Tousa notes gain; Delphi boosted by alternate plan talk; Charter weaker on rival's forecast

By Stephanie N. Rotondo

Portland, Ore., Dec. 6 - The automotive and homebuilder sectors dominated distressed trading Thursday, with the general market once gain feeling lighter after the Bush administration's mortgage plan was unveiled.

"It was better across the board," a trader said. "It was following whatever was going on in the stock market, getting some relief for whatever reason."

"The mortgage world is all good again," said another trader, though his tone indicated he did not believe it.

Another trader, however, attributed firmness in the market to short covering.

"The strong equity market helped, but things are just getting squeezed higher," he said.

Technical Olympic USA Inc.'s debt gained as much as 6 points on the day. The homebuilder - and homebuilders in general - has been moving higher for the last few days, with some traders earlier in the week attributing the better bids to presentations made by the struggling sector at Bank of America's conference in Orlando, Fla.

Still, it was the combination of the subprime mortgage fix and possible short covering that traders pointed to as the catalyst for Thursday's movement.

Meanwhile, Delphi Corp. managed to regain some of its losses it incurred over the week - though just by a fraction. One trader called the bonds up about 4 points as the market heard talk that a bondholder group was planning on submitting an alternative plan of reorganization.

Continuing its downward momentum, Charter Communications Inc.'s paper fell for the second day in a row. A trader blamed the losses on a lowered 2007 forecast from rival Comcast Corp.

Tousa notes gain

Technical Olympic's bonds soared as much as 6 points on the session, and traders gave mixed explanations for the gains.

One trader, who pegged the 8¼% notes due 2011 up 3 to 4 points at 44 bid, said he was unsure what caused the spike.

"It's a little bit illogical to me, but it seems to be working," he said.

Another trader said the move was likely a reaction to the new mortgage plan unveiled by the Bush administration. The trader said the announcement seemed to be the catalyst behind the broad market's firmness, as it "took away some of the uncertainty" - at least for the time being.

"I think it put some folks in a better mood," he said. However, "in the long run, I don't know how much it is going to help."

The trader deemed the 8¼% notes 4 points better at 45 bid, 46 offered, up from 41 bid, 42 offered, and the 9% notes due 2010 at 43 bid, 45 offered.

But another trader said it was "purely short covering" that boosted the homebuilder's debt. He called the 8¼% notes 6 points higher around 46 and placed the 9% notes at 42 bid.

"There is a lot of short covering in the market [right now]," he said.

Another trader said he would not be surprised if short covering was behind the move.

At another desk, a trader placed the 9% notes at 43 bid, 44 offered. He said he did not see anything specific that sparked the movement but added that it could be due to the subprime mortgage fix.

"If they freeze up the subprime mortgage rate in an effort to stop all the foreclosures, that may help stabilize the market," he said.

Yet another trader placed the 8¼% notes up 5 points at 45 bid, 47 offered. However, the subordinated debt was still languishing at 3.5 bid, 5.5 offered or 5.5 bid, 7 offered. The trader opined that "I don't think they're going to bounce" even on the subprime bailout news.

Under the plan negotiated with the nation's mortgage lenders, some subprime mortgage rates would be locked in for five years. Other homeowners facing difficulty could receive assistance in refinancing their existing loans with loans secured by the Federal Housing Administration. Also, the Federal Reserve is slated to implement stricter lending standards later this month, while the Housing and Urban Development Department - along with federal banking regulators - is looking to improve disclosure requirements.

Meanwhile, Hollywood, Fla.-based Technical Olympic is reportedly meeting with an ad hoc committee on Friday to release its restructuring and long-term business plan.

"I think they end up filing," one trader said. "We'll see. Overall, I think they are getting a little ahead of themselves."

The trader also said that he heard there was a "rift" between senior and subordinated noteholders - not surprising given where the two groups are currently trading.

And as the bondholders and the general market wait to see what the company's advisers have to say, some are not hopeful.

"I am sure the bondholders are not going to like it," a trader said.

Elsewhere in the sector, a trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 jump to 79 bid, 80 offered. He meantime saw Standard Pacific Corp.'s 7% notes due 2015 also up 4 points on the bid side at 70 bid, 71 offered.

The trader noted that WCI Communities Inc.'s bonds were little changed, noting "you don't see much activity in them." He saw its 9 1/8% notes due 2012 "still within the same range" at 55 bid, 57 offered.

But another trader said that the building sector was "definitely firming up, even WCI," though he didn't have a precise level on the bonds.

Another market source saw the WCI bonds move up to just under 57 bid, a gain of nearly 2 points on the day.

