Dura notes slip; Calpine powers up; Bon-Ton, Linens edge higher; Tousa bonds steady

By Stephanie N. Rotondo

Portland, Ore., Dec. 10 - All seemed right - or at least better - with the world Monday, and the distressed bond market reacted in kind.

While most traders reported light volume in the distressed market, most names were better or, at worst, unchanged, on the day as recession concerns started to take a backseat.

News that bond insurer MBIA Inc. would receive a $1 billion equity injection from Warburg Pincus LLC was what one trader called a "symbolic vote of confidence" - just what the market needed to get back on track.

"The MBIA news was viewed very positively," another trader said.

Still, the first trader remained cautious.

"They will need more than that to right that ship," he said.

The market was also hopeful that the Federal Reserve would make yet another interest rate cut at the central bank's meeting Tuesday. Optimism on that front also helped to push things higher.

"Everything is great, everything is higher," a trader enthused.

Everything was higher, that is, except Dura Automotive Systems Inc. That company's bonds fell about 2 points on the session - though probably would have fallen more in a less-enthusiastic marketplace - as its confirmation hearing was put on hold in an effort to have more time to secure exit financing. But given the current state of the credit market, more people are starting to believe that finding the cash will be like finding a needle in a haystack.

But Calpine Corp. did follow the overall trend, gaining as much as 4 points on the day. Outside of general market sentiment, traders could not point to any specific reason for the increase.

Retailers, which had been hit in the previous week, started to feel a little better. Both Bon-Ton Stores Inc. and Linens n'Things were slightly better to steady on the day.

Meanwhile, market players are still trying to figure out what Technical Olympic USA Inc. is up to. The homebuilder's bonds were slowly but steadily gaining in the previous week and began the new week unchanged to maybe a little lower.

Like a bad transmission, Dura drops

Speculation on whether Dura Automotive Systems is heading for system failure heated up Monday after the automotive parts supplier asked a court to delay its confirmation hearing. According to court papers, the company wants more time to secure exit financing.

A trader quoted the 8 5/8% senior notes due 2012 around 24, while another pegged the bonds at 23 bid, 25 offered. Just two months ago, the debt was trading in the low-50s.

At another desk, a trader said the 8 5/8% notes skidded to 23 bid, 25 offered from 25 bid, 27 offered, while its 9% notes due 2009 were unchanged. Those notes trade - when they do trade - for less than one cent on the dollar, at 0.0625 bid, 0.125 offered.

Dura was originally scheduled to head to court Tuesday to seek approval on its reorganization plan, which includes a $169 million rights offerings backstopped by Pacificor LLC. But the Rochester Hills, Mich.-based company said it wants to give its banks - Goldman Sachs Credit Partners and Barclays Capital - more time to sell the $425 million in loans.

Should the exit financing not be obtained, the deal with Pacificor could go south.

Last week, a bankruptcy judge ruled against holders of the junior debt, stating that the indenture's "X-Clause" did not require the company to compensate the subordinated debt.

"When read as a whole, the subordinated note indenture clearly manifests the intent to assure payment in full of the senior notes before permitting payment (in whatever form) to the subordinated noteholders," the judge said in the ruling.

A trader said the 9% subordinated notes due 2009 were "toast," closing Monday at 0.0625 bid, 1.125 offered, "all you wanted."

The trader, who had predicted exit financing trouble from the get-go, said that "people have really started to think there is trouble."

"It will be a tight race," he said.

Elsewhere in the autosphere, Federal-Mogul Corp.'s bonds were a little better following a week where the debt slowly, but steadily, lost ground. A trader placed the notes - which tend to trade in line with one another - at 73 bid, 74 offered, up from last week's ending levels around 72. However, another trader called the bonds unchanged at 74 bid, 76 offered., although a source at another desk pegged its 7 3/8% notes due 2006 up nearly 2 points at 82.5 bid.

Activity in Delphi Corp.'s bonds quieted down Monday after making last week's biggest mover list. A trader did see Delphi's 6.55% notes that were to have come due last year firm a point to 59 bid, 61 offered.

