Dura bank debt, bonds weaken on missed coupon; Sea Containers in Chapter 11

By Paul Deckelman and Sara Rosenberg

New York, Oct. 16 - Dura Automotive Systems, Inc.'s bank debt and its junk bonds weakened as it became official - confirming weeks of financial market speculation - that the company's Dura Operating Corp. subsidiary would not be making a scheduled $17.25 million interest payment on its 8 5/8% senior notes due 2012.

Elsewhere, Sea Containers Ltd.'s bonds traded down sharply, then came back off their lows to end not too far from where they had started - but in reality, were down several additional points since they had begun trading flat, or without their accrued interest, after the company failed to redeem $115 million of 10¾% notes that were scheduled to mature on Sunday - but did not. Sea Containers announced very early Monday that it had filed for Chapter 11 protection from its creditors.

Transeastern comeback continues

Meanwhile troubled Transeastern's recently beleaguered bank debt continued to rebound during Monday's market hours, still on private-side information, according to a trader.

The Coral Springs, Fla.-based homebuilder's term loan closed out the day at 71 bid, 72 offered, up from Friday's closing levels of 68 bid, 70 offered, the trader said. The bank debt spent Thursday and Friday of last week on the rise due to a private lender call that was held Thursday, a trader said. By comparison, on Wednesday the loan had been at 62 bid, 64 offered.

Transeastern has been a big focus on trading desks ever since it announced about three weeks ago that because of challenging Florida housing market conditions it would be unable to support its existing capital structure and that it is exploring various options to fix the liquidity problem, including requesting waivers from its lenders regarding potential defaults and permitting future advances under the revolver, and restructuring land bank obligations.

Transeastern is a joint venture of Technical Olympic USA Inc. and The Falcone Group - but neither partner plans to make any new equity investment in their problem child until its capital structure woes are resolved

Dura gets drubbed again

But the big news in both the bank debt and the bond markets was Dura, after the struggling Rochester Hills, Mich.-based automotive parts manufacturer failed to make the Oct. 15 coupon payment on its bond issue.

In the bank debt market, the company's second-lien term loan weakened, closing out the day at 78.5 bid, 79.5 offered, down from Friday's closing levels of 80 bid, 82 offered, the trader said. On Friday, the loan had been bouncing around a bit on speculation that the bond interest payment might go missing, trading as high as 85, then moving to 83 bid, 83.5 offered in the afternoon and then, very late in the session, trading at 81.

Over in the junk bond market, the Dura 8 5/8% bonds fell to about 28.5 bid, 29.5 offered, trading flat, or without their accrued interest, as generally happens after an event of default such as a missed coupon payment.

Meantime, its 9% subordinated notes due 2009 were being quoted at 5 bid, 5.5 offered - seemingly up from levels under 2 previously.

But a trader noted that this issue too was trading flat, which translated to a loss of 4 points of accrued interest, in real terms.

The Dura notes provide for a 30-day grace period before the nonpayment officially becomes an event of default under the notes' indenture.

However, if the payment is not made during the grace period, then the company will be in default under its second-lien term loan, 9% senior subordinated notes and, of course, its 8 5/8% notes.

As for the company's asset-based revolving credit facility, the nonpayment constituted an immediate event of default.

As was previously disclosed, Dura is evaluating its capital structure with a focus on reducing its long-term debt. A financial restructuring would be in addition to the comprehensive operational restructuring that the company is undertaking in response to challenging industry conditions.

In response to the missed interest payment announcement, Standard & Poor's downgraded the company's ratings including the 8 5/8% notes to D from CC and the senior secured debt to CC from CCC.

Other autos shrug off Dura debacle

Dura's failure to pay its coupon came as no surprise to investors, traders said, noting that it had been long out in the market that the payment would likely not be made. So there was no great rush to the exits among the holders of other automotive-sector bonds as a result.

"No, I really didn't see much going on with, say Dana or Delphi," a trader said in dismissing the idea that Dura might tow other names in the sector lower.

Another trader, looking at specific issues, saw Plymouth, Mich.-based parts maker Metaldyne Corp.'s 11% notes due 2012 actually up a point at 89.5 bid, 90.5 offered.

He also saw Tenneco Inc.'s 8 5/8% notes due 2014 up ½ point at 99.5 bid, 100.5 offered, while Visteon Corp.'s 8¼% notes due 2010 were off ½ point at 95 bid, 96 offered.

