Quebecor paper fluctuates on missed payment; WCI bonds better; Tousa structure mixed

By Stephanie N. Rotondo

Portland, Ore., Jan. 16 - Wednesday's distressed bond market continued to be heavy overall, traders said, with a few exceptions.

"In general, the market still feels heavy," a trader said. He added that there were "some short-covering rallies," but overall there "was not a lot of buying."

One of those exceptions - technically speaking - was Quebecor World Inc. The Canadian company announced late Tuesday that it had failed to make a scheduled interest payment, and its bonds responded by moving lower.

But as the bonds began to trade flat - without accrued interest - the debt rallied a bit, ending the day slightly higher than the previous session.

Continuing the trend of after-market announcements, WCI Communities Inc. released a statement after the close of business, which stated that it had obtained an amendment on its revolving credit facility and term loan. The homebuilder's bonds did not get a chance to react to the news - though they did close higher than the previous trading day. The bonds were expected to "jump" once Thursday's market opens.

Also in the housing sector, another missed coupon was a relative "non-event" for Tousa Inc. The company failed to make the Jan. 15 payment on its 7½% notes due 2015. Earlier this month, the company missed the payment on its 9% notes due 2010 and its 10 3/8% notes due 2012, as well. On the news, the company's entire structure - corporate and bank debt - was mixed.

Quebecor bonds mixed on missed payment

Quebecor World was once again the name du jour, as the company missed an interest payment on its 9¾% notes due 2015.

Though not immediately in default - the company now enters into a 30-day grace period - the company has also missed the deadline set by its banks to come up with C$125 million in new financing. If the banks reject a so-called "rescue financing" proposal, those lenders could force the commercial printer into Chapter 11.

Several traders reported the company's bonds were trading flat - or without accrued interest - on the missed coupon. One trader early on in the day placed the 8¾% notes due 2016 at 55 bid, 57 offered, which was lower from the previous session's closing levels of 55 bid, 60 offered.

At market close, however, Quebecor's bonds seemed to have rallied. But the fact that the bonds were trading flat could have accounted for the increase, one trader said.

That trader quoted the 4 7/8% notes due 2008 at 67 bid, 68 offered at the end of the day, up from its daily low around 62. The 6 1/8% notes due 2013 were likewise up from its low of 57 bid, 58 offered to around 64.

At another desk, a trader pegged the 4 7/8% notes at 67, noting that the debt opened at that level before hitting a low point of 62. Another trader said there was "heavy volume" in the 6 1/8% notes, which he deemed "up a little" at 63 bid, 64 offered.

Elsewhere, a source saw the 6 1/8% notes due 2013 down 2 points at 62 bid, 64 offered, while its 4 7/8% notes slated to come due in November were 3 points better at 67.5 bid, 68.5 offered.

Another trader saw the 2008 issue finishing at 67.5 bid, 72.5 offered, although at one point, he said, they traded as low as 63.5.

"It was another wild day for Quebecor," he said.

On Tuesday, Quebecor accepted a rescue plan from its parent, Quebecor Inc., and private equity firm Tricap Partners Ltd. However, the company's banks have to approve the deal, and it is widely believed that the banks are not in favor.

Quebecor also asked its banks to extend the deadline by which the company needed to come up with its alternative financing, but it has not yet received a response.

Standard & Poor's subsequently has downgraded the company but stated that the rating could go back up if the coupon payment is made within the 30-day grace period.

WCI obtains amendment, bonds better

Distressed homebuilder WCI Communities waited until the market closed for the day to announce that it had come to an agreement with its lenders.

The Bonita Springs, Fla.-based company had until Wednesday to secure an amendment on its revolving credit facility and term loan. With the market waiting to see if the parties would come to terms, WCI finalized an agreement with its banks that will give the company more financial flexibility.

A trader said the 4% convertible notes - which he called "the key issue with their put date [the] closest public debt maturity" - did not trade during the session, while the 9 1/8% notes due 2012 "traded a bunch," up half a point to the 49 area.

Post-news, however, there was little activity in the name, though the trader speculated that "I expect the bonds will jump in the [morning]."

