TOUSA, Transeastern up; Blockbuster, Movie Gallery down; Hines Horticulture moves

By Stephanie N. Rotondo

Portland, Ore., June 29 - Late-breaking news Friday sent market players clamoring for Technical Olympic USA Inc.'s bonds, as the company announced it would take on less debt from its Transeastern joint venture.

According to the settlement agreement, Transeastern's bank debt will be paid in full, which sent the JV's loans over par. The news also helped Technical Olympic's revolving credit facility firm by about half a point.

Meanwhile, troubles are mounting in the movie rental sector, as more disappointing news was released from Blockbuster Inc. late Thursday.

As pressures in the sector continue to pile up, Blockbuster's bonds, as well as those of Movie Gallery Inc., were seen weakening again.

On top of sector issues, Movie Gallery may have some problems of its own. Traders are saying that the company is looking to do an exchange, but no one believes the process is going as smoothly as perhaps it was hoped.

Elsewhere, Hines Horticulture Inc.'s bonds, which have been radio silent of late, were seen moving around a bit on Friday on the back of what was called "non-news" by a trader.

But, as the market was beginning to feel better Thursday, Friday felt heavier, traders reported.

"Not a lot of things were very active," one trader said. He attributed the lag to many market players leaving their desks early to enjoy a long, extended weekend ahead of the Fourth of July. He said it could also be due to several indices coming out and being lower than the expectation.

Another trader, however, said he saw a lot of markets as the month and the quarter came to an end.

Transeastern loan, TOUSA bonds up

Transeastern's term loan strengthened considerably on Friday after news emerged that a settlement agreement has been reached with homebuilder Technical Olympic, under which Transeastern's bank debt will be repaid in full, according to a trader.

Transeastern's term loan ended the day at 105 bid, 106 offered, up from 99½ bid, par ½ offered, the trader said, adding that the paper traded that high because it will get taken out at 105.7.

Technical Olympic's revolver was also better on the settlement news, with levels going out at 97 bid, 97¾ offered, unchanged to up about a half a point, the trader added.

On the bond side, Technical Olympic's debt was seen up as much as 9 points after the late-breaking news but fell a bit to close about 6 points higher on the day.

Right after the news hit, a trader said the 10 3/8% subordinated notes due 2012 were trading at 86. At another desk, a trader said those notes moved as high as 84 and closed the day at 80 bid, 82 offered.

The second trader also saw the 8¼% notes at 95 bid, 97 offered, adding that the 9% senior notes due 2010 were probably a point higher than that.

A third trader quoted the 7½% notes due 2015 at 69.5 bid, 73.5 offered, while the 8¼% notes were pegged at 95.5 bid, 96.5 offered. He also saw the 10 3/8% notes at 79 bid, 82.5 offered.

The second trader said the news was good for bondholders, as the company would be taking on less bank debt from Transeastern than had previously been expected.

"The bonds will be less pushed down in the capital structure," he said.

As for the wide spreads in the markets, the trader attributed the increase to it being a Friday, with less liquidity flowing around.

As part of the settlement, Transeastern, a joint venture between Technical Olympic and Falcone Group, will become wholly owned by Technical Olympic and merged into one of its subsidiaries.

To fund the Transeastern senior debt repayment, Technical Olympic will come to market in July with $500 million in new term loan debt comprised of a $200 million first-lien term loan and a $300 million second-lien term loan.

Citigroup is the lead arranger, bookrunner and administrative agent on the deal.

In addition, as a condition to the new deal, the company's existing revolver will be amended and restated to reduce the size to $700 million from $800 million and allow for the new bank debt.

Also under the settlement, Transeastern's senior mezzanine lenders and junior mezzanine lenders will release Technical Olympic from its obligations.

The senior mezzanine lenders will get $20 million in 14.75% senior subordinated payment-in-kind election notes due 2015 and 8% series A convertible preferred PIK preferred stock.

The junior mezzanine lenders will get warrants to purchase shares of Technical Olympic common stock. The warrants will have an estimated fair value of $16.25 million at issuance.

The settlement is expected to close around July 31.

Technical Olympic is a Hollywood, Fla., designer, builder and marketer of single-family residences, town homes and condominiums.

News sparks movement in Hines

The quiet-of-late Hines Horticulture bonds were seen trading Friday, which one trader called "interesting."

The trader slated the 10¼% notes due 2011 at 77 bid, 78 offered after news - or "non-news," as the trader called it - was released earlier in the week.

The company announced Wednesday that it had entered into a limited waiver agreement with its lenders, allowing the company to delay posting its first-quarter results without fear of default.

The results were originally scheduled to be released on May 9 but were postponed - a situation that also occurred when the nursery supplier was scheduled to release its fourth-quarter and year-end numbers earlier this year.

Movie Gallery, Blockbuster down

Dothan, Ala.-based movie rental chain Movie Gallery has had a "rough week," according to one trader, who said the debt continued to deteriorate at the end of the week.

The trader quoted the 11% notes due 2012 at 67.5 bid, 68 offered, down about a point. A second trader, however, called the bonds down "a few points" at around 66.5.

The bonds have been feeling the pressure from sector troubles, which seem to be piling up.

"It will be interesting to see what happens [with Movie Gallery]," the first trader said.

As Netflix and Blockbuster continue to vie for market share in the online realm, Blockbuster announced earlier in the week that it was seeking amendments to its credit agreements. More "disappointing news," as one trader put it, was released late Thursday by the company.

The Dallas-based chain said it would close 282 stores in the United States this year, about the same number it closed in the previous year.

On that news, along with the ongoing sector troubles, Blockbuster's 9% notes due 2012 were also deemed weaker, as a trader pegged the bonds around 92.

Broad market weaker

Linens n'Things' bonds were "beat up this week" amid sector issues and weak housing data. The floating-rate notes slid further into distressed territory on Friday as a trader quoted the bonds "down a little, but not that much" at 73 bid, 74 offered, down from the previous day's levels of 74.5 bid, 75 offered.

A trader said Solo Cup Co.'s 8½% notes due 2014 were trading at 86 bid, 87 offered, falling back to Wednesday's levels after seeing the bonds gain just over a point Thursday on the news that the company had completed a $130 million sale/leaseback transaction.

Elsewhere, a trader said Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were "weaker, but not a lot of activity," placing the bonds around 65.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.