Housing data no help to Tousa, Standard Pacific; Calpine up; RSC gains, Charter dips

By Stephanie N. Rotondo

Portland, Ore., Oct. 25 - Positive housing data was not enough to help distressed homebuilders Thursday, and Technical Olympic USA Inc.'s bonds continued to tumble.

"With so much bad news out there, one good number is not going to push [the sector] that much," a trader said.

The Commerce Department reported that new home sales rose by 4.8% in September. Analysts were expecting the index to decline by 2.5%. Still, the seasonally adjusted annual rate of 770,000 units is about 23.3% below its year-ago level.

With that, Technical Olympic's bonds lost another couple of points, after dropping as much as 4 points in the previous session.

But traders gave mixed reports regarding Standard Pacific Corp.'s bonds. As the market waited for the West Coast homebuilder to release its third-quarter results, a trader pegged the bonds down as much as 4 points, while another called the bonds better on the day.

"They are probably not so good," the first trader said of the looming numbers.

A bankruptcy court on Thursday denied Rosetta Resources Inc.'s motion to dismiss the fraudulent transfer case brought against it by Calpine Corp. That news prompted the power producer's debt to gain about a point on the session.

Meanwhile, two separate earnings reports had very different effects on RSC Holdings Inc. and Charter Communications Inc.

RSC posted better-than-expected figures for the third quarter of 2007, and its bonds regained some of the losses they had earned earlier in the day. Charter, however, was weighed down by disappointing numbers from rival Comcast Corp.

Tousa not helped by housing data

Homebuilders were not helped by new positive housing data, which showed new homes sales rising in September.

A trader said Technical Olympic's bonds were off "a point or so," its 9% notes due 2010 at 60 bid, 62 offered and its 8¼% notes due 2011 at 60 bid, 61 offered. The subordinated issues were also weaker, the 7½% notes due 2011 at 16.5 bid, 17.5 offered, the 7½% notes due 2015 at 15.5 bid, 16.5 offered and the 10 3/8% notes due 2012 at 15 bid, 16 offered.

Another trader, who noted that the homebuilder's bonds were hit in the previous session after the company filed an 8-K which stated they expect "significant" asset impairment charges, said the bonds came up from the previous day's lows by about a point. He pegged the 8¼% notes at 60 bid, 61 offered, up from around 59.

Over in the bank debt, the first- and second-lien term loans moved lower in trading as market players are watching to see if the company's proposed amendment would pass.

The first-lien term loan went out at 98 bid, 98½ offered, down from 98½ bid, 99 offered on Wednesday, and the second-lien term loan went out at 93¾ bid, 94¾ offered, down from 94 bid, 95 offered, a trader remarked.

The company's revolver was unchanged at 98½ bid, 99 offered.

"There's a lot of different ways that this can play out over the next couple of days. Bigger holders seem to be saying that they have enough for approval [of the amendment] but I don't think anything has been signed. If you own the loan, I don't see why you wouldn't want this to pass, but if you own a big slug of the bonds and you want them to file, you wouldn't let it go through. Uncertainty is if there's cross ownership," the trader said.

On Wednesday the Hollywood, Fla.-based homebuilder said that it is seeking an amendment because it anticipates that recording certain asset impairment charges, deposit write-offs and abandonment charges will cause it to breach one or more of the covenants under the first-lien term loan and revolver.

Asset impairment charges are expected in the third quarter due to weaker-than-anticipated net sales orders and declining prices, and write-offs and abandonment charges are expected in the third quarter since the company is exercising its right to abandon a number of homesite option contracts due to deteriorating market conditions.

Under the amendment, pricing on the first-lien term loan would be increased to Libor plus 500 bps and the revolver pricing grid would be changed so that pricing can range anywhere from Libor plus 250 bps to Libor plus 525 bps depending on ratings and leverage.

Expected numbers hurt Standard Pacific

It was Standard Pacific's bonds that took the biggest hit in the housing sector, as investors geared up for third-quarter numbers, expected after the market closed.

A trader deemed the bonds 3 to 4 points lower, its 6 7/8% notes due 2011 at 73.5 bid, 75.5 offered and its 9¼% notes due 2012 at 54.5 bid, 55.5 offered.

"I have heard some folks say that those bonds are worth zero," the trader said of the Irvine, Calif.-based company's debt.

Another trader, however, saw the bonds "up again today," with its 7% notes due 2015 up 1.5 points to 73 bid, 75 offered.

As of press time, the results had not yet been released. The homebuilder will hold its third-quarter conference call at 11 a.m. ET on Friday.