Among the bankrupt auto names, he said, Toledo, Ohio-based partsmaker Dana's 5.85% notes due 2015 were down 2 points, at 68 bid, 69 offered, while Troy, Mich.-based components manufacturer Delphi's 6.55% notes that were to have come due on June 15 were a point better at 98.5 bid, 99.5 offered.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 were little changed at 87.5 bid, while GM arch-rival Ford Motor Co.'s 7.45% notes due 2031 were pretty steady at 77.5.

Sea Containers sinks

Outside of the automotive realm, traders said, Sea Containers' bonds gyrated around at lower levels after the Bermuda-based maritime and railroad transportation company - as had been widely expected - failed to pay off on its 10¾% notes, which ostensibly matured on Sunday

"The news on them came out," a trader said, and after bouncing around down at lower levels all day, the bonds came back up to end at 71 bid, 72 offered, which he said was off about 1½ points from where they had begun the day.

The fact of the matter, however, was that in reality, "these bonds were really down about 6 points," since they were trading flat, or without their 5 points of accrued interest, on the news that Sea Containers would not be paying off the 10¾% notes and was instead sailing into bankruptcy.

Another trader saw the company's 10½% notes due 2012 fall from the lower 70s down into the middle to high 60s, before bouncing back upward to close at 69. All three of the company issues, he said - the 101/2s and 103/4s, as well as the 7 7/8% notes due 2008 "all traded within a point of each other." He described trading as active.

Yet another trader saw the 101/2s at 69.5 bid, 71 offered, the 103/4s at 70.5 bid, 72 offered, and the 7 7/8s at 69.75 bid, 70.75 offered, all trading flat.

In announcing its filing, Sea Containers disclosed that it had held talks with the holders of the 103/4s in the hopes of coming to an agreement so that it would not have to go bankrupt - but while some progress had been made, the company had not been able to reach agreement with all of its stakeholders prior to the maturity date on the bonds.

Besides the $115 million of 10¾% notes, it has the 101/2s and the 7 7/8s outstanding, for consolidated debt of some $650 million, part of its $1.58 billion in liabilities at the time of its filing, versus $1.67 billion in assets as of June 30.

Solo Cup swoons

Solo Cup Co.'s bonds were "volatile," in the words of one, falling sharply after the Highland Park, Ill.-based paper cup and plate manufacturer announced that it would be restating its earnings from this year all the way back to 2001 after it found accounting errors in the reports.

"Their financials came out," a trader said of the company's 8½% notes due 2014, "and they dropped six points," falling as low as 76 bid, 77 offered from prior levels in the low 80s before coming back off those lows to end at 80 bid, 82 offered, down only modestly on the day.

"There were a lot of the bonds traded," he said, "maybe $60, $70, $80 million."

Another trader saw the bonds open around 82 bid, 83 offered, fall as low as 76, but then come back to finish around 81.25 bid, 82.25 offered, "way off the lows, but only down a point at the end."

The company "is supposed to hold a conference call" Tuesday, at while executives are expected to talk about the restatement, Solo's second-quarter loss of $299.4 million, and its consideration of sales of non-strategic assets and alternative financing strategies.

"So maybe [Tuesday] will be just as volatile," he said.

The conference call is scheduled for 11 a.m. ET.

Foamex funding boost bonds

Elsewhere, a trader saw the bonds of bankrupt Linwood, Pa.-based foam rubber products maker Foamex International Inc.'s bonds better on twin news of financing that will allow the company to exit bankruptcy soon.

He quoted its 9 7/8% notes due 2007 up a point at 112 bid, 113 offered.

Foamex said that it was entering into an equity commitment agreement to conduct a $150 million rights offering to existing common and preferred shareholders, with five shareholders - D.E. Shaw Laminar Portfolios; Goldman, Sachs & Co.; Par IV Master Fund Ltd.; Sunrise Partners LP; and Sigma Capital Associates - agreeing to backstop the rights offering, funding any shortfall between $150 million and the actual rights offering proceeds, through the purchase of new preferred or common stock in a reorganized Foamex.

Separately, Foamex LP, the company's primary operating partnership, received a financial commitment from a group of lenders led by Bank of America and Banc of America Securities for up to $790 million of exit financing, of which it expects to draw about $645 million upon the company's emergence from Chapter 11.

The U.S. Bankruptcy Court in Wilmington, Del. must approve the financial commitments. The company is hoping a court hearing will be held Oct. 30.

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