Trump bonds slide on news; TOUSA notes fall back; Movie Gallery debt weaker

By Stephanie N. Rotondo

Portland, Ore., July 2 - Traders reported a "dead" Monday, as many market players were enjoying an extended vacation ahead of the Fourth of July holiday.

"The Street was virtually dead today," one trader said. "It will be like this all week."

However, in a virtually uneventful day, Trump Entertainment Resorts Inc. was on the tip of everyone's tongue, as the company announced it would not be selling the Atlantic City casino and hotel.

The news sparked a 4-point decline in the bonds and was deemed a major mover in an otherwise quiet day.

Meanwhile, Technical Olympic USA Inc.'s bonds fell back from their Friday highs, which was prompted by an announcement that it had come to terms with the lenders of its Transeastern joint venture.

The debt was deemed a couple points weaker, with one trader speculating, "reality is settling in."

Late-breaking news prompted Movie Gallery Inc.'s bonds to continue their downward slide, losing about 25 points since Friday's close, making it the biggest mover of the day.

The Dothan, Ala.-based company announced late Monday that it had entered into talks with its lenders, as it was unable to meet certain financial obligations. The company also said that it is considering the possibility of an asset sale.

As quiet as the day was, sources are indicating that Tuesday - essentially a half day, as the market is closing at 2 p.m. ET - will be even quieter.

"It was dead today, tomorrow will be deader," a trader said.

Trump notes slide

Trump bonds slid about 4 points, traders reported, on the news that the company had not found a buyer.

A trader quoted the 8½% notes due 2015 down to around 95.75. Another trader said the debt "got walloped," trading actively around 95 bid, 96 offered. He added that the bonds closed Friday around 99.5 bid, par offered.

At another desk, a trader said the bonds were down "about 4 points roughly," to 95.5 bid, 96 offered.

"I think a lot of people were longing them based on them getting taken out in some sort of deal," he said.

The casino and hotel operator spent the last three months searching for a buyer, a move aimed at making money for investors of the struggling enterprise.

TOUSA bonds fall back

After Friday's run-up in its bonds, Technical Olympic's notes were seen falling a bit, as one trader speculated, "reality is settling in."

The trader quoted the 9% senior notes due 2010 down a point to around 95.25, while the 7½% notes due 2015 fell 2 points to 68.

"They just went up to far," the trader said of Friday's gain in the bonds after the company had announced it had reached a settlement with the lenders of its Transeastern joint venture. "While it was a good deal, the reality is they are still in a rough place."

Another trader said the bonds were lower "out of the gate" Monday, pegging the 7½% notes due 2011 at 70 bid, 72 offered and the notes due 2015 at 66 bid, 68 offered.

The second trader said investors probably digested the news over the weekend, resulting in the debt "getting clobbered again."

The trader also noted that other housing-related names, such as WCI Communities Inc., were essentially unchanged on the day.

In its afternoon comments, Gimme Credit LLC said it would maintain its 2007 estimates on the company, as well as its preference of the senior notes. Gimme Credit said it has assigned the Hollywood, Fla.-based homebuilder a rating of deteriorating, stating, "We continue to expect the housing market to remain weak into 2008; however, with the settlement of the Transeastern dispute, TOUSA's fortune is more closely aligned to a general recovery in the sector. We expect that Florida, unfortunately, will remain a problem market for years to come."

Move Gallery slips

Movie Gallery notes continue to slide further into the realm of distressed as the company announced it had failed to meet certain financial obligations and was in discussions with its lenders on how to remedy the problem.

Just before the news broke, a trader pegged the 11% notes due 2012 at 67 bid, 68 offered, down from Friday's close around 69 bid, 70 offered. The bonds have been losing ground since last week, when rival Blockbuster said it would seek credit amendments and then announced it would close almost 300 stores this year.

The trader said he was not a big fan of the name but conceded that the bonds have shown resilience in the past.

"They were up at 80, then went to 40, then back to 80," he said.

Then, after the closing bell, the news was released, and the bonds spiraled downward, falling over 25 points, back into the aforementioned 40.

"There was quite a lot of movement in these Movies," a trader said, adding "they really got a smack."

He saw the company's secured first-lien bank debt ease to a wide 83 bid, 88 offered from 85 bid, 90 offered before the news, with its second-lien paper widening out to 58 bid, 68 offered.

