Thornburg, Countrywide paper hold steady; Sales report does little to hurt retailers' debt

By Stephanie N. Rotondo

Portland, Ore., May 13 - It was almost a case of déjà vu during Tuesday's trading session, as even a steady flow of news impacted the distressed bond market little.

"There wasn't a lot to write home about," said one trader.

The news that Thornburg Mortgage Corp. would delay filing its 10-Q had little effect on investors either way. Traders said the bonds closed the day unchanged on little volume.

Meanwhile, after several sessions of losses, Countrywide Financial Corp. saw its debt try to recover slightly - or at least hold on to its position.

The Commerce Department reported yet another decline in retail sales for last month. But overall, distressed retailers remained on an even keel. Even Linens n'Things Inc., which also said it would delay filing its quarterly report, ended the session unchanged.

Though traders noted there was "sporadic activity" in the market, they still saw very little action in the junk sector.

"It was another dull day," a trader said. He added that he was not sure what was causing the slowdown.

"I don't know if there is a focus on new issues or what," he said.

Indeed, one trader said he heard that many market players were focusing on Nortek's new deal, which will replace bank debt with bonds. He said that players were trying to figure out how to play the paper, as the new issue will have some securities typical in bank debt - but not all of them.

"In general, it got real quiet in the afternoon," another source said. "The market was softer at the open, based on the stocks."

"It was too quiet for my liking," he added. "Not worse than [Monday] but not necessarily better."

Thornburg, Countrywide stable

Thornburg Mortgage delayed releasing its 10-Q Tuesday but did state that it expected to post a substantial loss for the first quarter of the year.

But as was the case in Monday's session, the news did little to move the company's bonds - a trend seen throughout the distressed arena.

A trader quoted the 8% notes due 2013 at 80 bid, 82 offered, about where they had been. Another trader called the name very quiet, while another source pegged the issue down around a point at 80 bid.

Another trader said he "didn't see any [substantial] trades, just odd-lots." Given the latest bad news about the company, he said, "they should be lower - but I see nothing to verify that."

The company said it needed more time to file its quarterly report as it assesses the recent deal it made to raise cash in March. In recent months, Thornburg was faced with a series of margin calls that nearly forced the company into bankruptcy. The company was able to negotiate a deal with its lenders to cease their repayment demands, but in return, Thornburg had to secure about $1 billion to appease its banks.

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

Among other struggling names in the financial sector, a trader said Calabasas, Calif.-based Countrywide Financial's bonds "continued to be active" and managed to hold steady after several days of losses.

The trader said the 4% notes due 2011 were unchanged at around 84.5. He also pegged the 6¼% notes due 2016 at 79 bid, 80 offered, which he said was in the "same general zip code."

At another desk, however, a trader called the 6¼% notes some 3 points lower at 78 bid, 80 offered.

The trader also noted that Residential Capital LLC's longer-dated paper, such as the 6½% notes due 2012, remained unchanged in the high-40s.

Linens, retailers mostly unchanged

Linens n'Things also said it needed more time to file its quarterly report. The company said its recent bankruptcy filing was hindering it from filing on time.

The Clifton, N.J.-based company did release some preliminary figures, which showed sales slipping by less than 1% to $566.9 million.

Still, there was little change in the retailer's floating-rate notes due 2014. In fact, traders reported there were few, if any, trades in the name.

"[They] reported less than $10 million cash on hand," one trader said. "The bonds should be weaker but have not traded."

Another trader said there was a print at 32, which he deemed unchanged.

Another trader saw Linens' notes down a deuce a 31 bid, 33 offered.

Overall, retailers "looked mixed to better," a trader said, even as the Commerce Department's monthly sales report showed yet another decline.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 were "off a touch" at 74 5/8 bid, 75 1/8 offered, versus levels of 75 bid, 76 offered previously. Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 were unchanged at 84.5 bid, 85 offered.

Meanwhile, Michael's Stores Inc.'s paper was likewise unchanged, its 11 3/8% notes due 2016 at 83.75 bid, 84 offered.

Sally Beauty's debt ended the day about the same as on Monday. The 9¼% notes due 2014 closed at 99.75 bid, par offered, and the 10½% notes due 2016 ended at 98 "give or take."

A trader said that trading in Dollar General Corp.'s bonds was "a little active," though there was very little price movement. He quoted the 10 5/8% notes due 2015 at 98 bid, 98.5 offered - "kind of where they have been," he said.

Elsewhere, a trader deemed "most retail names lower," including Bon-Ton's 10¼% notes at 74 bid, 76 offered and Rite Aid Corp.'s 7.7% notes due 2027 at 59.5 bid, 60.5 offered, both down a point. He saw Burlington Coat Factory Warehouse's 11 1/8% notes down 2 points at 83.5 bid, 84.5 offered.

On Tuesday, The Commerce Department reported a 0.2% decline in retail sales during April. The dip - which fell in line with market expectations - was the second slip in the last three months.

The sales figures were weighed on by a 2.8% decrease in automotive sales. Excluding that, retail sales would have edged higher by 0.5%.

Broad market holds steady

Broder Bros. Co. reported its first-quarter results, which a trader said were "in line with expectations." Still, the company's 11¼% notes due 2010 closed unchanged at 70 bid, 70.5 offered.

Also unchanged was WCI Communities Inc.'s debt. The 4% convertible notes due 2023 ended the session at 66 bid, 67 offered, while the 9 1/8% notes due 2012 ended around 43.

Sealy Mattress' 8¼% notes due 2014 were seen slightly better at 89 bid, 89.5 offered, up about a point.

The gaming sector was on the quiet side, a trader said. Harrah's Operating's 10¾% notes due 2016 remained around 86. The trader also said that "MGM's might have been a tad better, but just a fraction."

Charter Communications Inc.'s paper was mixed just one day after the company posted its first-quarter numbers. After getting boosted in the previous session, a trader said the 11% notes due 2015 were unchanged at around 84, while the 10% notes due 2014 edged up to 59.5 bid, 60 offered. Another source called the 2014 issue up 1.5 points to 59 bid, 61 offered.

A trader saw Idearc Inc.'s 8% notes due 2016 "still at" 70 bid, 72 offered, with R.H. Donnelley's 6 7/8% bonds up half a point at 66 bid, 68 offered and its 8 7/8% notes unchanged at 67 bid, 68 offered.

Paul Deckelman contributed to this article.

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