Doral bonds edge higher; Iridium dips on rumor; Auto sector improves; Tembec firms

By Stephanie N. Rotondo

Portland, Ore., June 5 - Doral Financial Corp. said Tuesday it would meet with the company that has made a second, unsolicited bid for the struggling bank, as Doral's bonds continue to improve.

The financial institution said it wanted to clarify a few terms of the proposal but also said that the current deal with a Bear Stearns-led investor group was still in effect.

Meanwhile, a rumor emerged that a bankruptcy court has overturned a settlement agreement between Iridium LLC and its creditors. The defunct satellite provider's bonds fell in trading, after Monday's gains.

The automotive sector is rebounding after last week's losses. Distressed automotive parts makers such as Dura Automotive Systems Inc. were seen as much as 5 points better on the day.

The strength - or lack of - of the Canadian dollar could be the reason for Tembec Inc.'s gains, a trader said. However, the currency may also be just one part of the equation, he added, noting the investor optimism in the name could be rising.

As with Monday, traders reported a very quiet trading day.

"There are no new ideas," a trader said on Monday. "People are looking for ideas and there are not any."

Another trader said the lack of market movement could be attributed to overall market stability or just a general lack of activity.

Doral bonds firm

Doral's bonds continued to firm as the company said it would meet with FBOP Corp. to discuss its proposal.

A trader pegged the floating-rate notes due 2007 slightly higher at 99.25 bid, 99.75 offered. Another trader said the notes were around 99.5.

"If I was the equity guys...I'd probably be in bed with FBOP because they are giving me hope," the first trader said. "They are not diluting me so much."

The Puerto Rico-based bank said it plans to meet with the company that has proposed a rival bid against an investor group led by Bear Stearns. However, the financial institution also said that the current deal is still in effect until further notice.

The trader also said that the FBOP deal is better as it is a bank as well.

"They are just interested in running a banking business," he said, whereas that may not be what Bear Stearns is looking for. Plus, he added, going from a bank to a bank means less hoops to go through.

Iridum dips

Iridium's notes were seen dropping after Monday's gains as rumors circulated that a court ruled against the defunct satellite provider.

A trader called the 13% notes due 2005 down almost 3.5 points to 19.5 bid, 20.25 offered. Another trader quoted the 14% notes due 2005 down as much as 5 points to around 18. He added that the notes were seen Monday trading at 22 bid, 23 offered.

"Somebody's getting nervous," said the first trader.

In March, a federal appeals court overturned a 2001 $135 million settlement between Iridium's unsecured creditors and lenders, siding with former parent, Motorola Inc. The court ordered the bankruptcy court overseeing Iridium's case to reconsider its ruling.

Under the terms of the settlement, the creditors and lenders would form a separate entity that could sue Motorola. The group contends that Motorola kept control over the company even after Iridium went public, thus contributing to its downfall.

But rumors are flying that the court once again sided with Motorola by overturning the settlement.

Auto sector better

Dura Automotive is making another run-up, as traders reported that the distressed automotive parts maker gained 4 to 5 points during trading.

A trader pegged the 8 5/8% notes due 2012 at 58 bid, 59 offered.

Another trader said that Dura's bonds were "probably the biggest mover" on the day, with the 8 5/8% senior notes trading as high as 59 bid before ending at 58 bid, 60 offered, still up 5 points on the session.

Yet another trader concurred, noting that the bonds, after finishing around 53.5 bid on Monday, opened on Tuesday at 55 bid, 56 offered and moved up to 58 bid, 59 offered, while the company's 9% subordinated notes due 2009 - which closed at 13.5 bid Monday - "were moving higher throughout the day," getting as good as 14.5, before ending around 14.25.

At another desk, a trader saw the 9s ending at 14.5, up a point on the day, and pegged the 8 5/8s up 4 points at 57.5 bid, 58.5 offered.

A trader said he also saw Dana Corp.'s bonds getting stronger. He quoted the 7% notes due 2029 at 96 bid, 96.5 offered, up from Monday's closing levels around 95.

"Distressed autos just continue to trade very well," he said.

Tembec notes higher

A trader said Tembec's bonds were "definitely up" by 1.5 to 2 points.

He said the 8 5/8% notes due 2009 moved higher to 60.5 bid, 61.5 offered.

As for the reason for the gains, the trader said it could be a couple different things, including the strength of the Canadian dollar.

He also said the increase could be due to "optimism as far as pricing." He said that, as the Canadian forest products company continues to shut down plants - thus reducing supply - pricing could improve.

At another desk, a trader said the bonds were "a little better," with its 8 5/8% notes at 60 bid, its 8½% notes due 2011 at 54 bid, 54.5 offered and its 7¾% notes due 2012 at 53 bid, 54 offered, all "at least one point higher."

Linens n' Things falls

Disappointing numbers from rival Bed, Bath and Beyond was the catalyst for Linens n' Things' drop in its bonds, according to one trader.

The trader said the bonds were fairly active on an otherwise quiet day. He quoted the floating-rate notes due 2014 at 84.5 bid, 85 offered.

Another trader saw the notes due 2014 down 2 points at 84.5 bid, 86.5 offered, also attributing the slide to sector weakness after bad numbers from rival Bed, Bath & Beyond.

Bed, Bath and Beyond lowered its first-quarter profit projection to 36 cents to 38 cents per share, below the 39 cents a share expected by many market participants. Full quarterly results are expected June 27.

Like its rival, Linens n' Things also posted poor quarterly figures, which was attributed to a decline in home sales.

Trump up on buzz

Trump Entertainment Resorts Inc. saw its bonds firm as market players speculated that more parties are interested in buying the hotel and casino operator.

A trader said the 8½% notes due 2015 were up half a point to 103. He said the market was buzzing that either a private equity firm or perhaps another Atlantic City executive were considering bidding for the company.

"It is more potential indication of interest in the company," he said of the bonds' rally.

Broad market mixed

A trader saw MagnaChip Semiconductor's bonds "up a bit," with the South Korean computer-chip maker's 8% subordinated notes due 2011 at 77 bid, 79 offered and its 6 7/8% senior notes due 2011 at 88 bid, 90 offered, both a point higher on the day.

Among the stubs given to the former holders of Northwest Airlines Corp.'s 10% notes due 2009 upon the carrier's emergence from bankruptcy and the conversion of those bonds into equity, "it doesn't look like there's much change there," a trader said, quoting them at 14 bid, 15 offered.

A trader also saw Primus Telecommunications Group's 8% notes due 2014 up 2 points to a close of 72.75 bid, 73.75 offered.

Paul Deckelman contributed to this article.

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