Delphi, Dura bonds fall; Beazer, Technical Olympic, WCI drop; Broad market mixed

By Stephanie N. Rotondo

Portland, Ore., Aug. 6 - Delphi Corp.'s bonds were deemed heavier during Monday's session, but it was unclear why.

A trader speculated that general liquidity concerns in the marketplace could be driving the bonds lower, as recent news regarding the company had been good. Another trader, however, wondered if concerns regarding exit financing were prompting the loss.

At any rate, the trader seemed to think that exit-financing concerns were causing Dura Automotive Systems Inc.'s bonds to weaken. The trader said that, if the financing does not get done at particular levels, a recent backstop agreement could be terminated.

Meanwhile, homebuilders are continuing to bear the brunt of a flailing market. Traders said distressed housing names such as Beazer Homes USA Inc., Technical Olympic USA Inc. and WCI Communities Inc. all saw their bonds hit, as mortgage worries leak into other sectors.

Still, while the market has felt lower of late, one trader said that is what the market needed.

"Traditional distressed guys are ... saying we need to sell off like this," he said. He added that Moody's Investors Service recently published a report that forecasted default ratings would increase through 2008 and possibly into 2009.

"That's what folks are looking for," he said.

Delphi, Dura dip

Delphi bonds were seen coming off by at least a point, despite news that the company had come to terms with the rest of its unions.

A trader quoted the 7 1/8% notes due 2029 at 110 bid, 112 offered and the 6.55% notes that were to have come due last year around 111.

Another trader said the 7 1/8% notes were at 111 bid, 112 offered, adding that the company's bonds were "heavy all day."

The first trader, however, said he was not sure why the bonds had fallen.

"The company seems to be doing pretty good," he said, noting that the Troy, Mich.-based automotive parts supplier was well on its way to restructuring and had reached agreements with the last of its unions.

Without specific bad news, per se, the trader blamed liquidity concerns that are affecting the whole market.

"People are not being very euphoric," he said.

The second trader, however, said the dip could be attributed to concerns that its exit financing does not get done - something he believes was also affecting Dura's bonds.

"There are two provisions [of a backstop agreement with Pacificor LLC] that certainly would cause some concern if I were a bondholder," the trader said, citing Dura's recent announcement that Pacificor, a bondholder, would backstop 100% of a $140 million to $160 million rights offering.

The chief concern, the trader continued, was that Pacificor can back away from the agreement if the exit financing is not done at a particular level.

At another desk, a trader called Dura's paper weaker, with the 8 5/8% notes due 2012 at 51 bid, 54 offered, and the 9% subordinated notes due 2009 at 4 bid, 5 offered.

Autos lower

In the rest of the automotive realm, a trader called Dana Corp.'s bonds "down again," with the 6½% notes due 2009 at 82 bid, 84 offered. He called that market down 3 points.

Another trader, however, said that Dana paper "got better toward the end," as the market rebounded slightly with the stock market. He pegged the bonds at around 84, noting that they were trading between 81 and 82 for most of the day.

Elsewhere, Remy International Inc.'s bonds were called quiet, but a trader said Federal-Mogul Corp.'s bonds were "definitely down again." He placed the bonds - which trade in line with each other - at 87 bid, 89 offered.

The trader said he has been looking into the veracity of a recent rumor that a near-collapse hedge fund is "puking" Federal-Mogul bonds into the marketplace.

"I haven't been able to figure out if there is any teeth to it," he said.

Homebuilders hurting

Homebuilders are continuing to get knocked down as mortgage worries spill over into the sector.

A trader said Beazer Homes' 8 5/8% notes due 2011 were trading around 78.75, with a yield of 16.4%.

"That's not great news," he said, for the company that recently has had a bankruptcy looming over its head.

Another trader quoted the 6 7/8% notes due 2015 at 72.5 bid, 73.5 offered, which he called "down a couple."

The trader also said that he had heard a rumor that the company's bondholders were trying to organize and form an ad hoc committee.

Meanwhile, the trader said that Technical Olympic's bonds were "down pretty hard." He saw the 10 3/8% notes due 2012 at 45 bid, 48 offered and the 7½% notes due 2015 at 39.5 bid, 40.5 offered.

"Those got whacked too," he said.

Another trader pegged the 9% senior notes due 2010 at around 80.

"That's still pretty high, considering," he said.

A trader said investors "are still pretty concerned" with WCI Communities' plight, given the company's exposure to Florida's housing market.

The trader placed the 7 7/8% notes due 2013 at 70 bid, 72 offered. He said that most of the company's bond issues trade close together, though the 9 1/8% notes due 2012 might be slightly higher as it has a higher coupon.

The Bonita Springs, Fla.-based homebuilder said Monday that, while it expects to see $400 million to $600 million more in free cash flow during the rest of the year, it is talking with its lenders to amend certain agreements "to provide broader latitude to operate during this protracted downturn."

Broad market mixed

Blockbuster Inc.'s 9% notes due 2012 were seen softer after Moody's Investors Service downgraded its corporate family rating to Caa1 from B3, attributed to disappointing first- and second-quarter results.

A trader said the Blockbuster bonds opened at 83 bid, 84 offered but moved as low as 80.5 after the downgrade.

At another desk, a trader said he heard Fedders Corp. held a bondholder call on Friday. He said he had not confirmed the rumor but speculated that perhaps investors were "trying to figure out their options." He also said that a report from the company is due by Aug. 15.

The trader added that the 9 7/8% notes due 2014 traded only in odd lots during the first session of the week, with most around the 27 levels.

The trader also said that "people keep talking about" Swift Transportation Co., Inc. The trader said the 12½% notes were at 68 bid, 71 offered.

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