Calpine notes lower; Movie Gallery loan up, bonds dip; Linens n'Things firmer

By Stephanie N. Rotondo

Portland, Ore., Aug. 28 - Traders once gain reported a light volume day Tuesday as a bearish equity market put pressure on the credit markets.

With the Dow Jones industrial average falling more than 200 points on the day, traders said the distressed bond market felt softer as well.

"The whole market was down 2 to 3 points," a trader said. "[We're] setting up for nice sell-off after the holiday."

"Everything got worse today in the afternoon," another trader said, adding that he saw most names down at least 1.5 points.

On the West Coast, San Jose, Calif.-based Calpine Corp. saw its bonds dip as much as 5 points during the session. Late Monday, the company announced it had filed an amended reorganization plan that would give more value to stakeholders.

One trader, however, wondered why that would move the bonds and speculated that perhaps the corporate debt was following its equity counterpart.

Meanwhile, Movie Gallery Inc.'s term loan moved higher for the second session in a row as the company said it had received yet another forbearance from its lenders. The new agreement gives the struggling movie rental chain until Sept. 30 to come up with a solution for its flailing enterprise.

However, the bonds did not continue its surge upwards during the session.

Despite a softer market all around, Linens n'Things bonds were seen gaining. According to a trader, the company held a conference call just before the market closed. The topic of that call was supposedly pre-earnings for the third quarter.

Calpine down on amended plan

As Calpine filed an amended version of its reorganization plan - aimed at giving more value to stakeholders - the power producer's bonds dropped as much as 5 points during the session.

One trader saw the bonds just 2 points off, with the 8½% notes due 2008 at 106 bid, 107 offered after opening at a high of 109.5. He also saw the 8½% notes due 2011 at 106.5 bid, 107.5 offered.

Another trader, however, said the bonds dipped 3 to 4 points. He said the 2008 issue opened at 109.5 bid, 110.5 offered and then closed at 107.5 bid, 108 offered. The 2011 issue hit its high early in the day as well, at 110 bid, 111 offered, before closing at 105.6 bid, 107.5 offered.

But the first trader was confused why the bonds would trade lower on the filing of the amended plan.

"The bonds should not have moved," he said.

However, he noted, "people still don't think we are out of the woods."

The trader added that the bonds were likely following the equity, which fell 22 cents, or 9.28%, to $2.15.

Elsewhere, a trader saw the 2008 notes fall to 105.5 bid, 106.5 offered from 109 bid, 111 offered. Another trader saw them down 5 points at 106 bid, 107 offered.

According to a press release issued late Monday, Calpine said the amended "waterfall" plan maintains key terms of the original plan but shows greater recoveries for stakeholders. Under the new plan, allowed claims range from $20.1 billion to $22 billion and general unsecured creditors are set to receive 95% to 100% of their claims.

Equity holders are also slated to receive $2.05 per share, up from the previous estimate of $1.80.

Movie Gallery loan up, bonds dip

Movie Gallery's first-lien term loan saw higher offers, although the bid side was unchanged, on the heels of the announcement that its credit facility forbearance agreement was extended, according to a trader.

The first-lien term loan went out at 83.5 bid, 85 offered, compared to Monday's levels of 83.5 bid, 84.5 offered, the trader said.

On Tuesday morning, Movie Gallery revealed that it extended the forbearance agreement it has with its first-lien credit facility lenders once again.

Under the extension, the lenders will forbear until Sept. 30 from exercising rights and remedies arising from existing defaults.

The original forbearance agreement was set to expire on Aug. 14 and was later extended to Aug. 27.

"That's why Movie Gallery was higher before, but it was private information," the trader remarked.

By before, the trader meant on Monday, when the first-lien term loan rose to 83.5 bid, 84.5 offered from 82.5 bid, 83.5 offered.

Meanwhile, the Dothan, Ala.-based movie rental chain's 11% notes due 2012 were seen lower at 28 bid, 29 offered. Another trader said the bonds opened at 28 bid, 32 offered and finished at 24.5 bid, 27.5 offered. In the previous session, the bonds had hit a high of 31, though trading was minimal.

Linens n'Things bucks market trend

Bucking the current trend, Linens n'Things' floating-rate notes were seen up slightly after the company supposedly held a pre-earnings conference call just before the close of the market.

A trader quoted the bonds due 2014 at 66 bid, 66.5 offered, up from the opening market of 64 bid, 65 offered.

"Maybe they are going to make some money," the trader said. He added that he did not hear the call.

The home decor retailer posted a wider second-quarter loss earlier this month. The company reported a net loss $42.0 million, compared with a net loss of $39.1 million for the second quarter of 2006.

Autos mostly lower

Among the distressed automotive names, Dana Corp.'s 6½% notes due 2008 were up half a point to 83 bid, 85 offered.

Troy, Mich.-based Delphi Corp. saw its 6.55% notes due 2006 slide 1 point to 102 bid, 104 offered.

Meanwhile, a trader said Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were down 2 points to 52 bid, 54 offered. At another desk, a trader said the 9% subordinated bonds due 2009 traded at 4.

Remy International Inc.'s bonds were deemed unchanged.

Broad market mixed

A trader saw building materials manufacturer and distributor AMH Holding Inc.'s 0% notes due 2014 down at 64.75 bid, 65.75 offered.

Elsewhere, a trader saw Fremont General Corp.'s 7 7/8% notes due 2009 trade at 91.

"To me, that seems way overvalued," the trader said. When asked for potential reasons why the mortgage lender would trade so high, the trader responded, "Someone is drinking."

Another trader called the bonds down 2 points at 89 bid, 90 offered following a ratings downgrade from Moody's Investors Service, which also prompted losses in the equity.

Beazer Homes USA Inc.'s debt was "down a couple," a trader said, with its 8 5/8% notes due 2011 at 78 bid, 80 offered and 8 3/8% notes due 2012 at 77 bid, 79 offered, both down 2 points.

Thornburg Mortgage Inc.'s 8% notes due 2013 slipped 1 point to 82 bid, 83 offered. Another trader saw them down 2 points at 81 bid, 83 offered.

Swift Transportation Co. Inc.'s 12½% notes due 2010 continued to move higher, closing up 1.5 points to 67 bid, 69 offered.

Also better were Spectrum Brands' bonds. The 11¼% notes due 2013 moved 1 point higher to 84.5 bid, 85.5 offered, while the 7 3/8% notes due 2015 moved up just a half point to 73.5 bid, 74.5 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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