Thornburg debt moves up ahead of numbers; GM loan gains ground; Mrs. Fields plan filed, bonds slip

By Stephanie N. Rotondo

Portland, Ore., Aug. 25 - As the last official week of summer started, Thornburg Mortgage Corp.'s bonds continued to be quoted higher.

However, traders reported that trading volume in the name - as well as the broader market - was rather light. But one source speculated that some movement might occur during Tuesday's session, as quarterly earnings are expected.

In the autosphere, General Motors Corp.'s loan inched its way upward. While there was no news to prompt the move, a trader suggested that the gains were due to short covering.

Meanwhile, Mrs. Fields Famous Brands LLC filed its pre-packaged bankruptcy plan, but that did little to spark interest in the bonds. Still, the bonds were quoted lower, though a trader noted that trades were mostly odd lots.

Thornburg debt moves up

Traders saw Thornburg Mortgage's bonds trade at 74.5 bid, 75 offered Monday, well up from the last round-lot trades in the low- to mid-60s.

Still, traders noted that trading in the name has been light, with mostly odd lots going through.

Last week, market sources reported that the 8% notes due 2013 were being quoted higher, attributed to the company's successful preferred stock exchange. The Santa Fe, N.M.-based company extended the offer - which was slated to expire last Wednesday - to Sept. 2.

On Tuesday, investors will get to see if the company's attempts to clean up its balance sheet have potential, as earnings and a conference call are expected.

"You might see [some trading] tomorrow," a trader said.

Another trader said the bonds pushed up to the 75 level in intraday trading before going out at 74 bid, 76 offered, still well up from 65 bid, 67 offered last week.

Thornburg is one of several mortgage lenders that have spiraled downward due to the subprime crisis. The company was pushed to the brink of bankruptcy earlier this year when investors flooded the lender with margin calls, thereby depleting the company's liquidity.

According to a Bloomberg article last week, Thornburg is now looking to update its business model in an attempt to decrease its dependence on private lenders. The company has until March 2009 to raise about $5 billion in financing to pay off some of its creditors.

In the rest of the sector, MBIA Inc.'s 14% surplus notes due 2033 - high-grade rated but junk-traded - were down 1 point at 73 bid, 75 offered.

GM loan gains ground

General Motors' term loan posted some gains during Monday's market hours, but there was no real reason for the positive momentum, according to a trader.

The Detroit-based automotive company's term loan was quoted at 74¼ bid, 75¼ offered, up from Friday's levels of 73½ bid, 74½ offered, the trader said.

"People might have been covering shorts. [Also], people are cleaning up books I think, so you'll see people take views one way or the other. There was no real flow," the trader explained.

On the other hand, GM's counterpart, Ford Motor Co., a Dearborn, Mich.-based automotive company, saw its term loan levels remain unchanged on the day at 77¾ bid, 78¼ offered, the trader added.

"Most stuff is unchanged on the loan side even though equity is down. No volume. A lot of people are out this week," a second trader remarked.

On the bond side, a trader saw GM's benchmark 8 3/8% bonds due 2033 unchanged at 49 bid, 51 offered, while its 49%-owned auto financing arm GMAC LLC's 8% bonds due 2031 were likewise unchanged at 54 bid, 55 offered.

Another trader saw GM's benchmarks off half a point at 48 bid, 49 offered, while domestic rival Ford Motor's 7.45% bonds due 2031 were off by nearly a point at 50.5 bid, 51.5 offered.

At another desk, however, a trader said that the GM bonds were up half a point, to 50 bid, in round-lot trading, while the Ford bonds were down 1 point at 51.5 bid. He saw the GMAC bonds down almost a point at 54.

Mrs. Fields files plan, bonds slip

Mrs. Fields filed its pre-packaged bankruptcy petition Monday, but the filing had little impact on the company's debt.

A trader said odd lots of the 11½% notes due 2011 traded around 55, while there was nothing in the 9% notes due 2011. Another market source placed both issues around 60, down 2 points.

But the first trader noted that the bonds are a "small issue," and activity in the name is typically light.

The Salt Lake City-based cookie maker has already received 78% approval from noteholders on its reorganization plan. The company hopes the bankruptcy court will approve the plan the first go-around and exit Chapter 11 protections within 45 days.

Under the plan, the company plans to exchange $195.7 million in senior unsecured debt for $87.5 million in cash, $52.5 million in new debt and 87.5% of new equity in the reorganized company. Unsecured creditors - which total about $4.5 million in claims - are expected to receive 100% recovery, while existing stock will be cancelled.

The remaining stock will go to Capricorn Investors III LP, which holds a $6.5 million note expected to recover 96.4%.

The plan differs somewhat from the original proposal given to stakeholders. Under the original plan, noteholders would exchange their debt for $90 million in cash, $50 million in new notes and 87.5% of the new equity. Existing stockholders were slated to get 12.5% of the new stock, along with warrants to purchase 30% of the equity.

Casinos mixed

Among the gaming issues, a trader saw Majestic Star Casino's 9½% notes due 2010 at 65.5 bid, up a point in round-lot trading from Friday's levels. He saw its 9¾% notes due 2011 down 0.375 point at 10.

He also saw MGM Mirage's 6% notes due 2009 at 98.25, up a quarter point, although he said that was to be expected from a very short issue.

However, he also saw MGM's 7½% notes due 2016 up a point at 81 bid, and its 6 5/8% notes due 2015 about 0.25 point better at 80.25, though its 8 3/8% notes due 2011 were off a quarter point at 90.75.

Another trader saw the MGM 7½% issue close up half a point at 80 bid, 82 offered, although he said that intraday, they were up a point in round-lot dealings.

Another market source saw Harrah's Entertainment Inc.'s 5 5/8% notes due 2015 down nearly a point at 38.5, while its 5¾% notes due 2017 were down more than 2 points, at about the same level.

Week starts off slow

"There's lots of red lights today on Bloomberg," one trader said of the first session of the pre-holiday week.

While the distressed market traded lower in sympathy with the equity markets - the Dow Jones Industrial Average fell more than 200 points - volume remained on the lighter side.

"It's a pretty dismal day," the trader said. "Trace volumes are light and spread out over the sectors.

"There's no rhyme or reason."

"Everybody is away this week," said another trader, adding that the last gasp of summer made it difficult to get investors interested in something new.

"There is very little impetus for people to want to trade anything," he said.

Sara Rosenberg and Paul Deckelman contributed to this article.

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