the bonds traded at 2.25 in the previous session.

Another trader quoted the bonds at 3 bid, 3.25 offered, a market echoed by another market source.

Yet another trader said the 12% notes that were to have come due in 2004 gained a point on the talk about a Motorola settlement, at 2.5 bid, 3.5 offered.

Another trader saw them as high as 3.25 bid, 3.5 offered post-news, versus 2.25 bid, 2.75 offered before.

However, at another shop, a trader, quoting the bonds at 2.75 bid, 3.75 offered, said, "the news [about a possible settlement] is out, so this is not a homer."

At a status conference Wednesday, lawyers for the unsecured creditors and former parent Motorola said they are working toward a consensual agreement. If the parties can come to terms, the second part of the case - what Motorola's fiduciary duty was - will be dismissed.

The conference was adjourned until Dec. 18.

Dura slides, Delphi drives

Dura Automotive Systems' bonds continue to slide down, but it is still unclear to some market players why.

"I haven't heard a word," said one trader.

The trader slated the 8 5/8% senior notes due 2012 at 45 bid, 46 offered. Another trader gave the same market for the bonds.

Elsewhere, a trader called the bonds down 3 points at 45 bid, 47 offered.

But Delphi's bonds, which were seen weakening in the last two sessions, were a little better on the day. Again, it was not clear what prompted the move.

"On a day like today, it is hard to explain why that one would be up," a trader said, citing the volatility in the stock market.

The trader pegged the 6½% notes due 2009 around 95. Another source called the bonds unchanged.

Meanwhile, Dana Corp.'s 6½% notes due 2008 were half a point better at 81.5 bid, 83.5 offered.

Tembec rallies

After garnering losses in the last few sessions, Tembec's bonds rallied during the mid-week session.

A trader deemed the bonds "up a little bit," its 8½% notes due 2011 at 43 bid, 44 offered and its 8 5/8% notes due 2009 at 50.5 bid, 51.5 offered.

At another desk, a trader said the bonds were up 2 to 3 points across the board. He quoted the 8½% notes at 43.25, noting that they had started the week around 40. He also saw the 8 5/8% notes at 50.175 bid, 50.5 offered and the 7¾% notes due 2012 at 41.75 bid, 42.25 offered.

A market source said the 8 5/8% notes gained 1.5 points to 50 bid, 51 offered. Another trader who saw those bonds at the same level pegged them up 2 points on the day. Its 8½% notes were called half a point better at 43.

A trader saw Tembec competitor Ainsworth Lumber's 6¾% notes due 2014 drop to 63 bid, 65 offered from 66 bid, 68 offered previously, while its 7¼% notes due 2012 lost 2.5 points on the day to 67.5 bid, 69.5 offered.

While there was no news out to move the bonds, the debt typically moves in tandem with the strength of the Canadian loonie. Some market players have even gone so far as to say that the notes tend to move on nothing whatsoever.

Calpine slips

Calpine Corp.'s notes "came in some," a trader said, as fellow power producer TXU Corp. priced its new issue - which was active and higher in its first day of trading.

The trader said Calpine's bonds were down about 1.5 points, its 8½% notes due 2008 closing at 111 bid, 112 offered and its 8½% notes due 2011 at 115 bid, 116 offered.

Another trader also said the bonds had fallen 1.5 points during the session. He placed the 2011 paper down at 115 bid, 115.75 offered, compared to 117 the previous trading day. He said the 2008 issue fell to 111.5 from 113.

Elsewhere, a trader called the 8½% notes due 2008 down 2 points at 111 bid, 113 offered, while its 7¾% notes due 2009 were a point lower at 110 bid, 112 offered. Its 7¾% convertible notes due 2015 were likewise half a point lower at 106 bid, 108 offered.

Broad market mostly lower

A trader was surprised to see Fedders Corp.'s 9 7/8% notes due 2014 trading up at 14.5 bid, 16.5 offered. He said that some bonds had traded the previous day, which might have "spiked some interest."

"You hate to be the last one in," he quipped.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 slipped to 88, while Blockbuster Inc.'s 9% notes due 2012 were called active, trading early around 90.25, only to come off those highs to close at 89.5.

Level 3 Communications Inc.'s debt continued to be active, a trader said - and lower to boot. He quoted the 9¼% notes due 2014 down half a point at 93.5 while the 8¾% notes due 2017 fell to the 90 level.

Sea Containers Ltd.'s 10¾% notes that were to have come due in 2006 fell to 68.75 bid, 70.75 offered from prior levels at 75 bid, 77 offered. Its 7 7/8% notes due 2008 sagged to 65.5 bid, 67.5 offered from 71.5 bid, 73.5 offered.

Spectrum Brands Inc.'s 7 3/8% notes due 2015 were up 1 point at 72.5 bid, 73.5 offered, and its 11¼% notes due 2013 were half a point better at 85 bid, 86 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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