Calpine warms up, recession worries cool

Worries that a recession looms are beginning to dissipate, and with that power producer Calpine's bonds are gaining.

One trader, who said there are "multiple buyers" now that the company is slated to emerge from bankruptcy in January, quoted the 8½% notes due 2011 up about 4 points from Friday at 112 bid, 113 offered. He added that the bonds had begun to rally Friday, getting as good as 108.5 bid, 109.5 offered.

But the company's other issues did not fare as well as the 2011 paper, though still managed to post some gains. The trader said the 8½% notes due 2008 closed at 106.5 bid, 107.5 offered.

Another trader placed the 2011 piece at 111 bid, 112 offered and the 2008 issue at 106.5 bid, 107.5 offered.

"This 5-point spread is the biggest I have seen [in these issues] in a while," he said.

Still, the trader could not explain the movement.

"I have heard nothing," he said.

While most names in the bond market felt better in general, a trader said that other factors played into Calpine's increase, including doubts that a recession would take the economy by a chokehold.

"People are less worried about a recession," he said. "Without a recession, power demand stays strong. If demand is strong, these guys should do well."

Also following that logic was TXU Corp.'s debt. The 10¼% notes due 2015 were quoted higher at par bid, 101 offered.

Meanwhile, a trader said Calpine Generating Co.'s third-lien paper traded at 43.5.

Bon-Ton, Linens better

Retail names were "acting better," a trader said, as the market overall reacted favorably to a potential interest rate cut. The trader also noted that short covering was likely involved.

A trader placed Bon-Ton's 10¼% notes due 2014 up at 80 bid, 81 offered and Linens n'Things floating-rates notes around 56. Another trader quoted Bon-Ton's debt around 81.

Last week, Bon-Ton reported higher sales for the four weeks ended Dec. 1. Total sales increased to $393.1 million from $367 million for the same period in 2006.

Spreads widen on Tousa notes

Market players are continuing to try to find information on what occurred at a Friday meeting between an ad-hoc committee and Technical Olympic. The homebuilder's bonds, which had been slightly elevated last week, stabilized in Monday trading.

One trader pegged the 9% notes due 2010 at 42 bid, 44 offered. He added that the 8¼% notes due 2011 "widened out a little as well," at 44 bid, 45 offered.

Another trader saw the 9% notes trade at 44.

"They have gotten a little steam," he said. "God only knows why."

The trader also quoted the 7½% notes due 2011 and 2015 at 5.75 bid, 6.25 offered.

Another trader said the 8¼% notes fell 1 point to 44 bid, 46 offered.

Meanwhile, WCI Communities Inc.'s 9 1/8% notes due 2012 saw a wide market of 56.5 bid, 59.5 offered. Another trader called the issue 2 points better at 57.5 bid, 59.5 offered and the 7 7/8% notes due 2013 likewise up 2 at 54.5 bid, 56.5 offered.

A trader called Beazer Homes USA Inc.'s 8 5/8% notes due 2011 half a point better at 79.5 bid, 81.5 offered, while Standard Pacific Corp.'s 7% notes due 2015 firmed to 71 bid, 73 offered, up a point.

Broad market hanging in there

In the gaming sector, French Lick Casino's 10¾% notes due 2014 were "not much moved," offered at 77. However, Wimar Operating Co.'s 9 5/8% notes due 2014 were seen higher at 68.5 bid, 69.5 offered. Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were about a half point better at 78 bid, 78.5 offered.

Buffets Inc.'s 12½% notes due 2014 traded at 48 bid, 48.25 offered.

A trader deemed True Temper Sports Inc.'s 8 3/8% notes due 2011 unchanged at 62.5.

Transmeridian Oil Exploration's 12% notes due 2010 moved at 94.75 bid, 95 offered.

Blockbuster Inc.'s bonds, faced with the growing popularity of $1 DVD rentals available at such establishments as McDonald's, have seen steady declines recently. A trader quoted the 9% notes due 2011 at 83 bid, 85 offered.

Another trader, however, said the bonds were not down much on the session, at 84 bid, 84.5 offered.

"People are just haters," he quipped.

Paul Deckelman contributed to this article.

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