Calpine bonds firm

Calpine won the first of what will likely be many battles against Rosetta Resources Inc., as a bankruptcy judge denied the latter's motion to dismiss the fraudulent transfer complaint against it.

The San Jose, Calif.-based power producer's bonds - after losing ground in the previous session - firmed on the news. A trader quoted the 8½% notes due 2011 at 117 bid, 118 offered and the 8½% notes due 2008 at 112 bid, 113 offered.

Calpine has claimed that Rosetta received its oil and gas business by fraudulent transfer, claiming the former subsidiary did not pay fair value. Rosetta has denied the claims, stating that its transaction was approved by Calpine's board and the price was in fact fair. Further, the company has said it will "vigorously" defend itself against Calpine's claims.

Earnings spur mixed results in RSC, Charter

Mixed earnings reports had mixed effects on RSC Holdings and Charter Communications.

A trader said that before RSC, the construction equipment rental company, released its third-quarter financials, "there were several sellers, probably expecting weak numbers."

Those investors were probably surprised when the figures came out - and they were better than expected.

The trader said RSC's 9½% notes due 2014 were active and 2 to 2.5 points higher at 96 bid, 97 offered, up from the day's low of 93.5. Another trader, however, said the bonds closed near 95, which is where they had been before the sell-off.

The Scottsdale, Ariz.-based company reported net income of $47.5 million, compared to $59.6 million for the same quarter of 2006. In a press release, the company also said it reduced total debt by $44.1 million in the third quarter to just over $2 billion. Its year-to-date debt reduction equaled $304.1 million.

Elsewhere in that sector, Neff Corp.'s 10% notes due 2015 lost 1 point to 68 bid, 70 offered.

Charter Communications, meanwhile, did not fare as well. The cable provider saw is bond lose as much as 4 points in active trading, a trader said, as Comcast Corp.'s quarterly profit took a tumble.

The trader pegged Charter's 11¾% notes due 2014 around 88 and the 10% notes due 2014 around 82, both off 4 points. He said the 11% notes due 2015 fell 2 to 2.5 points to 97.

Comcast posted a 54% drop in its third-quarter profit, down to $560 million for the three months ended Sept. 30. That compares to a profit of $1.22 billion for the third quarter of 2006.

Investors interested in Tembec

Tembec Inc. continues to be a name investors are looking at, traders reported. One trader called the bonds unchanged on the day, while another called the bonds one point better.

The first trader placed the 8½% notes due 2011 at 42.5 bid, 43.25 offered and the 8 5/8% notes due 2009 at 57.

Elsewhere, a trader called the 8 5/8% notes up 1 point at 50.5 bid, 51.5 offered. Another market source put its 8½% notes a half point better at 43.5.

But it was another trader who gave an interesting commentary on the forest products company's debt.

"The only reason those bonds survive is [the hope] of a government bailout," he said. "Excluding that, the company probably has to file."

Broad market mixed

Solo Cup Co.'s 8½% notes due 2014 rose 1.5 points to 90 bid, 91 offered as the company announced it will sell its Japanese units.

Iridium LLC, which rose Wednesday on reports that there might be a settlement in its court case with Motorola, was "down a little bit" at 2.75 bid, 3.25 offered.

A trader said Movie Gallery Inc.'s 11% notes due 2012 rose 1 point to 28 bid, 30 offered. Blockbuster Inc.'s 9% notes due 2012 were likewise 1 point better at 90 bid, 91 offered. He opined that "Movies and Blockbuster don't necessarily make sense, being up together, but with Movie, people are trying to figure out [what kind of value is there]. A lot of people lost a lot of money trying to figure out where they could gain a couple of points back here and there and try to stem some of their losses."

In the retail sector, Bon-Ton Stores Inc.'s 10¼% notes due 2014 lost 1 point to 87.5 bid, 88.5 offered.

Names in the struggling autosphere were mixed on the day. Dana Corp.'s 6½% notes due 2008 were up half a point at 82 bid, 84 offered, while Delphi Corp.'s 6.55% notes that were to have come due last year also rose half a point to 94.5 bid, 95.5 offered.

But Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were deemed weaker, falling 3 points to 42 bid, 44 offered. Another trader saw the bonds 4 points lower, but also at 42 bid, 44 offered. At another desk, a trader said the senior paper "continues to come in hard," placing the notes at 43 bid, 44 offered. He stated his belief that there was "one big seller out there."

Federal-Mogul Corp.'s bonds firmed to 89.5 bid, 90.5 offered from 88 bid 89 offered previously.

Sara Rosenberg and Paul Deckelman contributed to this article.

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