Delphi bonds drive lower; E*Trade continues rally; Gaming sector steady; Tembec firms

By Stephanie N. Rotondo

Portland, Ore., Dec. 5 - Investors were still none too keen on Delphi Corp. on Wednesday, following a day that saw the automotive parts supplier's bonds drop as much as 12 points.

The slide in the previous session was due to a new reorganization plan that - once again - lowered payouts to its creditors. While its official committees and former parent General Motors Corp. were on board with the new plan, the market at large - long since weary of the struggling company - threw in the towel.

Meanwhile, E*Trade Financial Corp.'s bonds continued their rally as hesitant market players began to view a cash infusion deal as more positive than negative.

The gaming sector was hit several times this week with poor quarterly numbers and management shake-ups that left some wondering how to deal with the situation. But during Wednesday's trading, many names, such as Trump Entertainment Resorts Inc., managed to hang on in active trading.

With the housing sector sliding, the dollar weakening and a mortgage crisis that has hurt everybody, Tembec Inc.'s bonds have faltered. But a recent interest rate cut by the Bank of Canada has helped those bonds recover, placing Tembec on the big-mover list once again - but this time, it is a positive move.

Overall, traders reported a "sideways to firm" day.

"It was a little better, but not as good as the stock market," a trader said, placing the bond market up about a half point across the board.

New plan drives Delphi lower

An amended reorganization plan between Delphi and its creditors has caused many market players to throw their hands up in defeat. Delphi's bonds slipped as much as 12 points in the previous session after the agreement with the creditor groups was announced, and on Wednesday, the bonds continued to decline.

"There was decent selling going on [Tuesday]," a trader said. "I think there was just some follow through, and speculation on what is going on with the plan."

On top of that, the trader said that those involved in the name are "tired."

"Maybe they have just given up," he said.

Another trader said Delphi's bonds were "really getting crushed."

"People at this point are just saying I'm done, I'm tired," he said

The first trader called the name active and 1 to 1.5 points lower "depending on the issue." He pegged the 6.55% notes that were to have matured last year at 56.5 bid, 57.5 offered, the 6½% notes due 2009 at 57 bid, 57.5 offered, the 6½% notes due 2013 at 55.5 bid, 56.5 offered and the 7 1/8% notes due 2029 at 58.5 bid, 59.5 offered.

The second trader placed the 2009 paper at 56.5 bid, 57.5 offered and the 2029 issue at 57 bid, 59 offered.

Elsewhere, a trader called the 2013 piece "a big mover lately," down another 2 points on the session at 54.5 bid, 55.5 offered. However, he said the 8¼% notes due 2033 gained 2 points to close at 37 bid, 39 offered.

"That doesn't make sense," he said. "I guess somebody found a reason to trade them at those levels."

Delphi announced Tuesday that it had reached agreement with its creditors, as well as GM, on its reorganization plan. Under the new amended plan, unsecured creditors will receive 77.3% of their claims in new stock and the opportunity to participate in a rights offering. Bondholders will recover 90% of their claims.

Still, the company said more amendments might come before a Thursday hearing on the plan. Delphi also said it is continuing to plan for an early 2008 bankruptcy exit, as it will lose its $2.55 billion investment deal if it has not emerged by March 31.

But the automotive sector as a whole has been weakening under mounting pressure in the industry. Federal-Mogul Corp.'s bonds, for instance, were called "down a couple" at 75 bid, 76 offered, though there was no specific news to drive the name.

"Everything auto related has been coming in," a trader said. "It's a macro play, nothing name specific. Guys are just realizing it is not a good sector."

That trader pegged Federal-Mogul's notes - which tend to trade on top of one another - at 76.5 bid, 77.5 offered. Another trader saw the 7½% notes due 2009 down 2 points at 75 bid, 76 offered.

A trader also said that it might be lights out for Dura Automotive Systems Inc. He quoted the 8 5/8% senior notes at 25.5 bid, 27.5 offered and the 9% subordinated notes due 2009 at 0.25 bid, 0.50 offered. The trader said that while the company has said it will not have problems acquiring its exit financing, the reality in the current marketplace is something different.

"Say good night Gracie," he quipped.

E*Trade draws out rebound

E*Trade's debt continued to rally in Wednesday trading, with traders calling the bonds up as much as 5 points on the day.

