Trump debt lower; Thornburg steady; Movie Gallery bonds, loan down; Tousa mixed

By Stephanie N. Rotondo

Portland, Ore., Oct. 9 - Tuesday's trading in the bond market started strong, a trader said, as market players returned to their desks after a long holiday weekend.

"The glass is half full today," the trader said early in the session. "The world is a better place."

However, the optimism the trader expressed had dissipated by the close of the market.

"All the joy and happiness just disappeared," the trader said of the afternoon's activity. "The glass is half empty now."

Despite a good opening, he said, the "bullish" market "couldn't hold."

Such was the case with Trump Entertainment Resorts Inc.'s bonds. Rumors that yet another party was interested in the struggling casino operator prompted the debt to move higher. But by the end of the day, the bonds had come down from their high - though still up from the day's low.

Meanwhile, Thornburg Mortgage Corp. announced that it had increased its loss estimate from securities it had sold at a discount in August. Surprisingly, the mortgage lender's bonds remained virtually unchanged, which one trader attributed to "technicals."

Speculation that a pre-packaged bankruptcy plan would come sooner, rather than later, prompted Movie Gallery Inc.'s bonds - as well as its bank debt - to weaken. A Wall Street Journal reported last week that the company was expected to file within the month. But as several traders noted - to anyone following the Movie Gallery story - that is old news.

On Monday, Technical Olympic USA Inc. hired a financial adviser to review its capital structure. Come Tuesday, investors were digging through the various bond issues to figure out which carries the most value. Seemingly, the market found it in the senior debt, which closed better by at least 3 points. The junior debt, on the other had, closed down at least 3 points.

Trump attempts gain, closes lower

Early in the trading day, a trader saw Trump Entertainment's 8½% notes due 2015 moving higher on rumors that fellow casino operator MGM was interested in acquiring the Atlantic City property.

But investor optimism weakened toward the end of the day and the bonds actually closed lower.

A trader pegged the bonds "actually down a little" with an 85 handle. He said the bonds were "all over the place," opening at 86.5 bid, 87 offered.

"The past couple days they have been all over the place," he added, noting the bonds closed Thursday at 84 bid, 85 offered and Friday at 86 bid, 87 offered.

Another trader said the debt hit a high of 87.5 during the session and a low of 85.25. At market's close, the bonds were "up from the bottom" but still down from the highs at 85.5 bid, 86 offered.

"I don't think they are getting bought by anybody," the trader said, unless it was a "takeunder."

Another source called the bonds a point lower at 85 bid, 86 offered.

Last week, several news outlets reported on a rumor that David Cordish, president of The Cordish Co., was interested in buying one or all of Trump's casinos.

Thornburg steady

Thornburg Mortgage's bonds were "not much moved," a trader said, despite news that the Santa Fe, N.M.-based mortgage lender boosted its loss estimate.

The trader said the 8% notes due 2013 closed around 88.

Another trader saw the bonds trading between 88 and 89, adding, "The bonds didn't trade down on technicals." He said it was impossible to "get a borrow" on the debt. He speculated that, without the "technical stuff," the bonds would have moved lower.

Another trader quoted the debt at 88 bid, 89 offered, "really unchanged, maybe up half a point."

However, another source saw those bonds at 88 bid, up 2 points from late last week's levels.

The company increased its loss estimate to $1.1 billion from $863 million. The loss comes from bonds the company sold in August, which were backed by adjustable-rate home loans.

Thornburg, which is expected to release its third-quarter results on Oct. 16, noted that there could be more changes to the estimate.

Movie Gallery bonds, loan lower

Rumors of a potential pre-packaged bankruptcy plan prompted Movie Gallery's bonds and bank debt to weaken.

One trader called the 11% notes due 2012 down a couple points to 32.5 bid, 33 offered. Another trader said there was "not much of anything" in the bonds, though he added they "might have been weaker" at 32 bid, 34 offered.

"They are right on the verge" of filing, he said.

At another desk, a trader said the first-lien term loan ended the day around 89.5 bid, 91.5 offered, down about a point and a half on the day.

Word on the street is that the company is putting together a bankruptcy plan and lining up a debtor-in-possession financing facility.

Since investors do not know how big the potential DIP facility will be, they are starting to get a little a nervous over the status of their first-lien paper, the trader explained.

According to a Wall Street Journal report published Friday, the pre-pack plan will convert the bonds into stock.

"The bonds are worthless," a trader said. He also called the second-lien term loan "significantly impaired," and speculated that the paper would receive recovery of less than 50 cents on the dollar.

Tousa structure mixed

A trader said investors are starting to realize that bankruptcy is imminent for Technical Olympic and they are "looking for potential value."

As such, the homebuilder's structure was mixed on the day, as the senior paper moved up 3 points while the junior debt moved down the same amount. The trader said the 9% notes due 2010 closed around 66, while the 10 3/8% subordinated notes due 2012 closed at 26.

According to the trader, the increase in the senior paper - and the decrease in the subordinated debt - shows where investors are finding value.

"It's not in the juniors," he quipped.

Another trader said the bonds were "still moving up," prompted by Monday's news that the company had hired Lazard Freres as its financial adviser. He saw its 8¼% notes due 2011 at 63.75 bid, 65.75 offered, up from 60.5 bid, 63.5 offered on Thursday, the most recent significant trading session. The 9% notes rose to 67.25 bid from 65.75 offered.

However, the trader said the 10 3/8% notes were "actually looking down" at 25 bid, 26.5 offered, versus 27 bid, 29 offered on Thursday.

Among the other junior issues, the trader called the 7½% notes due 2011 and 2015 unchanged at 23.5 bid, 25.5 offered and 21.5 bid, 23.5 offered, respectively.

Another trader pegged the company's 9% notes at 65 bid, 67 offered, also up 2 points.

On Monday, the Hollywood, Fla.-based company said it hired Lazard Freres to review its capital structure. The retention of the adviser is aimed at helping the company create an asset management strategy.

Autos better

A trader said Remy International Inc.'s 8 5/8% notes due 2007 moved up to 113 bid, 117 offered from 108.5 bid, 110.5 offered after the automotive parts supplier announced it had filed its pre-packaged Chapter 11 case. He said that he "didn't see anything" in the company's other bonds, such as its 9 3/8% notes due 2009 and 11% notes due 2009, which he pegged at a wide 91 bid, 96 offered and 90 bid, 95 offered.

However, at another desk, a source saw the 8 5/8% notes having pushed up to 109, a gain of about 6 points, but saw the other issues hovering just beneath par, but with nothing trading in them Tuesday.

Delphi Corp. and Federal-Mogul Corp. are continuing to see improvements in their bonds, a trader said. He attributed the recent gains to "boosted confidence" that the companies will receive exit financing.

The trader said Delphi's 6.55% notes that were to have come due last year and the 6½% notes due 2009 "inched up some" to 97 bid, 98 offered. He pegged Federal-Mogul's bonds around 90.

At another desk, a trader said the 6½% notes due 2013 were higher with a 97 bid. He also saw Federal-Mogul's bonds hovering around 90.

Elsewhere, a trader said Delphi's 2009 paper edged higher to 97.75 bid, 98.75 offered from 96 bid, 97 offered, while Dana Corp.'s 6½% notes due 2008 firmed to 84 bid, 86 offered from 81.5 bid, 83.5 offered.

"All of those [distressed automotive parts supplier] names are up," he exclaimed.

Sara Rosenberg and Paul Deckelman contributed to this article.

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