Thornburg bonds gain momentum; Delphi loan, Cooper-Standard bonds moving up

By Stephanie N. Rotondo

Portland, Ore., April 2 -Thornburg Mortgage Corp.'s bonds continued to react to the news that the company had completed its financing plan, gaining as much as 8 points during Wednesday trading.

The jumbo home mortgage lender announced late Monday that it had completed its $1.35 billion financing deal, after twice receiving extensions on its lender-imposed deadline. While investors were concerned during Monday trading that the deal would not get done, causing the bonds to fall, on Tuesday the bonds closed about 10 points better.

Meanwhile, after waiting for months, Delphi Corp. could emerge from bankruptcy by the end of the week. Though it is not clear if the company has secured funding for its $6.1 billion exit facility, Delphi's first-lien term loan has slowly, but steadily, inched higher since braking for trading on Monday. The company's corporate debt, however, remains silent.

In the rest of the automotive realm, Cooper-Standard Automotive Inc.'s bonds continue to climb after releasing its 10-K Tuesday. Though the company posted a wider loss for the year, sales increased considerably, giving some market players hope for the company's future.

As the stock market gyrated on Federal Reserve chairman Ben Bernanke's comments that a recession is possible, trader reported that the distressed sector was firmer overall, though there were few names that were trading actively.

Thornburg bonds gain momentum

Thornburg Mortgage bonds were "through the roof," a trader said, as the debt was still responding to the news that the company secured its needed financing.

The trader quoted the 8% notes due 2013 at 73 bid, 74 offered.

Another trader said trading in Thornburg bonds dominated his desk, pegging the notes at around 73.

"Thornburg was pretty much it," he said.

Another source deemed the debt 5.5 points better at 72.5, while another called the bonds up 8 points at 73 bid, 76 offered.

Late Monday, the lender announced that it had raised the funds necessary to placate its bank lenders by selling $1.35 billion in new senior subordinated notes that include warrants to buy common stock at 1 cent per share.

The new capital was required by five of Thornburg's lenders under an agreement that would stop new margin calls and other repayment demands. Thornburg entered into the agreement after facing $1.8 billion in margin calls, of which $610 million was not paid. The failure to pay the margin calls then resulted in a number of defaults with its various lenders.

But while the completion of the financing plan has thus far been successful, the company is not yet out of the woods. In a letter to shareholders Tuesday, the company said that a collapse could still occur if shareholders do not agree to increase the number of outstanding shares.

In the letter filed with the Securities and Exchange Commission, Larry Goldstone, chief executive officer, said that if shareholders did not approve the increase, it could "seriously jeopardize the financial viability of the company."

Thornburg Mortgage is a Santa Fe, N.M.-based mortgage lender specializing in jumbo home loans.

Among other names in the financial sector, a source saw GMAC LLC's 6 7/8% notes due 2012 gain 1 point to end at 77.25, while its offspring, Residential Capital LLC, saw its 8 7/8% notes due 2015 2 points better at around 53.

However, Countrywide Financial Corp.'s 3¼% notes coming due on May 21, 2008 were "still" at 98 bid, par offered, a trader said, although he saw the 6¼% notes due 2016 firm as high as 83 bid from 79 bid, 81 offered previously.

Realogy Corp.'s 12 3/8% notes due 2015 were up 1.5 points at 47.5 bid, 49 offered.

Delphi exit soon?

After months of waiting, Delphi has said it expects to emerge from bankruptcy by the end of the week.

Delphi has had trouble exiting Chapter 11 protection, as the current state of the credit markets has resulted in the company struggling to find exit financing. The company has amended its credit facility several times in an effort to secure the funds.

A company spokesperson would not comment on whether the $6.1 billion in exit financing had been secured.

In late March, a bankruptcy judge gave the Troy, Mich.-based automotive parts supplier more time to complete its efforts to find the necessary cash by extending looming deadlines with former parent General Motors Corp. and the Internal Revenue Service.

Delphi's $2 billion seven-year first-lien term loan (Ba2) inched a little higher during trading, in line with an overall stronger market. The term loan was quoted at 94 1/8 bid, 95 1/8 offered, up from 94 bid, 95 offered on Tuesday, a trader said.

Since breaking for trading on Monday, the debt has moved up quite nicely. On the break it was quoted at 93 bid, 94 offered and then by the end of that day it was 93½ bid, 94.

So, from the break until the close Wednesday, the debt had already gained 1.125 points in trading.