A trader quoted the 8% notes due 2011 up 2 points at 78 bid, 80 offered, while another deemed the bonds 5 points better at 79 bid, 81 offered, up from 74 bid, 76.5 offered.

The bonds had moved up in the previous session as investors began to see a $2.55 billion cash infusion from Citadel Investors Group a sign that someone is interested in the flailing company. The company has been one of many hit by the mortgage meltdown of 2007.

Also on Wednesday, a group of shareholders led by Sebastian River Holding's Inc. filed a lawsuit against the company under the civil section of the Racketeer Influenced and Corrupt Organizations Act (RICO). The group claims that the company unlawfully manipulated its stock.

Gaming sector active, steady

Poor quarterly numbers and management changes caused quite a stir in the gaming sector over the course of the week. In Wednesday's trading, many gaming names, such as Trump Entertainment and Isle of Capri, managed to hold their ground - if not gain some - in active trading.

A trader called Trump's 8½% notes due 2015 "not really changed" at 76 bid, 77 offered, while another placed the bonds down slightly at 76.5 bid, 77 offered. At another desk, a trader said the Trump notes were unchanged to "maybe down a point" at 75 bid, 76 offered.

Meanwhile, Isle of Capri's 7% notes due 2014 closed unchanged to a half point better at 84 bid, 84.5 offered.

Wynn Las Vegas LLC's debt was deemed firmer, its 6 5/8% notes due 2014 up half a point to 97 bid, 98 offered. But Harrah's Operating Co. Inc.'s 5¾% notes due 2017 fell slightly to 69.25 bid, 70.75 offered.

Tembec firms

Tembec's bonds continue to push higher after the Bank of Canada cut a key interest rate, thus softening the exchange between the U.S. dollar and the Canadian loonie.

"They've been coming back up," said one trader. He quoted the 8½% notes due 2011 at 43 bid. Those bonds had been in the low- to mid-30s in recent weeks.

The trader also placed the 8 5/8% notes due 2009 better at 52 bid, up from 41 bid, 43 offered just two weeks ago.

Another trader called the forest products company a "big mover" on the week, its 8 5/8% notes up at 51.5 bid, 53.5 offered.

At another desk, a trader called the 8½% notes up 1 point at 42 bid, 43 offered.

Conference comments help homebuilders

Homebuilders were seen firming over the session, attributed to "positive" comments heard at the Bank of America conference in Orlando, Fla.

Several struggling homebuilders have presented at the conference. On Tuesday, Andrew Parnes, chief financial officer of Standard Pacific Corp., told an audience of market participants that while the company is preparing for another difficult year in 2008, plans to off load land assets are continuing and include yet another benefit to downsizing inventory: millions of dollars in tax refunds.

A trader said Standard Pacific's bonds were subsequently "up a good deal, especially the short dated paper." He pegged the 8½% notes due 2008 at 90 bid, 91 offered.

At another desk, a trader said Technical Olympic USA Inc.'s bonds were also better, its 8¼% notes due 2014 at 40 bid, 42 offered and its 9% notes due 2010 at 38.5 bid, 40.5 offered. The trader added that there was light volume in the name.

"They got somebody excited," he said.

Market tidbits

Community Health Systems Inc.'s 4¼% notes moved up a half point to 101 bid, 101.5 offered, while Tenet Healthcare Corp.'s 9 7/8% notes due 2014 gained a half to a full point, closing at 95 bid, 95.5 offered.

Elsewhere, Blockbuster Inc.'s bonds were stronger at the end of the trading day, closing up to 84 bid, 85 offered from 83.5 bid, 84.5 offered. The stock, however, slid 14 cents, or 4.22%, to $3.18, as investors started worrying about $1 DVD rentals being sold at such establishments as McDonald's.

Fedders Corp.'s 9 7/8% notes due 2014 have come back from their previous levels in the single digits, a trader said. He quoted the bonds ate 11 bid, 12 offered, attributing the gains in part to short covering as well as renewed interest.

"People just wanted to pick up some cheap bonds and drove them up," he said.

Calpine Corp.'s debt has been "all over the place," a trader said, as debate over the company's most recent valuation report wages on. The trader said the bonds came off of their recent highs Wednesday to close 1.5 points lower, its 8½% notes due 2011 at 106.5 bid, 107.5 offered and its 8½% notes due 2008 at 104 bid, 105 offered.

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