Calpine dips; Tropicana better; ResCap weaker; James River Coal firms; No coupon for Tousa

By Stephanie N. Rotondo

Portland, Ore., Dec. 18 - The distressed market was mixed Tuesday, though still amid light trading as most market participants are looking to the holidays.

Early in the session, a trader said the market tried to regain some of its losses incurred in the previous session. But by afternoon, momentum had run out.

Calpine Corp. and Tropicana Entertainment LLC continued to dominate the trading activity. Calpine's bonds, which had gained in the previous session on news of a valuation settlement, fell slightly. One trader attributed the dip to profit taking.

Tropicana, also known as Wimar Operating, was once again boosted as investors continued to be gleeful on Monday's news that the casino operator had paid its coupon payment. Meanwhile, the term loan continued its run up on hopes that the bank debt will be paid.

In mortgage-land, Residential Capital LLC's debt slipped about 3 points. One trader pointed to a Bloomberg report on rising defaults that cited the lender.

A buy recommendation could have been what prompted James River Coal Co.'s bonds to edge higher, a trader said. Increasing coal prices might have played a role as well.

An extended waiver from its banks is forcing Technical Olympic USA Inc. to forgo paying its Jan. 1 coupon. Traders agreed that activity in the name remained light, but they were mixed on price movement in the corporate debt.

Profit taking lowers Calpine

Profit taking was blamed for a slight decrease in Calpine's bonds Tuesday, though trading remained active.

One trader said the 8½% notes due 2008 opened at 115 bid, 116 offered and closed "down a little" at 114 bid, 114.75 offered.

At another desk, a trader pegged the 2008 paper at 114 bid and the 8½% notes due 2011 at 113 bid, 114 offered, also lower.

However, another trader called the bonds better, the 2011 issue at 114 bid, 115 offered and the 2008 piece at 114.5 bid, 115.5 offered.

The bonds were boosted in the previous session on news that the company had reached a valuation settlement with its creditors and shareholders. Under the settlement, the total value of the company is decreased from its mid-point level, but bondholders walk away with more than was previously expected. Equity holders, thought to recover nothing, will also receive new equity in the reorganized company.

Tropicana bonds, loan better

It was another active trading day for Tropicana bonds, just one day after the company announced it had made its scheduled coupon payment.

A trader quoted the 9 5/8% notes due 2014 around 67.5, while another deemed the debt firmer at 68 bid, 69 offered.

Another trader saw the notes at 67 bid, 68 offered, which he said was up from prior levels around 64 bid, 65 offered. Another trader also saw the bonds at the 67 bid, 68 offered level, while yet another had them up more than a point at 67.5.

The casino operator's debt has been on the forefront since last week, when news that the company had lost its gaming license prompted the bonds to slide. The bonds hovered near their lows for several days. This week, however, the bonds have attempted to rally.

With its license revoked, the company is forced into an asset sale. On Monday, the company added more properties under the "For Sale" sign and said that it would use proceeds from the sale to pay its senior bank debt. That news has helped its bank debt over the last few days.

The first-lien term loan was stronger once again as lenders are still excited by the prospect that the debt will be paid down in full with asset sale proceeds.

The first-lien term loan was quoted at 98¾ bid, 99½ offered, up from Monday's levels of around 98½ bid, 98 7/8 offered, traders said.

Elsewhere in the gaming sector, Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were called "quiet," trading at 76.5 bid, 77 offered.

ResCap dips on news report

Residential Capital's debt fell a couple points during the session, which one trader attributed to a Bloomberg report on default rates.

The trader pegged the 6½% notes due 2012 and the 6 7/8% notes due 2015 at 65 bid, 66 offered. He noted that he did not see many quotes in the name.

Another trader agreed with the 65 bid, 66 offered market, calling that down 2 to 3 points.

Yet another trader saw the 8% notes due 2013 fall to 65 bid, 67 offered from 69 bid, 71 offered.