The first-lien term loan is priced at Libor plus 575 bps, with a 3.25% Libor floor for life and call protection of 102 in year one and 101 in year two. The paper was sold to investors at an original issue discount of 92.

But since the January 25 confirmation of its reorganization plan, Delphi's corporate debt has lacked in activity. In fact, during Wednesday's session, a trader said there were only a few small trades in the name at around 34.

At another desk, a trader saw Delphi's 6.55% notes that were due in 2006 unchanged at around the 32 bid area. But another trader saw its 7 1/8% bonds due 2029 up 3 points at 33.5 bid, 34.5 offered.

Elsewhere in the autosphere, Cooper-Standard Automotive's bonds continue to climb after posting what one trader called "good" numbers on Tuesday.

The 8 3/8% notes due 2014 edged higher to close at 78 bid, 78.25 offered, while the 7% notes due 2012 also ended firmer at 87 bid, 88 offered.

Despite a 16% increase in sales for fiscal 2007, Cooper reported a wider loss for the year. However, as its business has expanded outside that of the U.S. automotive industry, some feel the Novi, Mich.-based company could weather the current economic storm.

"We like management's track record, the increasing customer and geographic diversity, potential for cash flow generation and competitive position," wrote Shelley Lombard, Gimme Credit analyst, in an afternoon report. "And the acquisitions will soften the impact of lower volume this year," citing the company's purchase of El Jarudo and Metzler Automotive's European and some of its Indian businesses.

No change for Sea Containers

A market source saw Bermuda-based Sea Containers Ltd.'s 10¾% notes that were to have matured in 2006 falling 18 points to around 40.

But another source said there was "nothing going on" in the name.

"The bonds are all tied up," he said. "So they don't really trade."

Building Materials steady

Building Materials Corp. of America's bank debt held steady after a downgrade from Standard & Poor's and a private lender call that was held to update earnings, according to a trader.

The term loan was quoted at 80½ bid, the trader said, unchanged from Tuesday's levels.

On Wednesday, S&P cut the company's corporate credit rating to B+ from BB- and left the ratings on CreditWatch with negative implications because of weakness in the housing environment.

"The downgrade and continued CreditWatch listing reflects the material weakening of the company's overall financial profile due to the challenging operating conditions in the company's primary markets, mainly in the residential repair and remodeling sector," said S&P credit analyst Thomas Nadramia in the rating release.

"As a result, the company's credit metrics have deteriorated to a level no longer consistent with the prior rating. In addition, given the difficult operating environment, we would expect credit metrics to remain challenged during 2008, likely constricting the cushion relative to covenant levels under its bank facility," Nadramia continued.

"If a further downgrade were to occur, it might not be limited to one notch," Nadramia added.

Broad market mostly firmer

Abitibi-Consolidated's 13¾% notes due 2011 were up a point at 101 bid, 102 offered. Among the company's established bonds, its 5¼% notes coming due June 20, 2008 were up a point at par bid, 102 offered, and while its 8.85% bonds due 2030 "were up a little this morning," a trader said, by the end of the day they had given back those gains and were unchanged at 43 bid, 45 offered.

Charter Communications Inc.'s 8 3/8% notes due 2014 were seen at around 93 bid, 94 offered while its 10% subordinated notes due 2014 were 3 points better at 50 bid, 52 offered.

A trader saw Neff Corp.'s 10% notes due 2015 continuing to firm, up 2 points to 49 bid, 51 offered. Another trader called Neff "a little stronger" at 50 bid, 52 offered, up a point.

Linens 'n Things Inc.'s floating-rate notes due 2014 were 3 points better at 35 bid, 37 offered, though on no news. Another trader quoted them at 37 bid, 39 offered, saying they were "going up a point every day" since recent lows around 28.

Among homebuilders, Beazer Homes USA Inc.'s 8 5/8% notes due 2011 edged up 2 points at 78 bid, 79 offered. Hovnanian Enterprises Inc.'s 6 3/8% notes due 2014 were unchanged at 68 bid, 70 offered, but Standard Pacific Corp.'s 7% notes due 2015 were 2 points up at 73 bid, 75 offered.

WCI Communities Inc.'s 9 1/8% notes due 2012 were up 2 points to 51 bid, 52 offered, continuing to recover from Monday's slide, while its 7 7/8% notes due 2013 were a point better at 50 bid, 51 offered. Its 6 5/8% notes due 2015 were unchanged at 47 bid, 49 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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