Traders mixed on Thornburg activity; Housing names 'whacked'; Calpine bonds lower

By Stephanie N. Rotondo

Portland, Ore., Sept. 11 - The distressed bond market seemed mostly weaker in Tuesday trading, but it was hard to get a definitive reading on some names.

For example, traders gave mixed accounts on Thornburg Mortgage Corp.'s bonds. Some said the bonds were boosted by a rating upgrade from UBS, while others said the bonds were lower to unchanged on negative news in the mortgage sector.

Housing and related names got "whacked" a trader said, on continuing - if not growing - concerns in the industry. The trader said construction rental companies, such as Rental Service Corp., Neff Corp. and Ashtead Holdings, were lower, while materials manufacturers like Ply-Gem Industries Inc. and Ready Mixed Concrete Co. were also softer.

Among homebuilders, most names were weaker, such as Standard Pacific Corp. and Beazer Homes USA Inc. But it was unclear which direction Technical Olympic USA Inc.'s bonds went.

Calpine Corp.'s bonds also fell on the day. The company went to court to get approval on its disclosure statement, among other things, Tuesday. The company's attorney also noted that talks with shareholders to amend the reorganization plan had fallen through.

The Jewish holiday Rosh Hashana begins Wednesday at sundown. Many market players will be away from their desks in observance of the Jewish New Year.

Traders mixed on Thornburg

Traders gave mixed accounts for activity in Thornburg Mortgage's bonds Tuesday. On one side, traders said the bonds were up as much as 4 points on an upgrade from UBS, while on the other, traders claimed the bonds were weaker on news that Countrywide Financial needs more cash.

A trader quoted the 8% notes due 2013 at 84 bid, 86 offered, calling the bonds lower. Another trader, however, said the bonds moved up 4 points to the 90 area as UBS increased its rating to buy from neutral on the mortgage lender's equity.

At another desk, a trader first called the bonds up 3.75 points to 88 bid, 92 offered. At second glance, he said the bonds were down to 86.5 bid, 87.5 offered, adding that the stock was up.

"Very strange," he said.

Countrywide Financial, the largest mortgage lender in the United States, is said to be in talks with investors for a second multi-billion dollar bailout, much like the $2 billion the company received from Bank of America last month. Goldman Sachs Group Inc. and law firm Wachtell Lipton Rosen & Katz are said to be helping arrange the deal, which could include investments from Citigroup Inc. and JPMorgan Chase & Co.

The last trader said he was told, "Countrywide should be up because the money raised was going to be a new [convertible issue.]" That did not necessarily make sense, he noted, and said the company 4% floating-rate note was unchanged at around 87.

The trader added that he did not think Countrywide would file for bankruptcy, "but what happens if no one wants to give them any money?"

Housing, related names 'whacked'

"Housing and anything to do with it are really getting whacked," a trader said, as many names associated with the troubled sector grew softer during the trading day.

The trader said construction rental companies were especially "getting killed." He quoted Rental Service Corp.'s 9½% notes due 2014 down to 91 bid, 92 offered from the 94.5 bid, 95.5 offered market a couple days ago.

Neff Corp.'s senior notes due 2015 were also lower at 67 bid, 69 offered, down from 71 bid, 76 offered on Friday.

Even Ashtead Holdings, which the trader called a "strong credit," was weaker: the 8 5/8% notes due 2015 fell to 93 bid, 94 offered from 95.5 bid, 97 offered, and the 9% notes due 2016 dipped to 94 bid, 95 offered from 96.5 bid, 97.5 offered.

Outside of the rental companies, materials businesses were also hit. Ready Mixed Concrete fell about 3 points, its 9½% notes due 2012 at 92 bid, 93 offered. Window manufacturer Ply-Gem saw its 9% notes due 2012 slip to 82 bid, 83 offered from its previous levels of 84 bid, 85 offered.

The trader said that, among homebuilders, all names have fallen 1 to 2 points since last week, "Except WCI [Communities]." He speculated that perhaps WCI was more financially solvent than some of the other names.

He said Standard Pacific's 9¼% notes due 2012 were at 73 bid, 74 offered on Friday. On Tuesday, the bonds were down to 68 bid, 69 offered.