But the worst carnage was in the company's unsecured notes due 2012, which he saw nosedive to as low as 28 bid, 31 offered from prior levels in the mid-60s, before finally settling in around 32.

Another trader quoted the debt at 40 bid, 50 offered, which he called a loss of some 25 points on the session. "There was news earlier that things were going not-so-well. They dropped very drastically."

Volatile trading

A market source saw the bonds trading for most of the day in the mid-to-upper 60s, down a little from a closing level on Friday around 69.5 - but then nose-diving after the bad news hit the tape, well after 4 p.m. ET, first down to around the 50 level, and then all the way down into the upper 20s within the last hour of trading, in busy dealings involving large bloc trades. The bonds finally settled in a 26 to 28 context.

Movie Gallery's Nasdaq-traded shares had been essentially unchanged at $1.89 during the regular trading session, although volume of 2.4 million shares was about three times the average daily handle, but the stock had plunged $1.09, or 57.67%, to 80 cents in after-hours dealings as of 6:15 p.m. ET.

Movie Gallery's term loan B was lower and wide after the covenant non-compliance news emerged, according to a trader.

The term loan was quoted at 80 bid, 90 offered, down from 93 bid, 94 offered, the trader said.

"Everybody is trying to figure out what's going on with the company," the trader added.

Late in the day Monday, Movie Gallery announced that as a result of significantly softer-than-expected second-quarter results, it was not able to meet the financial covenants contained in its senior facility for the fiscal quarter ended July 1.

The company went on to say that it is in discussions with its lenders regarding the situation and intends to work closely with them to develop a plan to remedy the defaults, which may include seeking a waiver, amendment, forbearance or similar agreement.

Movie Gallery has fully drawn the remaining availability under its revolver and currently has liquidity consisting of about $50 million of cash on hand.

Goldman Sachs is the agent on the loan.

Movie Gallery also announced that Bill Kosturos, a managing director at restructuring and corporate advisory firm Alvarez & Marsal, has resumed his role at the company as chief restructuring officer.

Alvarez & Marsal was retained by Movie Gallery in 2006 to bolster its accounting and finance functions and assist in improving its overall operating performance and is also helping to evaluate available strategic and restructuring alternatives.

In addition, the Dothan, Ala.-based video rental company hired Lazard Freres & Co. LLC on Sunday to serve as an independent financial adviser.

Movie Gallery intends to consider a number of alternatives, including asset divestitures, recapitalizations, alliances with strategic partners and a sale to or merger with a third party.

Furthermore, the company said that it will continue to take actions to conserve cash and improve profitability, including accelerating the closure of unprofitable stores, consolidating stores in certain markets, realigning its cost structure to better reflect its reduced size, and seeking a more competitive capital structure.

Tembec lower

Hit by "general weakness," according to one trader, Tembec Inc.'s bonds were seen lower on the day.

The trader quoted the 8 5/8% notes due 2009 at 61.5 bid, 62.5 offered.

Another trader said the bonds were weaker, continuing Friday's negative momentum. Its 8 5/8% notes were a point lower at 61 bid, 63 offered, and its 8½% notes due 2011 and 7¾% notes due 2012 likewise each were a point down at 51 bid, 53 offered and 50 bid, 51 offered, respectively.

MagnaChip softer

A trader quoted Korean computer-chip maker MagnaChip Semiconductor Ltd.'s bonds "down a couple of points," its senior floating-rate notes at 89 bid, 91 offered versus 91 bid, 93 offered previously and its 6 7/8% notes at 84 bid, 86 offered, about a 3-point drop on the day. He saw the company's subordinated 8% notes due 2014 at 72 bid, 74 offered, also down 3 points.

Autos mixed

In the distressed automotive realm, he saw Remy International Inc.'s 8 5/8% senior notes coming due this year "not really changed" at 109 bid, 111 offered but saw the troubled Anderson, Ind.-based electrical systems manufacturer's subordinated 11% notes due 2009 and 9 3/8% notes due 2012 having pushed up to par bid, 101 offered from prior levels at 97 bid, 99 offered.

Meantime, he said, Dana Corp.'s 6½% notes due 2008 were down half a point at 104.5 bid, 105.5 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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