Countrywide takes a ride; Standard Pacific slips; Time running out for Quebecor; Calpine better

By Stephanie N. Rotondo

Portland, Ore., Jan. 11 - With a few exceptions, distressed bonds were essentially sideways Friday, following a topsy-turvy week.

Once again, Countrywide Financial Corp.'s debt topped the list of major movers. The mortgage lender's bonds took a ride after it was announced that Bank of America had agreed to purchase the struggling company. By the close of the day, the bonds came off of their session highs but were still up considerably from Thursday's closing levels.

Meanwhile, Standard Pacific Corp. has reportedly hired a financial adviser to help it out of the quagmire brought on by a slumping housing industry. That news put some pressure on the company's debt, which fell almost 4 points on the day.

The clock is ticking for Quebecor World Inc. in its quest to find financing on its bank debt before a quickly approaching deadline. Despite reports that the company will soon be signing a deal, the printer's debt slipped as much as 5 points - perhaps an indicator that the market does not believe a deal will happen.

During a week that racked up more losses than gains, Calpine Corp.'s bonds were not immune. However, as the power producer gets closer and closer to emerging from Chapter 11, the company's bonds rallied, attempting to regain some of its earlier losses.

Countrywide takes a ride

Countrywide Financial's foray into the outskirts of distressed territory may be short-lived - assuming a pending sale with Bank of America goes as planned.

The mortgage lender announced Friday that it was in fact going to be acquired by the bank in an all-stock transaction worth about $4 billion. The news of the merger sent Countrywide's bonds on yet another ride.

"Guys are elated and taking profits," one trader said. "But these are/will be par soon."

Early in the day, just after the announcement, the company's debt took another double-digit jump. But by the end of business, the bonds had come off their earlier highs - though just barely.

One trader said the 3¼% notes due 2008, which closed Thursday around 96, ended the day around 93 after hitting a high of 98. At another desk, a trader said of the company's many issues, shorter-dated paper closed the highest. He said 2008 paper was trading in the 96 context, while the 2009 issues was in the 92 bid, 95 offered range and the 2010 pieces ended at 91.

"Bank of America was a big buyer," the trader said.

Another trader said the 3¼% notes coming due this May ended at 96 bid, 97 offered, up only slightly from 95 bid, 96 on Thursday, and saw its 6¼% notes due 2016 at 85.5 bid, 86.5 offered, up from 76 bid, 78 offered on Thursday, and he noted, well up from the 40 bid, 42 offered level where they were trading "just the other day."

Another trader saw the 2008 paper at 95 bid, 96 offered, which he called up 3 points on the day, although he said they finished below their day's highs at 97.5 bid, 98.5 offered. He saw the 2016 issue up 8 points on the session at 84 bid, 86 offered, after having been as high as 89 bid, 91 offered.

Another market source saw Countrywide's bonds among the most actively traded on the day, with the 6¼% notes advancing more than 7 points to 87.5, the 3¼% notes ending at 96.125 and the 5.80% notes due 2012 at 90.5, both of the latter bonds up several points.

Countrywide's May 2008 revolver was also stronger, a trader said.

The revolver was quoted in the range of 93 bid, 98 offered, the trader said, adding that he thought the real market on the debt was more like 95 bid, 96 offered. By comparison, on Thursday, the revolver traded at 90, a second trader remarked.

Shareholders of Countrywide will receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. The purchase will make Bank of America the nation's largest mortgage lender and loan servicer.

"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," said Kenneth D. Lewis, Bank of America chairman and chief executive officer, in a news release.

"We are aware of the issues within the housing and mortgage industries," Lewis continued in the release. "The transaction reflects those challenges. Mortgages will continue to be an important relationship product, and we now will have an opportunity to better serve our customers and to enhance future profitability."

The acquisition is expected to close in the third quarter, subject to approval by Countrywide's shareholders and customary regulatory approvals.

"Countrywide's shareholders may not be thrilled about the valuation they're getting in the Bank of America merger, but holders of its fixed-income securities are delirious with joy," wrote Kathleen Shanley, an analyst with Gimme Credit LLC, in an afternoon report. "We note that the old MBNA Corp. debt now carries the same ratings as Bank of America Corp., which suggests Countrywide bondholders have little to fear post-merger."

Upon hearing the news, Moody's Investors Service said a rating upgrade could be in Countrywide's future, while Standard & Poor's took the company off of CreditWatch negative. However, Moody's also said that Bank of America could face a downgrade based on its "ability and willingness to raise capital to support its balance sheet after a number of sizable acquisitions."

Elsewhere in the sector, Residential Capital LLC's 6½% notes due 2012 were quoted at 66 bid, 69 offered, up 10 points, although a trader noted that the bonds were "pretty wide all day" and were "kind of all over," with some people quoting them as wide as 60 bid, 70 offered.

