Tousa rebounds; Tekni-Plex dips; Fremont bonds better; Spectrum steady; Calpine up

By Stephanie N. Rotondo

Portland, Ore., Sept. 28 - As is typical of the distressed market of late, Friday trading was lackluster, at best.

One trader called trading during the close of the week "a big zero."

Another said there was "not a hell of a lot of activity out there."

Overall, the junk sector was mostly lower, with a few exceptions.

Technical Olympic USA Inc.'s bonds were one of those exceptions. A trader said the bonds moved up 2 points after its 6- to 7-point loss in the previous session. Market sources speculated the news that caused the slide prompted overreaction in the already spooked marketplace.

Meanwhile, Tekni-Plex Inc. filed its 10-K on Friday. While the figures showed an improvement over the previous year, the bonds fell about 6 points.

Fremont General Corp., like Technical Olympic, attempted to rally after negative news released Wednesday dropped the bonds to the 87 area. The debt moved up 5 points by the close of the week.

News of an asset sale did little to push Spectrum Brands Inc.'s corporate debt higher, but a trader speculated that the gains were already built in from the previous trading day.

Elsewhere, Calpine Corp.'s bonds were deemed up on the day, but there was little explanation as to why.

Tousa rebounds slightly

After experiencing a 6- to 7-point drop in its bonds during the previous session, Technical Olympic's bonds attempted to regain some of their losses.

One trader said the bonds were up 2 points, its 9% notes due 2010 at 63 bid, 64 offered and its 10 3/8% notes due 2012 at 28 bid, 29 offered.

Another trader, however, called the move "very tiny," pegging the 9% notes at 62 bid, 63 offered and the 7½% notes due 2011 and 2015 at 22 bid, 24 offered.

The previous dip was attributed to a news story released Thursday, which said that one of the homebuilder's joint ventures, Wellington LLC, had received notice of a covenant violation.

But the first trader did not see why that news had such a significant effect on Technical Olympic's debt.

"Why the bonds fell 6 or 7 points did not really make sense," he said, adding that the "company has a huge amount of liquidity to ride out the storm."

The second trader took more of a middle-ground approach.

"The question is whether they can cure it," he said of the potential default. The company has until Oct. 19 to inject $10 million into the JV.

"In theory, you are not talking about a lot of dollars," he said. "In reality, do they have enough to cover it?"

But, according to an afternoon report published by Gimme Credit LLC, the notice is nothing more than a "normal margin call."

"We hardly believe Centex [Tousa's JV partner] or Tousa will go into general default over a normal margin call on the debt of a small joint venture," the report said. "The market certainly is spooky these days, and any hint of negative news sends stocks and bonds tumbling. In this case, we believe the traders over-reacted and perhaps have created a short-term trading opportunity in TOA bonds."

10-K hurts Tekni-Plex

Despite improved earnings, Tekni-Plex's bonds fell 6 to 7 points on the day.

A trader pegged the 12¾% subordinated notes due 2010 at 69, down from previous levels near 76. He called the packaging manufacturer's 10-K figures "very weak."

The company posted a $61.3 million net loss for the fiscal year ended June 29, compared to a net loss of $84.3 million the previous fiscal year.

Fremont bonds up from lows

Fremont General's bonds slipped 6 to 7 points earlier in the week as it came out that Gerald J. Ford might be rethinking his investment in the mortgage company.

But come the end of the week, a trader said the bonds are moving back up, speculating that the deal is still going through.

"It certainly smells like something in still going on," he said.

The trader saw the 7 3/8% notes due 2009 closer to 92," up from its Wednesday closing levels of 86 bid, 87 offered.

The trader said it seems likely that the investment deal led by Ford is still on, but that perhaps terms of the deal will be renegotiated.

Spectrum Brands steady on asset sale

An asset sale announced Friday did little to spur movement in Spectrum Brands' bonds, leading a trader to believe that the gains were incurred in the previous trading day.

"I think it was already in the market," he said.

The trader placed the Rayovac battery maker's 11¼% notes due 2013 at 89 and its 7 3/8% notes due 2015 at 76.5 bid, 77 offered.

"They have been moving up a little bit lately," he added.

The company said Friday that it is selling its Canadian home and garden businesses to a company formed by investment firm RoyCap Merchant Banking Corp. and Clarke Inc.

Terms of the deal were not disclosed. The transaction is expected to close Oct. 31.

In August, the company said it was looking to unload the business, which is not considered a profit contributor. Proceeds from the sale are expected to decrease the company's peak seasonal borrowing needs by $45 million for fiscal 2008.

Calpine gains

There was "definitely stuff going on" in Calpine bonds, a trader said, placing the debt up 3 or 4 points.

The trader quoted the 8½% notes due 2011 around 114, adding that he was not sure why the bonds moved.

Calpine posted an operating income of $154 million for the month of August, on $860 million in revenue. That compares to a $157 million income in July on $760 million in revenue.

Broad market mostly lower

A trader saw Ziff Davis Media Inc.'s 12% notes due 2009 trading "around a 60 level, which looks really high."

The trader said the company is in "pre-pack talks" with its lenders. The company did not make a scheduled Aug. 15 interest payment on the bonds.

The trader also saw Sea Containers Ltd.'s bonds down 2 points, its 10½% notes due 2012 closing at 72.

The trader noted that Sea Containers' went to court on Thursday, but "no one knows what happened at the hearing."

In a Friday filing with the bankruptcy court, the company received yet another extension on its exclusivity period.

At another desk, a trader said Delphi Corp.'s bonds were weaker, its 6.55% notes that were to have come due last year at 91 bid, 91.5 offered.

The trader also saw retailers losing ground. Linens n'Things' floating-rate notes slipped to 68, while Bon-Ton Stores Inc.'s 10¼% notes due 2014 and Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 dipped to 93.5 bid, 94 offered.

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