Earlier in the week, the trader also opined, "I am sure that the company is negotiating with the holders of the 4% notes to change terms to a higher coupon, lower premium issue and move the put date out."

Another trader called the 9 1/8% notes up 2 points to 48 bid, 50 offered following the news.

At another desk, a trader said that "the stock had been getting beaten up earlier in the day - I think it was on [investor] jitters [that they would not get the amendments done in time], the bonds were hanging tight. Then [chairman Carl] Icahn went on TV and made some comments that gave the bonds a little jump. Now, it just came over the tape that they did amend the credit amendments, so you would expect to see the bonds get a little bit of a bounce there."

But even with the relatively positive news, WCI's future remains uncertain.

The trader said that his opinion was "there are still bigger problems overhanging WCI - this is a patch on the bigger problem - but it does buy them some time to make some things happen, and when Icahn is involved, anything can happen."

"We long have expected a recapitalization of the company," wrote Vicki Bryan, an analyst with Gimme Credit LLC, in an afternoon report, "and if it comes bondholders will be faced with trying to stake a claim against mainly Florida assets (which are eroding every minute) while they battle a cadre of bankers and the formidable Mr. Carl Icahn."

Tousa misses another coupon

Elsewhere in the troubled housing sector, a trader called yet another missed coupon a "non-event" for Tousa, which failed to make an interest payment in its 7½% notes due 2015.

"They missed the Jan. 1 payment [on the 10 3/8% subordinated notes due 2012 and 9% notes due 2010] already," he noted.

Another trader said there was "good volume" in the 9% senior notes. He pegged the bonds at 43.5 bid, 44 offered.

In the junior debt - which includes the 10 3/8% and 7½% notes - however, there was "not so much volume," the trader said. He added that the subordinated issues have been trading between 8 and 10.5 over the last two weeks.

"Many feel that those won't be worth anything, and the market is certainly indicating that," he said of the junior paper.

Another trader deemed the 7½% notes unchanged at 9 bid, 11 offered, while its 9% notes were up a point at 42.5 bid, 44.5 offered.

Yet another trader, who said the missed payment was "not much of a surprise," saw the senior notes at 42 bid, 44 offered and the juniors at 9 bid, 11 offered pretty much across the board.

Meanwhile, the Hollywood, Fla.-based homebuilder's first-lien term loan fell by about a quarter of a point in trading, while its second-lien term loan held steady, a trader said.

The first-lien term loan was quoted at 95¼ bid, 96¼ offered, down from 95½ bid, 96½ offered, the trader said, while the second-lien term loan was quoted at 90 bid, 91 offered, unchanged from previous levels.

Broad market tidbits

Retailers remained mixed just one day after the December sales report from the Commerce Department was issued.

A trader said Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 continued to be active, closing around 76. Other retailers, however, like Linens n'Things and Bon-Ton Stores Inc., were quieter. Linens' floating-rate notes due 2014 slipped a couple points to 43, and Bon-Ton's 10¼% notes due 2014 ended the day at 68.5.

Delphi Corp. paper was dragged down yet again, a trader said. He said the automotive parts supplier's debt - which has begun to trade relatively close together - closed lower at around 40.

Elsewhere, the 6.55% notes that were supposed to have come due in 2006 were seen down 3 points at 40 bid, 42 offered on "no news," a trader said. Another trader saw those bonds at 38 bid, 40 offered, which he called a 4-point loss.

A confirmation hearing on the Troy, Mich.-based company's reorganization plan is set to begin Thursday.

Rumors of a looming bankruptcy filing sent Tropicana Entertainment LLC, also known as Wymar Operating, lower. A trader quoted the 9 5/8% notes due 2014 around 59.5.

Tembec Inc.'s 8 5/8% notes due 2009 were called down 2 points at 40 bid, 42 offered, while Buffets Inc.'s 12½% notes due 2014 fell to 18 bid, 22 offered from 22 bid, 25 offered previously.

Swift Transportation Inc.'s 12½% notes due 2017 tumbled to 36.5 bid, 38.5 offered from prior levels at 41 bid, 43 offered.

Solo Cup Co.'s 8½% notes due 2014 lost 3 points to 81 bid, 83 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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