Swift bonds better; Activity steady in Residential Capital's notes; Movie Gallery up

By Stephanie N. Rotondo

Portland, Ore., Aug. 27 - As many market players expected, activity in distressed bonds was muted Monday, attributed to this being the last week of summer, as well as a holiday week.

"It was basically a snoozer," a trader said.

"It will be dead all week unless some news comes out on something," another trader said. In fact, as he was expecting little activity to occur, he said he had other things scheduled for the week. "I have a haircut, some golf and some drinking planned for this week," he quipped.

A few traders, however, did note that there was some activity in Swift Transportation Co. Inc.'s bonds. One trader said the corporate debt was up as much as 5 points on the day, which he said could be due to opportunistic buyers.

Investors are continuing to focus their attention on the financial sector, as activity in Residential Capital LLC's bonds remained decent amid overall low volume in the market.

Meanwhile, Movie Gallery Inc.'s bonds were "straddling 30" at the close of the market. Traders said there has been no news to prompt the movement, but it could be a possible short squeeze.

The bond market will close early on Friday ahead of the Labor Day holiday.

Swift bonds, loan up

Movement in Swift Transportation's bonds was the "highlight of the day," according to one trader, who pegged the bonds up 5 points.

Earlier in the day, the trader said the 12½% notes, as well as the floating-rate notes, were up 3 points at 69 bid, 71 offered on light volume.

"It seems the same light volume that took the bonds down to the 61-62 level has taken them back up," he said.

Later, the trader saw the bonds continue to move higher, quoting them up 5 points to 70 bid, 72 offered.

"Big distressed buyers are taking advantage of the price drop to buy the paper, I am told," he said.

At another desk, a trader saw the bonds at 67.5 bid, 68 offered around mid-afternoon, while another said the bonds were at 67 bid, 68 offered.

Another trader saw the 12½% notes at 65.5 bid, 67.5 offered, up from 64.5 bid, 66.5 offered.

Other traders said the bonds, as well as the bank debt, went up because of a recent research report released on the company.

On the bank debt side, the term loan B ended the day at 89 bid, 90 offered, one trader said, and at 88 7/8 bid, 89 7/8 offered, a second trader said. Previously, the term loan B was being quoted at 88 bid, 89 offered.

According to the first trader, Wachovia put out a buy report on Swift's bonds on Friday, which spurred the bank debt to move upward.

Swift Transportation is a Phoenix-based truckload carrier.

Activity steady in Residential Capital

Over the last few weeks, investors have kept their eye on distressed mortgage companies, which has made for decent volume in those bonds. Traders said Monday that, despite an overall quiet day, activity in names like Residential Capital continued to be good.

One trader pegged the 6 3/8% notes due 2010 down a half point to 80.5 bid, 81 offered.

However, at another desk, a trader said the bonds were "in line with where they were Friday."

Another trader echoed that sentiment, pegging its 6 1/8% notes due 2008 at 84.75 bid, its 6% notes due 2011 at 78.75 bid, 80 offered and its 6 7/8% notes due 2015 at 78.

The second trader noted that he saw several wide markets among the mortgage lender's many issues.

Among other distressed names in the mortgage arena, Thornburg Mortgage Inc.'s 8% notes due 2013 were seen by a trader unchanged from last week's level at 83 bid, 84 offered. Another trader called them unchanged at 82 bid, 83.5 offered.

Movie Gallery up

After opening last week in the 18 bid, 20 offered range, Movie Gallery's bonds have gained 10 points since last Monday's session, though that seems "weird" to one trader.

A trader pegged the 11% notes due 2012 wide at 28 bid, 32 offered. Another trader claimed the bonds were "straddling 30."

According to another trader, the bonds did not move on Monday.

The second trader said the Movie Gallery bonds had earned most of their gains by Friday, and come Monday, the bonds were merely holding steady. He said he was not sure, but the increase could be due to short covering.

"It has been a weird one," the first trader said. "I still think [the bonds] are worth zero."

