Tekni-Plex falls on pulled speech; Movie Gallery loans, bonds down; Countrywide off despite reassurances

By Paul Deckelman

New York, Nov. 27 - Tekni-Plex Inc.'s bonds were seen bouncing crazily around at lower levels, with a trader linking the fall to the company's decision to scrub a presentation at an investor conference.

Elsewhere, Movie Gallery Inc. bonds and bank debt were seen having fallen sharply.

In the troubled mortgage sector, Countrywide Financial Corp.'s bonds were seen mostly lower despite a company executive's efforts to reassure investors that the Calabasas, Calif.-based mortgage giant's liquidity problems are under control. Residential Capital LLC's bonds were off from recent highs as investors took some profits after the big run-up in those bonds seen last Wednesday and to a lesser degree, last Friday.

Tekni-Plex takes a tumble

A trader saw Tekni-Plex's 12¾% bonds all over the place, saying its movements were "pretty crazy." He said the bonds opened at 56 bid, 57 offered, fell as low as 47 bid, 48 offered during the session but came off those lows to end at 51 bid, 52 offered, "down 5 points on the day, but intraday down 10 points."

Another trader saw a similar pattern, with the bonds going from the high 50s to the high 40s and then back to the low 50s.

He said he had not seen any fresh news out on the Somerville, N.J.-based packaging company, but suggested that some answers might be forthcoming from its Thursday conference call.

The first trader suggested that the fall may be linked to the company's decision to pull out of a scheduled presentation at an investor conference. "They were supposed to speak at the conference, but they cancelled their appearance."

Movie Gallery horror show

Elsewhere, Movie Gallery's bonds fell sharply "after their first-lien paper was getting murdered," a trader said, quoting the 11% notes due 2012 down 7 points on the day at 21 bid, 23 offered.

Another trader saw the troubled Dothan, Ala.-based video rental chain operator's bonds at 21 bid, 24 offered, down 4 points.

Yet another trader who saw the bonds at similar levels opined that they were down "in sympathy with the bank debt," which he saw trading as low as 75.5 bid, 78.5 offered from prior levels at 80 bid, 82 offered.

"If the first-lien paper is dropping that much," he said, "then the bonds are certainly not going to be acting positively."

A bank debt trader said that Movie Gallery's first-lien term loan was pretty volatile, trading down considerably early on in the session and then regaining a good portion of its losses before the close.

The first-lien term loan went out at 79 bid, 81 offered, down a point from Monday's levels of 80 bid, 82 offered, the trader said. In the morning, the paper traded as low as 75.

The trader explained that there were a couple of sellers out in the morning, which pushed trading levels down. Once that paper got cleaned out, some opportunistic buyers stepped in at the lower levels, pushing the loan back up.

Charter gyrates around

A trader saw Charter Communications Inc.'s bonds drop around a point in active trading, but then bounce off those lows to end unchanged, with its 10% notes due 2014 ending at 60 bid, 62 offered and its 8% senior notes due 2014 at 96.75 bid, 97.75 offered.

He saw no fresh news out about the problem-plagued St. Louis-based cable operator

Countrywide off despite reassurances

Elsewhere, Countrywide Financial's 6¼% notes due 2016 were seen by a trader to have fallen 1 point to 58 bid, 59 offered. He also saw its 3¼% notes due 2008 unchanged at 87 bid, 88 offered.

At another shop, a trader pronounced the company's bonds "mostly lower," noting that the 6¼ were trading with "a 58 handle" for most of the day.

A market source saw the widely traded 61/4s ending up slightly at 59, helped off its earlier lows by some large-block trading late in the session - but its 5 5/8% notes due 2009 were seen off 2½ points on the day at 74.5.

Yet another source called the 61/4s down nearly a point at 59, although its 4 1/8% notes due 2009 were actually up more than a point at 73.5, both on brisk trading volume.

Countrywide's recently battered NYSE-traded shares, meantime, gained 33 cents, or 3.82%, to close at $8.97 on volume of 45 million, somewhat above the usual activity level.

Countrywide, hard-hit by the credit crunch and recently reeling from suggestions that its liquidity could dry up because of troubles at Freddie Mac - a major buyer of mortgages from companies like Countrywide which itself has now run into some financial trouble - was in a damage-control mode on Tuesday.

Its managing director of investor relations told an audience of investors at a Friedman, Billings, Ramsey conference in New York that Countrywide's liquidity and capital are adequate to meet the company's operating and growth needs and to fund all debt maturities through 2008 without raising new debt. He also said that the bad news from Freddie Mac or other government-sponsored enterprises would not have a material impact on Countrywide's ability to fund its loans, and defended the more than $50 billion of advances which the company got from a branch of the Federal Home Loan Bank, borrowing which came under attack Monday by frequent Countrywide critic Sen. Charles Schumer, D.-N.Y. (see related story elsewhere in this issue).

Countrywide's bonds and shares got clobbered last week after government-sponsored mortgage financier Freddie Mac reported that it lost $2 billion in the third quarter, and said it reserved $1.2 billion for bad loans. Analysts predicted that those losses and the slowdown in the housing market could severely limit Freddie Mac's ability to purchase pools of mortgages from lenders such as Countrywide, which generate capital to keep making new loans by securitizing massive bundles of loans they have written and selling them, either to private-sector investment banks or to government-sponsored enterprises such as Freddie Mac and its larger companion, Fannie Mae. While investment banks have recently been pulling in their horns as far as buying loans from the mortgage lenders, the GSEs had seemed like reliable financing sources of last resort - until last Tuesday's Freddie Mac results led to market fears that this funding source too could dry up.

ResCap comes in from highs

Also on the mortgage front, a trader saw Countrywide competitor Residential Capitals bonds "continuing to soften a touch off the highs from [last] Wednesday and Friday. It feels like some shorts got covered and they kind of went back to reality a little."

ResCap, another trader said, "was one of the more active names," with its longer-dated issues, such as its 2013 and 2015 paper "weaker on the day. The bonds are trading closer to 60, down from recent levels" to which they had moved last Wednesday when ResCap announced it was tendering for several of its short-dated issues and said that parent GMAC LLC might also buy some ResCap bonds on the open market or in other transactions to help the company, and was committed to stabilizing the troubled Minneapolis-based lender.

"The short bonds popped up about 12 to 15 points," the trader said, "and the longer-dated bonds were up 8 or 9 points" on that good news. He said that with that news having been in the market since Wednesday, "they gave back a little of it [Monday] and gave back more today [Tuesday] on profit-taking."

ResCap's 7½% notes due 2013, another trader said, were down about 2 points on the session at 60 bid, 62 offered.

Sara Rosenberg contributed to this report.

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