Doral structure mixed; Sea Containers weaker; Linens n'Things falls; Primus stronger

By Stephanie N. Rotondo

Portland, Ore., June 26 - Still reeling from its recent rejection by a potential suitor, Doral Financial Corp. saw its bonds as well as its preferred issues fall a bit on Tuesday.

Market players are also speculating whether the investment group led by Bear Stearns, the remaining suitor for the company, will keep its bid on the table.

But Doral is likely being hit with a double-whammy, as subprime mortgage woes are flaring up again. Many subprime lenders, including Fremont Corp. and Accredited Home Lenders, are seeing their preferred paper weaken amid concerns in the sector.

Also out in the Caribbean, Sea Containers Ltd.'s bonds were called weaker as profit takers are taking their money and running.

The shipping container company also is running - to court that is - to object to the recent disbandment of its creditors' committee, stating that the order would severely impair its bankruptcy proceedings.

Separately, liquidity issues could be what are dragging down Linens n'Things' debt, at least according to one trader. He said that the company has limited cash flow, which could put even more pressure on the already struggling retailer.

Meanwhile, buzz of a PIPE deal might be the catalyst for Primus Telecommunications Group Inc.'s recent gains. There is no fresh news out on the company.

After the initial positive reaction to the recently filed reorganization plan, Calpine Corp.'s structure is going wishy-washy. A trader said the convertible issues were up on the day but the bonds were seen falling.

Doral bonds, preferreds down

Doral's bonds are feeling the slight of rejection after the company's recent announcement that FBOP Corp. opted to pull out of its bid for Doral against rival Bear Stearns.

A trader said Doral's floating-rate notes due 2007 - with a due date that is fast approaching - were down about 2 points at 97 bid, 98 offered, a market echoed by another trader.

"That's no good," the first trader said. "Glad I'm not long in those."

He also noted that the preferred issues were down about 4% to 5% across the board.

"Not a good thing," he said. "Yee-haw, it is not looking good for this company."

The trader also pondered whether Bear Stearns, the original bidder for the Puerto Rican bank, would stay in the game.

In fact, the second trader said he had heard talk that the group was looking to pull its bid, as well.

On top of the FBOP rejection, Doral could also be feeling the pressure from renewed subprime mortgage concerns, which, coincidentally, were fueled in part by the recent collapse of two hedge funds run by Bear Stearns.

"The whole lending sector is off hard," said the first trader. "It is a sea of red."

The trader mentioned names such as Fremont Corp, Accredited Home Lenders, among others, whose preferred issues were trading down about 1%, or the equivalent of one bond point.

"Nobody wants to buy them right now," he said.

Sea Containers down

Profit taking was attributed as the cause for Sea Containers' weakness in its bonds, as the Bermuda-based company went to court for an emergency status conference.

The trader pegged the 10½% notes due 2012 down a point at 92.5 bid, 93.5 offered, but he added that there were no actual trades.

The company, along with its official committee of unsecured creditors, filed an emergency motion objecting to the dissolution of the committee. According to the motion, the company and the committee stated that they "strongly believe that disbanding the current SCL Committee would negatively impact reorganization efforts and greatly hinder efforts to maximize value for all creditors."

The hearing is scheduled to continue on Friday.

Linens n'Things slips

A cash crunch could be the reason for Linens n'Things' recent fall into the distressed territory.

A trader quoted the floating-rate notes at 77, about a point off from the previous day's level.

"The company is going to run out of money," the trader said, commenting on the recent slip. "There is no cash flow."

Primus Telecom better

Satellite provider Primus Telecommunications was seen getting stronger, according to one trader, who said he had heard buzz that the company was looking into a PIPE deal.

He quoted the 12¾% notes due 2009 at 97 bid, 98 offered and the 3¾% notes due 2010 at 71 bid, 75 offered.

The trader noted that a PIPE deal usually involves the equity, but could still mean positive things for the bonds.

Calpine bonds dip

Integrated power company Calpine saw its convertibles firm up on the day, while its bonds slipped about 1.5 points.

The trader pegged the 6% convertible up at 115 bid, 116 offered and the 7¾% convertible at 134 bid, 135 offered.

On the debt side, however, the 8½% notes due 2008 were called weaker at 121 bid, 122 offered along with the 8½% notes due 2011, which fell to 127.5 bid, 128.5 offered.

Another trader saw the 8½% notes due 2011 down 2 points at 126.5 bid, 127.5 offered but could not give an explanation for the retreat.

The first trader said he thought the issues were reacting to the company's reorganization plan, about which he said there would likely be some "inter-creditor swapping" and some "wheeling and dealing."

Movie Gallery weaker

Dothan, Ala.-based Movie Gallery Inc. was seen weakening, as a trader quoted the 11% notes due 2012 at 76.5 bid, 77.5 offered, though he had no idea why.

Another trader also noted that the debt had dipped a couple of points and was also at a loss to explain it.

"There is no news, no nothing," he said. "They have been slowly drifting, but I don't see any impetus for it."

"I don't know if no news is bad news," he added.

Another trader said that he saw the bonds "on a pretty good ride," although he was unaware of any new information out on the No. 2 U.S. video rental chain operator. He saw the company's notes start the day trading "around 80ish" and then plunge 4 or 5 points in the early going to around the 75 to 76 bid area.

However, he said, "they backed up [i.e., came back up] 2.5 [points]" to end at 77.5 bid, 78.5 offered. "A lot of that traded," he said.

Broad market mixed

Technical Olympic USA Inc.'s bonds were seen up a bit, with one trader pegging the 10 3/8% notes due 2012 a half point better at 75 bid, 76 offered. A second trader quoted the notes half a point lower at 75 bid, 76 offered against an overall aura of weakness among homebuilding names.

Another trader saw MedQuest Inc.'s 11 7/8% notes due 2012 at 81 bid, 82 offered but added that the debt had been quiet.

The trader also mentioned Crown Paper Mill's 11% notes due 2005, which came across with a market at 1.625 bid, 2.5 offered. He said that was up from the 0.5 point area it had been trading in.

"Somebody is playing in the name," he said.

Still, the notes did not trade.

Elsewhere, a trader saw "some volume" in Magnachip Semiconductor LLC's 8% notes due 2014, although he saw the Korean computer chip manufacturer's bonds end about unchanged at 75 bid, 77 offered.

At another shop, a trader saw those bonds down a point on "no news" at 75 bid, 76 offered.

Yet another source saw the bonds open around the same 75 level seen late Monday and then gradually drop 2 points in trading to just above 73. The source also saw the company's 6 7/8% notes due 2011 actually firm on the day to 89 bid, a pickup of about 2 points.

Charter Communications' 11% notes due 2015 were called down a point at 103 bid, 104 offered, also against a "no news" backdrop.

Paul Deckelman contributed to this article.

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