Technical Olympic's 9% notes due 2010 were "quoted a lot," the trader said. He noted that the debt had been moving in the 72 bid, 73 offered levels last week and were now at 67.5 bid, 68.5 offered.

Another trader said the bonds were up, with the 8¼% notes due 2011 at 66 bid, 68 offered, up from previous levels of 64.75 bid, 65.25 offered. He said the company's various other issues were likewise up by about 2.25 points.

Yet another trader called the bonds up as much as 3 points, with the 10 3/8% notes due 2012 at 31 bid, 33 offered and the 9% notes a point better at 67 bid, 69 offered.

The Hollywood, Fla.-based homebuilder's bank debt was down during Tuesday's trading session on continued concerns regarding the homebuilding sector in general, a trader said.

The company's revolver ended the day at 91 bid, 93 offered, down about a point, the trader said.

The company's first-lien term loan was quoted at 96.5 bid, 97.5 offered, also down about a point, the trader continued.

And, the second-lien term loan was quoted at 96.75 bid, 97.75 offered, down about a point as well, the trader added.

Continuing the downward trend, Beazer Homes' debt was down 1.5 to 2.5 points "depending on the issue," a trader said. He quoted the 8 5/8% notes due 2011 down 1.5 points to 77 bid, 79 offered, while other issues, such as the 8 3/8% notes due 2012 were lower at 75.5 bid, 77.5 offered.

The broad housing sector has been troubled for months. The recent dips in housing and related names come just as the National Association of Realtors' released a revised monthly prediction, which forecast lower home sales in 2007. The group also expects that median home prices will drop 1.7% and new home sales will fall 24% to 801,000 this year and 741,000 next year.

Calpine bonds weaken

Power producer Calpine's bonds were "down a lot," at least one trader said, as it came out that talks with shareholders had not gone so well.

A trader placed the 8½% notes due 2011 down 3 points on the day at 104 bid, 105 offered. He said the bonds were at 107.25 bid at the market's open.

Another trader called the bonds active, pegging the 8½% notes at 105.5, which he called down just 1.5 points.

Yet another trader said the bonds were only off by a point, quoting the 8½% notes at 105 bid, 106 offered and the 7¾% notes due 2015 at 98 bid, par offered.

But another trader said Calpine's bonds were "a little better." He called the 8½% notes due 2008 up at 104.75 bid, 105.75 offered.

In a court hearing held in the U.S. Bankruptcy Court for the Southern District of New York, Calpine's attorney said negotiations with shareholders and unsecured creditors on a rights offering deal fell through. The San Jose, Calif.-based company was looking to amend its current reorganization plan to allow existing shareholders to buy stock in the company post-bankruptcy.

Autos mixed

A trader said Delphi Corp.'s bonds "continue to get hammered," placing the 6½% notes due 2013 at 83 bid, 84 offered, down 4 points from Monday's levels of 87 bid, 88 offered.

Another trader called the bonds active and "down again," slotting the 6.55% notes due 2006 at 86 at the close of market. He said the bonds rebounded from the day's lows, however: the notes opened at 87 and traded as low as 83 bid, 84 offered.

At another desk, a trader said the 6.55% notes were down 2 points at 84.5 bid, 86.5 offered, noting that it was not so very long ago that those bonds were trading above the 120 mark.

In other distressed automotive names, a trader said there is short covering going on in Remy International Inc.'s debt. He said the 9 3/8% notes due 2012 and the 11% notes due 2009 traded at 122. He added that the bonds were closer to 95 just a week ago.

Another trader called Remy's debt down, with the 11% notes at 110 bid, 112 offered, down from 116 bid, 118 offered. He also saw the 9 3/8% notes at 108 bid, 110 offered, down from 114 bid, 116 offered.

Elsewhere, Dana Corp.'s 6½% notes due 2008 slipped 1 point to 81 bid, 83 offered, while Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were also down 1 point at 47 bid, 49 offered.

Trump bonds dip

Trump Entertainment Resorts Inc.'s bonds were initially up on the day, a trader said. He said the boost was carried over from the previous day, where speculation on renewed takeover talks pushed up the casino operator's bonds and equity.

But the speculation died out as the day wore on and the 8½% notes due 2015 came back from their high of 83 to close at 81 bid, 82 offered.

"I guess it sputtered out," the trader said.

Sara Rosenberg and Paul Deckleman contributed to this article.

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