WCI jumps on amendment news; better or worse for Quebecor?; Burlington Coat weaker

By Stephanie N. Rotondo

Portland, Ore., Jan. 17 - Thursday was a day that could only be categorized as "ugly," as a plummeting stock market discouraged would-be distressed debt investors.

"It's ugly out there," said one trader. "This is not a sellers' market. There are a lot of quotes, but not much trading."

"I don't even know how to describe it anymore," he added. While there was some belief that things in the junk sector were "getting better," there is a general feeling of "why buy something today when I know it is going down?" he said.

"It's kind of ugly," said another trader. "There is a lot of fear."

"Everything is lower, probably 1 to 2 points generally," said another source. "It probably gets worse before it gets better."

"It is very difficult to get anyone to focus," a trader said. "A lot of people say they are short - but everybody can't be short."

Topping the list of major movers in the distressed arena was WCI Communities Inc. As expected, the Bonita Springs, Fla.-based homebuilder's debt took a leap after the announcement late Wednesday that it had secured bank amendments. The convertible issue - considered to be the key issue currently - gained as much as 18 points on the day, while the other issues were about 6 points better.

Quebecor World Inc. also continued to be active amid a largely inactive market. That company also made a late announcement Wednesday, stating that it had pushed back the deadline to finalize its rescue-financing proposal.

Still, it was unclear how the bonds reacted to the news, and sources at different desks had different commentaries.

Better quarterly results helped Burlington Coat Factory Warehouse Corp.'s bonds throughout the week. Day after day, traders reported that the debt was not only active, but better as well - even as other retail-related names were weaker and quiet.

But as the general marketplace took a dive, Burlington's bonds went along, slipping about 3 points during the session.

The bond market will close early Friday in preparation for Martin Luther King Jr. Day on Monday.

"Tomorrow should be very interesting," a trader said. "Hopefully, a lot of guys will be taking the day off so the stock market won't get totally crushed."

WCI bonds jump on amendment

WCI Communities' bonds did in fact jump, as was expected, after the company announced it had come to terms with its banks.

Mid-afternoon, a trader said the 4% convertibles notes due 2023 had gained about 18 points, trading around 78. That issue is widely considered to be the issue to trade, as it has a put in August.

The trader also said the 9 1/8% notes due 2012 were up about 5.5 points to around 54.5.

By market close, however, the initial high had worn off, and the homebuilder's bonds came in slightly with the rest of the market.

A trader said the bonds were "up, up and away, its 4% notes closing at 75 bid, 77 offered and its 9 1/8% notes at 55 bid, 57 offered.

"It was very positive news with the banks giving them some breathing room," the trader said of the newly inked amendment to the company's revolving credit facility and term loan.

Another trader, who noted that "the converts were by far the trade," placed the 4% notes at 75 bid, 77 offered and the 9 1/8% notes at 55 bid, 57 offered. He also saw the 6 5/8% notes due 2015 at 49 bid, 51 offered and the 7 7/8% notes due 2013 at 52 bid, 54 offered.

Another source pegged the WCI 9 1/8% notes at 52 bid, 55 offered, up from 47 bid, 49 offered.

Another trader saw those bonds at 54.5 bid, 56.5 offered, which he called a 6-point gain.

Yet another market source had the bonds at 56, up more than 6 points on the day.

The last-minute reprieve gave WCI until June 30, 2009 to clean up its balance sheets. According to one trader, the company has enough liquidity to last that long, even if the $125 million convertible issue is put in August.

"If the bonds continue to move up, people will feel more comfortable with that taking place," he said.

Still, the new amendments are not the end of the story.

"This is far from over," a trader said. The agreement with the banks gave the homebuilder a "second gasp of life," but that does not mean they are out of the woods.

"In my opinion, they will eventually file," the trader said. "But it has been put off."

"It's all smoke and mirrors; there is no real progress, no real solution," he added.

Quebecor: better or worse?

Quebecor World also received an 11th-hour reprieve, announcing late Wednesday that it extended the deadline to satisfy terms on its C$400 million rescue plan.

The extension gives the commercial printer until Sunday to iron out the details - as well as get bank approval on the plan.

The Canadian company's bonds were once again active, in an otherwise hesitant market. But it was unclear how the corporate debt fared.