Another source called the 8 3/8% notes due 2015 lower by 3 points at 66 bid.

The 6 7/8% notes and the floating-rate notes due 2009 were among the more actively traded bonds of the session, with the 2015 issue nose-diving late in the day to 65 bid, down 2.5 to 3 points and the floaters down more than a point at 74.5.

ResCap parent GMAC LLC's 8% notes due 2031 were seen by a trader to be unchanged at 84 bid, 85 offered, while another source saw the bonds to be up a point at 85.375 bid. Its 6 7/8% notes due 2012 dipped a quarter of a point to 85.

In a Bloomberg report titled "Defaults to quadruple as more companies cut to junk," ResCap was cited as one of 32 companies that were downgraded to junk by Moody's Investors Service this year.

James River edges higher

James River Coal's bonds were seen gaining slightly, but traders were not clear what prompted the move.

A trader said the 9 3/8% notes were about a point better at 89, a figure echoed at another desk as well.

The first trader said he was not sure why the bonds had moved, but the second said a buy recommendation from Jeffries could have been the culprit. The trader also noted that Central Appalachia coal prices (CAPP) "have steadily risen," as well.

No coupon payment for Tousa

Traders gave mixed reports on activity in Technical Olympic's corporate debt.

The Hollywood, Fla.-based homebuilder announced in an 8-K filing with the Securities and Exchange Commission that due to an extended covenant waiver on its bank debt, it would not make its Jan. 1 coupon payment on its 10 3/8% notes due 2012.

A trader said there was little going on in the name after the news, which was "fully expected."

"I think everybody would have been amazed if they did pay it," he said.

The trader quoted the 9% notes due 2010 at 40 bid, 42 offered. Another trader placed the 9% notes at 40.5 bid, 41.5 offered and the 8¼% notes due 2011 at 42.25 bid, 43.25 offered.

At another desk, a trader called the debt lower, the 8¼% notes at 42.5 bid, 43.5 offered and the 10 3/8% notes at 3 bid, 5 offered.

Another trader, however, said the 8¼% notes firmed 1.5 points to 42.25 bid, 44.25 offered. Another market source called the 9% notes a point lower at the 40 level.

The homebuilder has 30 days from the payment due date to fund the coupon or else the bonds could be accelerated.

In other housing-related coupon payment news, MAAX Corp., a bathroom fixture manufacturer, said in a statement on its web site that it did not make its interest payment on its 9¾% notes due 2012. A trader said the bonds were not moved by the news.

However, another trader claimed the bonds retreated to 22 bid, 27 offered from prior levels at 26.5 bid, 29.5 offered.

Meanwhile, a trader said WCI Communities Inc.'s bonds were unchanged, its 9 1/8% notes due 2012 at 55 bid, 56 offered and its 7 7/8% notes due 2013 at 53 bid, 54 offered.

Broad market mixed

News that it would emerge from bankruptcy by Dec. 27 did little to move Federal-Mogul Corp.'s bonds. A trader pegged the automotive parts supplier's debt at 72.5 bid, 73 offered, which he called "pretty much unchanged."

Sea Containers Ltd.'s 10½% notes due 2012 were up 2 points around 66. A trader said there was "no real reason" for the gain, adding that the bonds have moved 7 points higher in the last couple weeks.

A trader saw Tekni-Plex Inc.'s 12¾% notes due 2010 at 61, about the level to which they jumped on Monday. He quoted its 8¾% notes due 2013 at 93 bid, 95 offered and its 10 7/8% notes due 2012 at 107 bid, 109 offered.

At another desk, the 12¾% were seen having firmed 1.5 points to 61.5.

Tembec Inc.'s 8 5/8% notes due 2009 were seen down 1 point at 50 bid, 52 offered, while its 8½% notes due 2011 hung in around 42.

Buffets Inc.'s 12½% notes due 2014 lost 1.5 points to 44.5.

Sara Rosenberg and Paul Deckelman contributed to this article.

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