A trader saw Beazer's 8 5/8% notes up 2 points at 78 bid, 80 offered.

Delphi pares its losses

After several days of losses, Delphi paper managed to gain about 4 points on news that Highland Capital, along with other bondholders, might be submitting an alternative reorganization plan.

A trader quoted the 6.55% notes that were to have matured last year and the 6½% notes due 2009 around 61, while another placed the 2009 issue at 60 bid, 61 offered, up from around 57.

The first trader said the potential new plan could have intrigued bondholders, who were hoping for a better deal. Currently, unsecured creditors will receive just under 78% of their claims in new stock in the reorganized company and the opportunity to participate in a rights offering. Bondholders will receive 90% of their claims in new stock.

The second trader said the word was that the Highland-led plan would include an over $2 billion rights offering backed by the bondholders. But, as the current plan already has approval from the official committees, it was possible that Delphi could ignore the alternative.

"If [the alternate plan] doesn't work out for [Highland], then they will probably just sue [Delphi]," a trader said.

Elsewhere in the struggling autosphere, Federal-Mogul Corp.'s bonds continue to drift lower. One trader said that changes made to the terms of the company's bank debt might have "had a negative impact on people's perception and outlook on the company."

The trader slotted the bonds in the mid-70s, while another placed the notes at 72 bid, 74 offered.

Remy International Inc. emerged from bankruptcy Thursday and, as one trader put it, "nobody cared."

Another trader said Remy's 8 5/8% notes slated to come due on Dec. 15 pushed up to 114 bid, 116 offered from recent levels at 108 bid, 110 offered, although he said of its emergence from Chapter 11 "what a non-event that was."

Charter weaker on rival's forecast

Charter Communications' paper continued to slide for the second straight day after rival Comcast cut its 2007 forecast.

A trader said the bonds lost 3 points over the two days, closing a half point lower in Thursday trading. He quoted the 11¾% notes due 2014 around 64, down from 67 bid, 68 offered two days ago. The 11% notes due 2015 were also weaker at 83.5 bid, 84 offered.

On Wednesday, Comcast cut its cable revenue outlook to 11% from the previous 12% forecast released in October. Free cash flow is expected to drop 20%, instead of the 10% decline previously expected.

Countrywide climbs

A trader saw Countrywide Financial Corp.'s 6¼% notes due 2016 up 2 points at 63 bid, 64 offered, lifted by the subprime borrower rescue plan.

Another market source saw the bonds get as good as 66 bid before going home at 64, up 3 points on the day, in active trading.

Mortgage sector higher

A trader saw "not much movement" in Residential Capital LLC's 6½% notes due 2013 - which, he noted, now carry an 8% coupon thanks to step-ups trigged by ratings downgrades. He quoted the bonds at 65 bid, 67 offered, though that was up from 63 bid, 65 offered previously.

He saw just a half-point move in Thornburg Mortgage Inc.'s 8% notes due 2014, to 83.5 bid, 85.5 offered.

Another trader said ResCap paper was "definitely up," although he said that it "wasn't completely off the charts." He pegged its 6% notes due 2011 at 66.75 bid, 67.5 offered, up about half a point or a point, but saw its subordinated bonds jump anywhere from 3 to 5 points with its floating-rate notes due 2009 - which he characterized as "one of the more volatile ones" - zooming to 49 bid, 50 offered from a wide 46 bid, 51 offered previously. He noted that the latter bonds "were down in the 20s" before ResCap's Nov. 21 announcement that it was tendering for some of its bonds, "when people were concerned about them filing," although that issue was not among them.

"They fell from 37 to 25 in a day, when ResCap was really under pressure," he said.

He also saw the floaters due June 2008 - one of the bonds being tendered for - up 1 point at 84, around the takeout price outlined in the tender offer.

E*Trade Financial Corp.'s 8% notes due 2011 were up 4 points at 82.5 bid, 84.5 offered. Another market source saw the bonds up 0.25 point at 83.75 bid.

Broad market better

As the Canadian loonie continues to waken, Tembec Inc.'s bonds continue to rise. A trader placed the 8½% notes due 2011 in the mid-40s and the 8 5/8% notes due 2009 at 53 bid, 54 offered.

Another trader said Calpine Corp.'s debt started the day lower but rallied with the rest of the market late in the day. He said the 8½% notes due 2011 were "up a couple" at 107 bid, 108 offered.

Hines Horticulture Inc.'s 10¼% notes due 2011 were down 2 points at 73.5 bid, 74.5 offered after a downgrade by Moody's Investors Service.

Paul Deckelman contributed to this article.

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