One trader said the bonds lost about 2 points during the session, its 6 1/8% notes due 2013 at 63.5 bid, 65.5 offered, its 9¾% notes due 2015 around 61 and its 4 7/8% notes due 2008 at 69 bid, 71 offered, down from 70 bid, 72 offered.

Another trader called the 6 1/8% notes unchanged at 66 bid, 67 offered, although he said there had been a high volume of trading - but not a ton of movement. He saw the bonds get as good as 68.5 and go as low as 65.5, but in the end he said, "[almost] everything traded at 66-67."

Another trader saw those bonds at 66 bid, 68 offered, while quoting its 4 7/8% notes at 70 bid, 72 offered and its 8¾% at 57 bid, 59 offered.

Another trader, however, said the bonds were "probably up a little. But they are trading flat, so that accounts for some of the move."

That trader quoted the 4 7/8% notes at 71 bid, 72 offered, up 2 points, and the 6 1/8% notes at 67 bid, 68 offered, up from 61 bid, 63 offered.

Still, he said, "there are not a lot of fans of publishing companies right now."

For example, he said, Vertis Inc.'s 10 7/8% notes due 2009 were trading at 43 bid, 45 offered and its 13½% notes at 20 bid, 22 offered.

"They are getting crushed," he said.

Burlington active, weaker

Burlington Coat Factory's debt took a downward turn Thursday after several active sessions of gains.

"Nobody cares about retailers," a trader said.

The trader said the 11 1/8% notes due 2014 were weaker at 72.5 bid, 73.5 offered. As for the recent gains in the name, the trader said the move occurred because the company's numbers "were a little better than expected."

Another trader called the bonds active, closing at 72 bid, 73 offered from 75 bid, 76 offered in the previous session. Another said the notes lost nearly 4 points, ending at 75.5.

Earlier in the week, Burlington reported its second-quarter results. For the period ended Dec. 1, net sales decreased 3.9% to $946.6 million. The company posted a $23.2 million net income for that time period.

But retailers as a whole are having a harder time attracting investors. With a recession looming, and consumer spending weakening, many retailers are finding their balance sheets out of whack - along with their sales.

Overall, retail sales for the holiday shopping season were weaker than the previous year, as was expected. Rising fuel costs and a housing slump prompted consumers to go lighter for the Christmas season, which did not bode well for consumer-driven industries.

"Anything having to do with consumers, look out below," a trader said.

Elsewhere in the sector, Bon-Ton Stores Inc.'s 10¼% notes due 2014 slipped 2 points to 65 bid, 67 offered, while another trader saw them down about 2 points at 66 bid, 67 offered from 68 bid, 68.5 offered previously. Claire's Stores Inc.'s 9¼% notes due 2015 were also down a deuce at 63 bid, 65 offered.

However, the exception to the rule was Finlay Fine Jewelry Inc., with a market source seeing its 8 3/8% notes due 2012 at 45 bid, up a point. At another desk, though, those bonds were being quoted as high as 51 bid, up 6 points.

Broad market bits: Calpine, Tousa, Delphi

Calpine Corp.'s bonds "came in hard," a trader said, its 8½% notes due 2011 at 111.5 bid, 113.5 offered and its 8½% notes due 2008 at 115 bid, 117 offered, both down 4 points.

The trader attributed the decrease to an overall weakening marketplace in which the San Jose, Calif.-based company's when-issued common stock fell under $17.

"There wasn't a whole lot of volume," he added.

Tousa Inc.'s debt also drifted in, closing "a couple points lower," the trader said. He quoted the 8¼% notes due 2011 at 40.5 bid, 41.5 offered and the 9% notes due 2010 at 41 bid, 42 offered.

"Their business is terrible," a trader said of Delphi Corp., which announced Thursday that a majority of stakeholders approved its reorganization plan. The trader said the automotive parts supplier - an industry that would be hit hard during a recession - saw its debt slip yet again this week. Generically, he pegged the bonds at 38 bid, 40 offered. Specifically, he placed the 7 1/8% notes due 2029 and the 6½% notes due 2013 at 39.5 bid, 40.5 offered.

However, another trader said Delphi's 6.55% notes that were to have come due in 2006 rebounded from Wednesday's retreat, back up to 40 bid, 42 offered, a gain of 2 points on the day.

Paul Deckelman contributed to this article.

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