Standard Pacific bonds continue to gain; Delphi, Federal-Mogul notes slightly better

By Stephanie N. Rotondo

Portland, Ore., Oct. 29 - Trading in distressed debt was sluggish at best Monday as the market waited to see if the Federal Reserve would cut interest rates again.

The Fed cut rates at its last meeting in September by 50 basis points after a credit crunch had investors scrambling and companies struggling to find liquidity.

Before that rate cut, the market slowed down considerably, as it did during Monday's session. But not all market players believe another rate cut will have any effect.

"It will be a complete non-event," said one trader. He said that what happened last time - a slowdown, then a flurry of activity and then back to nothing - will likely occur again.

"I don't think it will do anything to our market," he said of the potential rate cut.

"The quarter point is already priced in," he said. "At a half point, maybe we get a hit."

But whether he sees the cut as a positive or not, the rest of the market played it cool, which results in very little activity in the junk sector.

Standard Pacific Corp.'s bonds continued to see gains, likely carryover from last week when the company said its new orders were up and cancellations down. Still, a trader noted that activity was light.

In the automotive realm, Delphi Corp.'s bonds saw "a little bit of trading," while Federal-Mogul Corp.'s notes traded in light volume. Still, both companies' debt was deemed a touch better at the end of the day.

Standard Pacific gains

Standard Pacific's bonds were stronger, according to one trader. He added that while he did not see much in the name on the relatively inactive trading day, the bonds seemed to be up.

The trader quoted the 6½% notes due 2008 at 90 bid, 92 offered, up from 89 bid, 90 offered last week. He also called the 7% notes due 2015 better at 74.25 bid, 75 offered, up from 73 bid, 74.5 offered.

"That's the only name that saw any action, and it was slight," the trader said of the lack of volume in the overall market.

Another trader said the homebuilder's bonds were "stronger by a point or two," with its 6½% notes up 2 points at 90 bid, 92 offered.

Last week, the Irvine, Calif.-based homebuilder posted poor numbers, as expected. But in its quarterly conference call Friday, investors and analysts alike were pleasantly surprised to hear that new orders had increased while cancellations were down. The company said that new orders increased by 23% over last year and cancellations were a mere 34%. Comparably, Homebuilder DR Horton reported that new orders declined by 39% while cancellations equaled 48%.

Elsewhere in the sector, Beazer Homes USA Inc. received consents on its bond amendments, which include a waiver of possible default. The news did little - or perhaps more accurately, nothing - for the bonds.

One trader said there was one round lot trade in the company's entire structure, while another said he has not even seen a quote in the name for about a week.

But another trader said the bonds were mostly up half a point, with its 8 5/8% notes due 2011 at 80.5 bid, 82.5 offered and its 8 3/8% notes due 2012 at 79.5 bid, 81.5 offered. Its 8 1/8% notes due 2016 closed at 78.5 bid, 80.5 offered and its 6 7/8% notes due 2015 at 76 bid, 78 offered, both unchanged.

Technical Olympic USA Inc.'s bond structure was mixed, a trader reported. The 9% notes due 2010 closed unchanged at 59.5 bid, 60.5 offered, while the 10 3/8% subordinated notes due 2012 were "down a little" at 15 bid, 15.5 offered.

Delphi, Federal-Mogul better

Among distressed automotive parts suppliers, Delphi's bonds saw "a little bit of trading," according to one source, who also noted that the debt was "a touch better."

The source pegged the 6.55% notes that were to have come due last year closed at 95.5 bid, 96.5 offered, while the 7 1/8% notes due 2029 ended the session at 96.5 bid, 97.5 offered. Another trader called the 6.55% notes up half a point at 96 bid, 97 offered.

But Federal-Mogul's bonds saw "one-off type trades" throughout the day, a trader said, though he added they were "maybe a little better."

The trader said the bonds - which tend to trade in line with each other - were holding their ground in the high-80s. He said he saw a print at 90 during the day, but noted "the price seemed a little high."

Both Delphi and Federal-Mogul are looking to exit bankruptcy soon. On Friday, Federal-Mogul said it had reached "agreements in principle" with insurers who were the lone holdouts against the company's reorganization plan. By resolving the objections, the company inches closer to emerging from Chapter 11 protection.

Meanwhile, Dana Corp.'s 6½% notes due 2008 were unchanged at 82 bid, 84 offered, while a trader said Remy International Inc.'s 8 5/8% notes coming due on Dec. 15 were down 1 point at 112 bid, 114 offered. Remy's junior bonds, the 11% notes due 2009 and 9 3/8% notes due 2012, were down 2 points at 88 bid, 93 offered.

Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 lost half a point to 41.5 bid, 43.5 offered and Visteon Corp.'s 7% notes due 2014 were up 3 points at 81.5 bid, 82.5 offered. Its 8¼% notes due 2010 gained 1.5 points to 92.5 bid, 93.5 offered.

Broad market mixed

Blockbuster Inc.'s 9% notes due 2012 were "hanging in" at 90 bid, 91 offered, a trader said. Another trader said Movie Gallery Inc.'s 11% notes due 2012 were down 2 points at 28 bid, 30 offered.

Linens n'Things floating-rate notes were called unchanged at 66.75 bid, 67.25 offered.

Delta Air Lines Inc.'s stubs traded at 6.25 bid, 7 offered.

"That's about right [where they have been]," a trader said.

Neff Corp.'s 10% notes due 2015 were a half point lower at 71.5 bid, 72.5 offered.

Sea Containers Ltd.'s 10¾% notes that were to have come due last year were up 1 point at 71.5 bid, 73.5 offered.

Solo Cup Co.'s 8½% notes due 2014 were seen up 4 points at 90 bid, 92 offered. The trader did not know what was behind the increase.

Paul Deckelman contributed to this article.

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