The trader also saw the 6 3/8% notes due 2010 up 6 points at 62 bid, 65 offered.

Another trader called the 6½% notes due 2013 down 2 points on the day at 60 bid, 62 offered, while its 8 3/8% notes due 2015 were down 1 point at 60.

Thornburg Mortgage Inc.'s 8% notes due 2013 pushed up to 82.5 bid, 84.5 offered from prior levels at 81 bid, 83 offered.

E*Trade Financial Corp.'s 8% notes due 2011 were unchanged at 82 bid, 84 offered.

Standard Pacific hires adviser

In this market, homebuilders just cannot catch a break.

Standard Pacific learned as much after its bonds dropped at least 3 points on the news that the company had hired Miller Buckfire as its financial adviser.

A trader said the Irvine, Calif.-based company's debt fell "3 points or so" across the board, its 7% notes due 2015 at 61.5 bid, 62.5 offered. At another desk, A trader quoted the 6 7/8% notes due 2011 at 62.75 bid, 63.75 offered, the 7% notes due 2014 at 62 bid, 63 offered and the 7¾% notes due 2013 at 63 bid, 64 offered.

Another trader deemed the 9½% notes due 2012 down 6 points at 36 bid, 38 offered, while another trader saw the 7% notes down 3 points at 62 bid, 64 offered. At another desk, a trader saw its 9¼% notes due 2012 swoon more than 10 points on the day to 34.

The homebuilder's term loan B also fell in trading. The term loan B was quoted at 66½ bid, 68½ offered, down from Thursday's levels of 68 bid, 70 offered, the trader said.

"People are trying to draw a conclusion on what the purpose of that engagement is, and looking at the pricing, I would think people are guessing it's some sort of restructuring," the trader explained.

Clock ticking for Quebecor

Time is quickly running out for Quebecor World, as the company continues its attempts to refinance some of its debt.

Shortly before the close of the trading day, one trader said the commercial printer's bonds had fallen 3 to 5 points, adding "we don't know where they are going to land yet."

Another trader pegged the 6 1/8% notes due 2013 down 4 points to 70.25, down from 74.5 bid, 75.5 offered. The 4 7/8% notes due 2008 were likewise lower at 78.5 from 81.

Elsewhere, a trader called the 7¾% notes due 2016 up a point at 93.5 bid, 94.5 offered.

A trader said the company's 4 7/8% notes were "hit pretty hard," quoting them down 10 points at 69 bid, 71 offered.

News reports published Friday stated that the company is very close to inking a deal with its banks to refinance $125 million by Tuesday. The company also needs to find a way to reduce its credit facility to $500 million by Feb. 29 - and then be able to pay the amount in full by June 30.

Still, the reports said that sources familiar with the situation warned of too much optimism, as there is a possibility negotiations could still break down.

Calpine regains some losses

As it makes its way toward a bankruptcy exit, Calpine's bonds shook off losses garnered throughout the week, regaining almost 4 points during the session.

Considered one of the stronger credits in the distressed sector, Calpine was not immune to the investor uncertainty that played havoc during the week. But as its date of emergence gets closer, the credit began to firm.

A trader said the 8½% notes due 2011 climbed 3 points to 112, while the 8½% notes due 2008 moved 3.5 points up to 116.

"Nice follow through on that credit," he said.

Another trader said there seemed to be "better buyers" in the name, with the 2011 paper ending at 111 bid, 113 offered and the 2008 piece at 115.5 bid.

The San Jose, Calif.-based power producer's when-issued stock began trading over-the-counter on Thursday.

Broad market mostly sideways

Tropicana Entertainment LLC's debt was deemed "active again," though essentially unchanged to slightly weaker. A trader placed the 9 5/8% notes due 2014 at 60.5 bid, 61.5 offered.

Trump Entertainment Resorts Inc.'s debt was also called unchanged, its 8½% notes due 2015 at 71 bid, 72 offered.

Tenet Healthcare Corp.'s bonds were called "fairly active and better," its 7 3/8% notes due 2013 at 88.5 bid, 89 offered and its 9 7/8% notes due 2014 at 93.75 bid, 94.5 offered. A trader said he did not know what was prompting the move.

A trader said short covering was the cause of Tekni-Plex Inc.'s slight gain. He placed the 12¾% notes due 2010 at the 71 level.

Neff Corp.'s 10% notes due 2015 were called "a little lower, but not much," at 45 bid, 47 offered.

Fedders Corp.'s 9 7/8% notes due 2014 were deemed unchanged at around 10.

In the autosphere, Metaldyne Corp.'s 11% notes due 2012 have slipped to around 48, down from the mid-60s "not long ago," a trader said.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.