Technical Olympic, Beazer, WCI better; Blockbuster up; IMAX dips; Trump higher

By Stephanie N. Rotondo

Portland, Ore., Aug. 7 - A Federal Reserve meeting Tuesday prompted the equity markets to go on a ride, which led to an at times quiet, at other times active distressed bond market.

At Tuesday's meeting, the Fed chose to keep a key interest rate unchanged, despite recent volatility in the market. The Fed acknowledged the market gyrations but maintained its belief that the economy will stabilize and moderate growth will continue.

A trader said the market seemed "jumpy" ahead of the Fed meeting. Post-meeting, stocks moved higher, which helped boost names in the bond market as well.

"The whole market was up today," another trader said, noting that many market players were "waiting and watching" what the Fed would do.

"The market is trying to decide which way it wants to go," said another source. "It has been a bit of a roller coaster."

While Tuesday's session seemed to be a high point on said roller coaster, rumors are continuing to circulate that several hedge funds are liquidating - and at least some are seeing Dallas as the center of that storm.

Still, many names in the distressed realm were seen firmer. Among them, homebuilders made the top of the list, with Technical Olympic USA Inc. gaining as much as 4 points - just one session after that company's bonds were beat down about 5 points.

Beazer Homes USA Inc. and WCI Communities Inc. also saw increases in their bonds. There did not seem to be specific reasons for the surge upward, but most traders indicated short covering was the culprit.

Meanwhile, Blockbuster Inc.'s debt was deemed active during trading, as well as higher by at least 2 points. Traders said the bonds have been "range trading" in recent weeks, and one source speculated it was not an accident.

Anticipated poor second-quarter results could be the cause of IMAX Corp.'s dip in its bonds, according to one trader. He said the bonds were weaker but, as the notes rarely trade, it was hard to really get a read on them.

Elsewhere, poor earnings did little to hurt Trump Entertainment Resorts Inc.'s bonds. A trader saw the notes edging higher after the casino operator posted a wider loss for the second quarter of 2007.

Tousa, Beazer, WCI better

Homebuilders were seen rebounding after a beginning-of-the-week smackdown that left most names in the sector weaker. Some traders attributed the gains to short covering, while others said the increases were just following the lead of the equity markets.

A trader said Technical Olympic's 9% senior notes due 2010 were "up a bit" at around 78, "which means the 8¼% notes are about a point lower," he added.

The trader also saw the 10 3/8% subordinated notes due 2012 at 49.5 bid, 50 offered.

At another desk, a trader said Technical Olympic's bonds "rallied a whole bunch," pegging the 10 3/8% notes at 49.5 bid, 50.5 offered.

"That's up a solid 4 points after being crushed the day before," he said, noting that the whole structure was firmer.

The trader said the bounce back reflected what was going on in the overall market but added that short covering was also likely.

The gains in the bonds come despite Fitch Ratings announcing it had downgraded Technical Olympic, giving the company an issuer default rating of CCC from its previous level of B-.

The senior unsecured notes were pushed down to CC from CCC+, while the senior subordinated bonds dropped to CC from CCC-. The recovery rating on the senior debt was also lowered to RR6 from RR5, but the subordinated notes remain at RR6.

The downgrade was attributed to continued concerns in the housing market, as well as further deterioration of its credit metrics in relation to the debt incurred from the Transeastern JV settlement.

The first trader said that the Hollywood, Fla.-based homebuilder is expected to release its quarterly report after Wednesday's close, just in time for Thursday's conference call.

The trader also mentioned that Beazer Homes was active and rebounding off the previous day's lows. He said the 8 5/8% notes due 2011 were at 79.5 bid, 80 offered; the 6½% notes due 2013 were at around 74.75; and the 6 7/8% notes due 2015 were around 75.75.

WCI Communities bonds also were better, with the 7 7/8% notes due 2013 at 71 bid, 71.5 offered and the 6 5/8% notes due 2015 at 69.75 bid, 70 offered.

That Florida homebuilder announced Monday that it had "sufficient liquidity," despite a housing downturn and a lackluster search for a buyer, and that it expects to increase its cash flow by $400 million to $600 million during the remainder of 2007.

Second-quarter results are expected on Aug. 16.

Blockbuster up, active

Blockbuster's bonds were deemed active during the session, right up until mid-afternoon, one trader said.

The trader called Blockbuster's 9% notes due 2012 up at 84 bid, 85 offered.

"I'm not sure what is going on, though," he said.

Another trader also saw the bonds firming, quoting the notes at 83.5 bid, 84.5 offered, up from the previous day's levels at 81 bid, 82 offered.

"It felt like buyers came back," he said.

The first trader also said the bonds have been "range-bound" between 80 and 85 for some time now, speculating that the recent gains and losses have been "people just playing [the bonds]."

IMAX dips

Second-quarter financials are expected from IMAX on Thursday, and one trader saw the rarely traded bonds edging lower in Tuesday's session.

The trader placed the 9 5/8% notes due 2010 at around 97.

"Someone thinks the numbers aren't going to look pretty," he said.

Still, he pointed out that the bonds typically trade just once a week and they had not traded in "decent size" in a while. He said it was therefore hard to get a reading on the notes.

IMAX will hold its quarterly conference call at 8:30 a.m. ET on Thursday.

Trump higher despite numbers

Trump Entertainment Resorts bonds edged higher, a trader said, despite a wider posted loss for the second quarter of 2007.

The trader quoted the 8½% notes due 2015 at 84 bid, 85 offered.

The casino and hotel operator reported a $13.5 million loss, attributed to a decline in gambling revenue, for the second quarter. For the same period a year earlier, the company showed a loss of just $4.9 million.

Broad market mixed

James River Coal Co.'s 9 3/8% notes due 2012 were holding steady in the 82 bid, 84 offered context they have been in, as one trader saw the bonds last trade at 83.

The coal producer will hold its quarterly conference call at 11 a.m. ET Wednesday. The quarterly report will be posted before the trading session begins.

Elsewhere, Tembec Inc.'s 8½% notes due 2011 were seen at 43.25 bid, 43.5 offered.

A trader called Delphi Corp.'s bonds "a touch lower," with the 7 1/8% notes due 2029 at 110 bid, 110.5 offered. Dura Automotive Systems Inc.'s debt, however, was seen better, with the 8 5/8% senior notes due 2012 at 54 bid, 56 offered and the 9% subordinated notes due 2009 at 4.25 bid, 4.75 offered.

The trader did note that he saw "overall weakness" in the distressed automotive realm.

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