Technical Olympic bonds see gains ahead of holiday weekend; Ply Gem weaker

By Stephanie N. Rotondo

Portland, Ore., April 5 - The last full trading day before the long holiday weekend saw many market players out of their seats and trading activity slowing to a crawl.

"It seems dead to me," one source said.

"It's a very short day," said another.

At another desk, a market participant was planning his early escape.

"The very latest I'll be here is 4:01 p.m.," he quipped.

During the lackluster trading day, Technical Olympic USA Inc.'s bonds were somewhat active, all things considered. Traders said the company's bonds gained as much as 4 points on Thursday, despite a downgrade from Fitch Ratings.

There was no indication as to why Ply Gem Industries Inc.'s notes were seen softer, but the low market surprised one market player. He did note, however, that he had not seen the name in some time.

A rating downgrade did little to upset James River Coal Co.'s bonds, which one distressed trader called unchanged. The downgrade was attributed to poor liquidity and operating conditions.

Technical Olympic firms

Homebuilder Technical Olympic saw its bonds gain ahead of the holiday weekend, despite yet another agency downgrade.

At midday, a market source pegged the 9% senior notes due 2010 at 93.5 bid, 94.5 offered, while the 10 3/8% notes due 2012 came in at 76.5 bid. By the close of business, a distressed trader called the senior notes "up a little" at 94.

"I would have called them 92-93 yesterday," he said.

But it was the 10 3/8% notes that garnered major gains: the bonds jumped up 3.5 points, according to the trader, to close at 77.

"There's been a lot of activity in them," the market source said.

At another desk, a trader saw the 10 3/8% notes up 4 points on the day at 76.5 bid, 77.5 offered, calling the issue one of the few features he saw on a mostly dead day.

When asked for a reason for the move, he observed that the company's "stock was up, but I think they're both playing off each other today. There was nothing really of newsworthiness that I saw that would indicate that they would go higher" - that is, he added, "unless somebody knows something that I don't."

Fitch Ratings downgraded the notes Thursday due to "continued challenging market conditions" as well as the potential that the Hollywood, Fla.-based company would incur some of its Transeastern joint venture's debt. The senior unsecured notes fell to CCC+/RR5 from B and its senior subordinated debt was cut to CCC-/RR6 from CCC+.

The Fitch downgrade comes just days after Moody's Investors Service announced it was considering lowering its rating on the distressed company. Moody's looked to poor quarterly figures and the expectation that the company will have to amend its credit agreements as the basis for its decision.

Moody's ranks Technical Olympic's senior debt B3 and its senior subordinated debt Caa1.

Ply Gem bonds down

A market player was surprised to see a lower-than-expected market on Ply Gem's bonds, though he admitted he had not run across the name in a while.

"They're lower than I thought they were," he said, quoting the 9% bonds due 2012 at 87 bid, 88 offered. "In February, they were in the 90s."

No fresh news has been released on the company, but the bonds have seen slight, yet steady, losses since fourth-quarter earnings were posted in March. The manufacturer of residential exterior products showed a $9.8 million net loss for the fourth quarter of 2006 compared to a net income of $3.7 million for the fourth quarter of 2005. For the full year of 2006, net income was $5.7 million compared to $20.2 million for the full year of 2005.

James River steady

Weak liquidity and poor geologic and operating conditions prompted Moody's to downgrade James River Coal, with a continuing negative outlook.

But the slip in its rating did little to affect the mining company's bonds, which Moody's cut to Ca from Caa3.

"There is not much activity in them," a distressed trader said. He pegged the 9 3/8% notes due 2012 at 89 bid, 90 offered, which he said was "kind of where they have been."

However, another source saw those bonds open a little lower on Thursday, at about the 90 level, down from Wednesday's close at 91, then make an abortive rally attempt during the session, getting as high as 94 bid - although on just a few small trades - before tumbling from that peak to end down 2 points on the day, in heavier trading, at 89.

The company posted a wider fourth-quarter loss in mid-March, attributed in part to mounting operating costs. Chairman and chief executive Peter T. Socha said that soft market conditions and new regulatory measures were to blame.

Communications sector down

Satellite communications provider Iridium LLC fell another quarter of a point, a market source said. The notes, which all trade in line with each other, were seen at 22.5 bid, 23.5 offered at midday.

In other distressed communications provider names, Primus Telecommunications Group Inc. saw its 8% notes due 2014 find a "slightly better offer," according to the source, but "that's no great shakes." He quoted the notes at 64 bid, 65 offered.

Sea Containers rebounds

A trader said that Sea Containers Ltd.'s bonds "have rebounded smartly," up about 2 points this week off their recent lows, although he had seen no particular news out on the bankrupt Bermuda-based maritime and railroad transportation company that might explain that rebound.

He saw Sea Containers' 10¾% notes, which were to have matured in 2006, at 85.5 bid, 86.5 offered, up a point on the week, and its 10½% notes due 2007 at 83.5 bid, 84.5 offered, up "at least" 1 to 2 points on the week and half a point in Thursday's session.

He suggested that perhaps, "people are re-evaluating some of the assets and think they may be worth more than [other] people think they are."

Another source saw the 10½% notes up at least 1.5 points on the day at 85.75 bid.

Paul Deckelman contributed to this article.

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