Movie Gallery firms; Delta preferreds active; Technical Olympic lags; Linens n' Things better

By Stephanie N. Rotondo

Portland, Ore., May 29 - The day after the long weekend was described as "pathetic" by one trader as activity in the distressed bond market almost came to a halt Tuesday.

Many market players were still out, a trader said, "or sunburned," he quipped. Another said perhaps others were nursing their Memorial Day hangovers.

Still, in a day were activity slowed to a crawl, Movie Gallery Inc. saw a decent amount of volume in its debt, edging up slightly from its closing levels on Friday. Traders could not explain why the bonds were moving upward.

Also active was Delta Air Lines Inc.'s preferred issue, in which one trader indicated there was good value.

On the less active side, Technical Olympic USA Inc.'s bonds moved a little as the company announced it had received an extension on a recent financing commitment. The funds from the loan are earmarked to pay down its Transeastern joint venture debt.

Linens n' Things attempted to move higher after the company announced it had entered into an amended credit facility, which included a $100 million increase. The retailer's bonds had slipped in recent weeks after the company posted a less-than-stellar fourth-quarter loss.

Movie gallery firms

Traders reported that Movie Gallery's bonds traded up, one of the few names that saw decent activity after the long weekend.

One trader quoted the 11% notes due 2012 at 88 bid, 89 offered, "maybe 87.5 [bid], 88.5 [offered]." He said the bonds opened the trading day at 86.75 bid, 87.5 offered.

He said he did not know why the bonds firmed, stating that the equity was off, but that the two "don't have much bearing on each other."

The trader also mentioned online movie rental provider Netflix's downgrade but said that the grade change was not related to credit.

A second trader pegged the notes at 87.25 bid, 87.5 offered. He said he thought the gains were due to a short squeeze, but he could not be sure.

There was no fresh news that spurred the movement, he added.

At another desk, a trader quoted the bonds at 88, up 0.5 point on "decent volume. A lot of paper traded in that 87.5-88.5 range," he said.

Delta preferred paper active

A trader said he spent a good portion of the day trading Delta's preferred stubs, which he quoted between $1.60 and $1.70. He said the activity was due to "people fooling around" with the issue to make some money.

In addition, he said, with Delta's bond stubs trading around 6.75 bid, 7.25 offered, there is "a little bit of an overcharge opportunity."

Technical Olympic sees light volume

Technical Olympic's subordinated debt saw some activity, a trader said.

He slated the 7½% notes due 2011 at 70.5 bid, 72 offered. He also saw the 10 3/8% notes due 2012 at 80.5 bid earlier in the day. According to the Nasdaq Trace system, that issue did not trade Tuesday.

The Hollywood, Fla.-based homebuilder announced Tuesday that it had received an extension on its financing letter from its lender, Citigroup Global Markets Inc. The company now has until July 31 to execute the two-part $500 million loan.

Linens n' Things edges higher

Specialty retailer Linens n' Things saw its bonds edge up slightly after the company announced it had entered into an amended and restated credit facility, which includes a $100 million increase, bringing the total facility to $700 million.

A trader quoted the floating-rate note due 2014 as last trading in a round lot at almost 85.5. The bond's movement came on very little volume in the day.

In a press release, the Clifton, N.J.-based company said the new credit facility included "several modifications to the credit facility that are all favorable to the company."

Dura gains

Traders saw Dura Automotive Systems Inc.'s bonds up again, possibly on continued speculation about a rumored rights offering.

"A good amount traded," a trader said, "and today they had a pretty good move," seeing its 8 5/8% notes due 2012 opening around 50 bid, 51 offered, trading up to 58 and then coming off that peak to end around 56.

The trader cited news that the company had posted an amended operating report.

But another trader saw the bonds only up about 2 points at 54.5 bid, 55.5 offered. He saw its 9% subordinated notes due 2009 up a point at 12.5 bid, 13.5 offered.

Yet another source pegged the 9% bonds at 14, up 1.5 points.

Among other troubled auto names, the second trader saw Delphi Corp.'s 7 1/8% notes due 2029 a point better at 116.5 bid, 117.5 offered, against a backdrop of increased investor optimism that Delphi, former parent GM and the auto workers union will be able to soon reach agreement on cutting the company's labor costs.

A trader saw Dana Corp.'s debt about half a point higher, the 7% notes due 2028 at 92 bid, 93 offered and the 2029 notes at 93 bid, 94 offered.

Federal-Mogul loan frees up

Federal-Mogul Corp.'s repriced, upsized and extended debtor-in-possession bank debt allocated and freed for trading on Tuesday, with the term loan quoted at par 1/8 bid, par 3/8 offered, according to a trader.

The $605 million term loan, which was upsized from $275 million and extended by six months, is priced at Libor plus 175 bps. Prior to the amendments, the term loan was priced at Libor plus 200 bps.

Federal-Mogul's DIP facility also includes a $500 million revolver that was repriced to Libor plus 150 bps from Libor plus 225 bps and extended by six months.

Citigroup and JPMorgan are the lead banks on the deal.

The additional DIP term loan funds are being used to refinance the company's $330 million of tranche C loans.

Federal-Mogul is a Southfield, Mich.-based auto parts manufacturer.

Broad market slips

Tembec Inc.'s 8 5/8% notes "did have some activity," a trader said, finishing around 60 bid, 61 offered, off from peak levels around 61 bid. Its 8½% notes were half a point down at 54.5.

A trader saw Calpine Corp.'s 8½% notes due 2011 down 5 points at 127.5 bid, 128.5 offered, while its stock was up 10%. He said it was one of those cases "where the bonds move opposite the stock," but had no other explanation for the movement.

Another source had the company's 8¾% notes due 2007 down 4 points at 123.

Sara Rosenberg and Paul Deckelman contributed to this article.

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