Standard Pacific bonds boosted; Delphi debt dips; Consumer confidence weighs on retail sector

By Stephanie N. Rotondo

Portland, Ore., May 27 - As distressed bond players returned from their long weekend Tuesday, Standard Pacific Corp. was the name on everyone's tongue.

The struggling homebuilder saw its bonds gain as much as 8 points during the session after announcing a private equity infusion of $530 million. The capital infusion will come in the form of a new series of convertible preferreds, as well the retirement of more than $120 million in debt with warrants to purchase preferred stock in the company. The agreement with MatlinPatterson Global Advisors will reduce overall debt by about half.

Meanwhile, Delphi Corp.'s bonds continued to experience losses. The automotive parts supplier's debt had begun to give back some of its gains Friday. Come Tuesday, former parent General Motors Corp. saw its equity downgraded - and companies associated with the automaker saw their bonds slide. But a trader was uncertain if the GM news was to blame for Delphi's slip.

Consumer confidence fell yet again and, as a result, consumer products and retailers ended the day weaker. Bon-Ton Stores Inc. and Burlington Coat Factory Warehouse Corp. were "trending softer," a trader said, while Spectrum Brands Inc.'s debt inched lower.

Standard Pacific's bonds boosted

Standard Pacific was the name du jour after the company announced a private equity infusion of $530 million.

The news boosted the homebuilder's bonds 1 to 8 points during the session. One trader pegged the shortest paper, the 6½% notes due 2008, up 1 point at 98.25 bid, 98.75 offered and the 5 1/8% notes due 2009 8 points better at 94.5 bid, 95.5 offered.

At another desk, a trader said the bonds were up 3 to 7 points "depending on which flavor you're looking at." He saw the short paper around 98.5 and called the 9¼% notes due 2012 "up the most" at 72 even, a 7-point gain.

The trader also quoted the 7¾% notes due 2013 at 80 bid, 81 offered, up from 75, and the 6¼% notes due 2014 at 76 bid, 78 offered, up from 73.

In a prepared statement released early in the day, Standard Pacific said MatlinPatterson Global Advisors LLC would make a $530 million capital infusion in the struggling homebuilder. Under the agreement, MatlinPatterson will purchase $381 million in new senior convertible preferred stock as well as exchange $128.5 million of senior and subordinated debt for warrants to acquire preferred stock. The infusion will cut the company's debt by about half.

"This capital infusion will strengthen our balance sheet, enhance our financial flexibility and provide funding for future growth opportunities," said Jeffrey Peterson, Standard Pacific's chief executive officer, in a statement.

Standard Pacific has been one of the worst hit companies in the housing downturn, attributed to its large exposure to the California real estate market. However, Gimme Credit analyst Vicki Bryan said that the agreement should allow the company to meet its debt obligations through 2008.

"It is already expected [the 2008 issue] will get paid off," one trader commented.

Still, new data out Tuesday implies that the housing sector in general will continue to face obstacles in the near term. In a Commerce Department report, home sales for April were unexpectedly higher than anticipated, gaining 3.3% to a seasonally adjusted annual rate of 526,000 units. However, March sales were revised in the report to show a heftier decline of 11% to 509,000 units.

In the Commerce Department report, prices for new homes increased 1.5% to $246,100 in April. But a Standard & Poor's/Case-Shiller report showed national home prices falling 14.1% in the first quarter compared with a year earlier, the lowest since the index was created in 1988.

Standard Pacific is an Irvine, Calif.-based homebuilder.

Is GM hurting Delphi?

After running up early last week, Delphi's bonds began to come back down on Friday - a trend that continued on Tuesday.

A trader said the bonds fell into the low-40s, while another market source placed the bonds generically at 40 bid, down as much as 4.5 points.

The trader said he was not sure if the session's losses had anything to do with an equity downgrade at General Motors Corp., Delphi's former parent. A Citigroup report cut GM's stock rating to "hold" from "buy," resulting in the equity's biggest decline since 1982.

Another trader called Delphi's 6½% notes due 2009 down 3 points on the day at 41 bid, 43 offered on market fears of further output cuts.

Whether the GM news had anything to do with Delphi's slide or not, other companies associated with GM felt the pinch. GM's 7 1/8% notes due 2013 fell 2 points to 77.5 bid, while GMAC LLC's 6 7/8% notes due 2012 slipped 3 points to 80.5 bid. GMAC offspring Residential Capital LLC saw its 8 7/8% notes due 2015 close at 51 bid, down 1 point.

Delphi is a Troy, Mich.-based automotive parts supplier.

Elsewhere in the autosphere, a trader saw Visteon Corp.'s 7% notes due 2014 in a 67 to 69 range, last traded at 67.5, which he said might be down a point, but he said activity there was "no great shakes."

Retail, consumer products decline

As consumer confidence hit a nearly 16-year low, consumer-related bonds were "trending softer," a trader said.

The trader said Bon-Ton's 10¼% notes due 2014 "dipped a little" to 72 bid, 73 offered, while Burlington Coat Factory's 11 1/8% notes due 2015 fell to around 85.

Meanwhile, Spectrum Brands' 7 3/8% notes due 2015 "continue to dip a little," ending the day around 69. The 11% variable-rate notes due 2013 closed at around 89.

According to the New York-based Conference Board, the Consumer Confidence Index declined to 57.2 in May, down from April's revised level of 62.8. The board attributed the bleak outlook to increasing gas prices and job concerns.

"Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers' confidence in the overall state of the economy," Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement.

Paul Deckelman contributed to this article.

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