"I don't know why they haven't filed yet," he added.

Another trader quoted the bonds at 28 bid, 31 offered, up from a wide 27 bid, 32 offered on Friday.

However, another trader quoted the bonds at 31 bid, which he said was well up from where they had begun on Friday, at 25 bid, 27 offered, chalking the movement up to belated investor response to the company's 8-K report, which was released late Thursday.

Another source, however, indicated that the bonds had already firmed to the 31 level late in the day on Friday and merely held onto those gains in relatively thin trading on Monday.

Last week, the company said it had received two Nasdaq staff determination letters, which stated that the company was not in compliance with certain filing requirements.

The company's stock closed Monday at $0.30.

Elsewhere, the company's first-lien term loan was better by about a point during trading hours, with some speculating that the improvement was due to better buyers in the market, according to a trader.

The first-lien term loan was quoted at 83.5 bid, 84.5 offered, up from previous levels of 82.5 bid, 83.5 offered, the trader said.

Movie Gallery is a Dothan, Ala.-based video rental company.

Offers better for Star Tribune loan

The Star Tribune Co.'s first-lien term loan B saw better offers on Monday after the company held a private lender call, which despite sparking speculation last week, ended up being a non-event, according to a trader.

The term loan B was quoted at 86.5 bid, 88.5 offered, compared to Friday's levels of 86.5 bid, 87 offered, the trader said.

"It was nothing positive or negative. [It] was just a monthly update call," the trader remarked, adding that the company didn't have a positive July but it wasn't anything that people weren't already expecting.

"They posted two quarterlies since the [bank] deal closed. This was the first time they did a monthly so people weren't expecting it, so it caused speculation," the trader continued.

Word of the call hit the market on Friday, at which time bids on the first-lien term loan B moved up to 86½ from 84 while the offer was unchanged. Although no one really knew what the call was going to be about, market participants were considering that there might be some sort of positive announcement based on the bank debt's performance.

"I guess there was no real reason for the bid to move up on Friday other than there must have been some buyers," the trader said.

"They're going to do monthlies going forward so now next month people will know what's going on," the trader added.

Star Tribune is a Minneapolis-based information provider and includes the Star Tribune newspaper, StarTribune.com and other print and digital products and services.

Autos mixed

Dana Corp.'s bonds were down 1 point, coming off Friday's 2-point rise after the company called for an alternative reorganization plan from Appaloosa Capital Management. The 6½% notes due 2008 were placed at 82.5 bid, 84.5 offered.

A trader saw no change in Delphi Corp.'s bonds, after 6.55% notes due 2006 rose last Friday to103-104 bid area, up from par-101 bid.

There was also no change in Dura Automotive Systems Inc.'s debt. The 8 5/8% notes due 2012 were last seen Friday at 54 bid, 56 offered.

And last, but not least, Federal Mogul Corp.'s debt was up 1 point to 83 bid, 85 offered.

Broad market quiet

There was "no trading that I saw" in Beazer Homes USA Inc.'s and Technical Olympic USA bonds, a trader said. He quoted Beazer's 8¼% notes due 2016 unchanged at 79.5 bid, 81.5 offered.

Another trader agreed that he hadn't seen Beazer quoted "for a while." He put its 6½% notes due 2013 at 76.5.

Technical Olympic, he said, was "up small," its 9% notes due 2010 at 73.5.

He saw WCI Communities Inc. higher, with its 9 1/8% notes due 2013 - which had been "straddling 80" - now at 81.75 bid, 82.75 offered, and its 7 7/8% notes due 2013 at 78 bid, 80 offered.

Spectrum Brands Inc.'s bonds were "up a couple." A trader saw the 7 3/8% notes due 2015 at 73 bid, 74 offered and the 11¼% notes due 2013 at 83.5 bid, 84.5 offered.

Tembec Inc.'s 8 5/8% notes due 2009 were up 1 point to 48 bid, 50 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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