Fremont General bonds up; Tembec gains; Linens N' Things weaker; Fedders better

By Stephanie N. Rotondo

Portland, Ore., May 22 - Fremont General Corp.'s bonds were the "big mover" of the day, a trader said, as the company announced it would sell its commercial lending business.

Traders said the news, which was released just before the bond market began trading on Tuesday, sparked as much as a 5-point gain on the open.

Canadian forest products company Tembec Inc. saw its bonds start to rebound a little from the losses it had acquired over the last week. But while traders agreed that the debt was up about 1.5 points across the board, they could not agree on what was causing the move.

Elsewhere, Linens N' Things continued to bottom out. A trader attributed the recent losses to poor numbers coupled with a lack of guidance.

It seems investors are taking another look at Fedders Corp.'s bonds, as the market theorizes that the debt could be worth 40 or more if the company is forced into an asset sale. On that theory, a trader said the notes were more active during trading.

Fremont notes up

After its was announced Tuesday morning that savings and loan Fremont General would sell its commercial real estate lending business, the California-based company's bonds opened as much as 5 points higher than the previous day's close.

According to a trader, the 7 7/8% notes due 2009 leveled off after the initial spike, settling in the 99 levels all day.

The trader pegged the notes at 98.75 bid, 99.75 offered.

"These bonds should trade above par," he said, "easily above par."

The trader said that some market players had been worried about the bonds, given their short maturity. However, the trader said he does not see anything to worry about.

At another desk, a trader said the bonds moved up 5 points on the day, trading in the 99 levels.

"I think it's good," he said of the news, "certainly from a bond perspective."

Earlier in the day, just after Fitch Ratings had revised its outlook on Fremont, a trader quoted the bonds at 99.25 bid, 99.375 offered.

Fremont was hit along with other mortgage lenders during the subprime meltdown. The sale of its lending business, as well as a minority stake in the bank, is a move designed to help bring the company out of the so-called "subprime woes."

Tembec gains

Tembec's bonds fell early in the day, then crawled slightly higher, a trader said.

The trader quoted the 8½% notes due 2011 at 52.5 bid, 53 offered, up from the opening at 51.5 bid, 52.5 offered.

When asked what prompted the move, the trader said the Canadian dollar - a benchmark typically used to explain activity in the Canadian forest products company's debt - was not particularly strong, so "it definitely wasn't that," he said.

"It kind of felt like a buyer came in," he added.

But another trader disagreed, saying the slight rebound in the Canadian currency was in fact the reason for the gains.

The second trader said Tembec's bonds were up about 1.5 points on the day, pegging the 8½% notes at 53 bid, 54 offered. He also saw the 8 5/8% notes due 2009 at 59 bid, 60 offered, and the 7¾% notes due 2012 at 52 bid, 53 offered.

The trader said, overall, the company could be attractive due to a good asset valuation in the case of liquidation.

Linens N' Things weaker

It has been no bed of roses for Linens N' Things of late, as traders are seeing a continued slide, attributed to poor quarterly earnings.

A trader slated the floating-rate note due 2014 as down 1.5 points to 84. "They continue to get beat up," he said.

"I think people have concerns on future expectations for the company," he continued. Not only did the numbers disappoint, he said, but the company gave no indication where it was going in the year to come.

"I just wonder if there's a particular large seller, because this thing is just getting weighed on," he said. "The bottom is selling out of it."

Fedders better

Liberty Corner, N.J.-based Fedders' bonds "got a little more active," a trader said, gaining "2 points or so" on the day.

The trader saw the 9 7/8% notes due 2014 higher at 38 bid, 39 offered. Another trader said he saw the bonds "a little bit better" at 36.5.

According to the first trader, investors are thinking the bonds could be worth more in the event of an asset sale.

"Folks think they are worth 40 or higher if they do a liquidation," he said. "So in the mid-30s, they are not a bad buy."

Aveta slips

Aveta Inc.'s term loan was lower again, this time losing about a point and a half on a day-over-day basis, according to a trader.

The term loan ended the session at 63.5 bid, 65.5 offered, down from Monday's closing levels of 65 bid, 67 offered, the trader said.

However, during trading, the loan moved around at 63 bid, 64 offered and even as low as 62.5 before it recovered slightly toward the end of the day, the trader added.

The loan has been in a downward spiral ever since a private lender call on Friday that had something to do with its struggling Puerto Rico business.

Aveta is a Fort Lee, N.J., for-profit company focused on Medicare Advantage and the health care needs of the chronically ill.

Winn-Dixie firms

Winn-Dixie Stores Inc.'s bonds are continuing to gain, traders reported. One market player said the stubs came in at 12.5 bid, 12.875 offered, while another saw the notes at 12.375 bid, 12.625 offered.

With no fresh news, the first trader said it was "more of the same."

"The stock is up and people are looking for ideas," he said.

Broad market mixed

Primus Telecommunications Group Inc.'s 8% notes due 2014 were called better at 70 bid, 72 offered. A trader said the firmness was due to "folks putting their money to work before the long weekend."

Another trader saw the 8% notes "rebounding" 2 points at 69.5 bid, 70.5 offered.

Elsewhere, Movie Gallery Inc.'s 11% notes due 2012 were deemed half a point better at 83 bid, 84 offered.

Northwest Airlines Corp.'s 10% notes due 2009 were 1.5 points better, at 75.5 bid, 77.5 offered, while Delta Air Lines Inc.'s stubs were also point better at 7.25 bid, 7.5 offered.

Calpine dips

A trader said Calpine Corp.'s paper was "uneventful again," calling the issues down about a point overall.

He saw the 8½% notes due 2011 at 129 bid, 130 offered, the 8½% notes due 2008 at 125 bid, 126 offered and the 6% convertibles at 112.5 bid, 113.5 offered.

Meanwhile, another trader said Calpine's bonds were pretty much unchanged from Monday's levels, except for the convertibles, which were "down a couple of points."

He saw the 4¾% convertibles at 113 bid, 115 offered, the 6% converts at 112 bid, 114 offered and the 7¾% 2015 converts at 131 bid, 133 offered, each down 2 points on the day.

Auto sector firms

In the automotive realm, traders saw Delco Remy bonds up about 1.5 to 3 points, with its senior notes quoted at 96.5 bid, 98.5 offered, up 1.5 points, and its subordinated notes, like the 11% notes due 2009, at 54 bid, 56 offered, up 2.5 points.

Dana Corp.'s 6½% notes due 2008 were 0.75 point better at 94.75 bid, 96.75 offered, while Delphi Corp.'s 6.55% notes due 2013 were also 0.75 point better, at 114.75 bid, 115.75 offered. Dura Automotive's 8 5/8% notes due 2012 were up a point at 39 bid, 40 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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