Housing data prompts losses in housing sector; Hines bonds dip on asset sale; Iridium up

By Stephanie N. Rotondo

Portland, Ore., Sept. 5 - A new housing report came out Wednesday and caused most distressed homebuilders to see losses in their bonds.

The report, a reading of the seasonally adjusted index of pending sales of existing homes, showed a record decline. In response, market players expressed concern in the housing sector and wondered if the worst is over.

"If you think that's bad, wait until you see the next [quarterly] numbers," a trader said dryly.

During the session, names like Technical Olympic USA Inc., Beazer Homes USA Inc. and WCI Communities Inc. dipped at least a point in their corporate debt.

Also feeling weaker was Hines Horticulture Inc.'s bonds. The rarely traded issue was uncharacteristically active after the company said it had finalized an asset sale. But while asset sales typically mean good things for bonds, that was not the case here - the bonds were deemed down about a point on the day.

Activity in Iridium LLC's bonds died down slightly, at least compared to the activity in the name the previous session. A trader reported the bonds, hurt by a judge's ruling in Tuesday's trading, tried to regain some of their losses.

At the middle of the first week of September, traders said more people are returning to their desks after their last-chance summer vacations. With more people in, the distressed market is seeing more activity than it has of late.

"Everything, with the exception of homebuilders, seems a little stronger," a trader said. "There are more quotes; more people seem to be at their desks."

"The market definitely seems firmer," another trader said.

Housing data equals homebuilder losses

New housing data released Wednesday resulted in losses for most homebuilders, as well as struggling mortgage lenders.

A trader said Technical Olympic's bonds were "down again," pegging the 7½% notes due 2015 at 31.5, which he called the issue's "all-time low."

Another trader agreed with that figure, adding, "That's ugly."

"We've never felt comfortable in those bonds anyway," he said, noting that the more senior issues, like the 9% notes due 2010, were what he focused on.

With that, he quoted the 9% notes at 71 bid, 73 offered.

"They are off maybe a point or so, but still holding in there," he said.

He also saw the 7½% notes due 2011 down a couple points to 34 bid, 36 offered.

Another trader said Tousa's bonds were down 1 point across the board, its 8¼% notes due 2011 at 69.5 bid, 71.5 offered and its 9% notes at 71 bid, 73 offered. Elsewhere, a trader saw the 10 3/8% notes due 2012 down 1.5 points at 41 bid, 43 offered.

The first trader said Beazer Homes' 8 5/8% notes due 2011 were down a point at 80 bid. The second trader called that paper unchanged at 79.5 bid, 80.5 offered. He also placed Beazer's 8 3/8% notes due 2012 at 78.5 bid, 80.5 offered.

Among WCI Communities' various issues, the trader called the 7 7/8% notes due 2013 and the 9 1/8% notes due 2012 off a point at 74 bid, 76 offered and 82 bid, 83 offered, respectively.

At another desk, a trader saw WCI's 7 7/8% notes at 74 bid, 76 offered, adding that he "hasn't seen a bid in them in several weeks." He also saw the 9 1/8% notes at 82 bid, 83 offered.

Meanwhile, the housing data also hit mortgage lenders. Thornburg Mortgage Corp.'s 8% notes due 2013, which have been growing stronger over the last few sessions, dipped a point to 87.5. Another trader called the bonds down 1.5 points to 86.5 bid, 88.5 offered, while another source placed the bond down closer to 2 points to 89.25.

In Residential Capital LLC's paper, the 7½% notes due 2013 were quoted at 77.5 bid, 78 offered. Another trader called the 6% notes due 2011 down 2 points to 77.5 bid, 79 offered.

According to its monthly report, the National Association of Realtors said its index, which measures pending home sales for existing homes, fell just over 16% in July, compared to a 12.2% drop the previous month. The July reading, based on a scale of 100, came in at 89.9, the second-lowest read since the index's inception in 2001. It also ranked the lowest since September 2001.

Asset sale hits Hines Horticulture

An asset sale - called disappointing by one trader - hurt rather than helped Hines Horticulture's bonds.

The trader said the 10¼% notes due 2011 traded a "fair amount, mostly with a 69 handle."

Another trader pegged the bonds down a point to 68.5 bid, 69.5 offered.

One source called the bonds down 3 points on the day and as much as 5 points on the week at 69 bid, 70 offered.

At another desk, however, a trader said the bonds rallied toward the end of the day. He said the debt hit a low of 68 but came back to close at 69.5 bid, 70.5 offered.

"[The bonds] were very active for a relatively small issue that does not trade much," he said.

In an 8-K filed with the Securities and Exchange Commission late Tuesday, Hines said it had sold its assets associated with its Trenton, S.C., nursery to Palmetto Perennials LLC for $5.7 million.

The sale was completed Aug. 29.

"It was a bit of a disappointment to some people," the first trader said.

Iridium bonds attempt rally

After losing its shirt in the previous session - figuratively speaking - Iridium's bonds were deemed "up a little" by one trader.

The trader said the bonds traded in "decent volume in the morning," hitting a high of 4 bid, 4.125 offered. He said the bonds came off those highs but still closed better at 3.625 bid, 4.125 offered.

The satellite provider's debt had fallen upwards of 10 points in the previous session after a bankruptcy judge dismissed half of the counts the company's unsecured creditors committee alleged against former parent Motorola Inc.

Autos mostly lower

A trader saw Remy International Inc.'s 8 5/8% notes due in December 2007 at 111 bid, 115 offered versus the 110 bid, 115 offered market on Tuesday.

"So, still the same," he said.

He also saw the 9 3/8% notes due 2012 and 11% notes due 2009 at 119 bid, 125 offered, up from Tuesday's closing levels. He theorized, "there must be a lot of shorts [doing some short-covering], looking for guaranteed delivery."

Another trader saw the "real market" for the subordinated bonds at 120 bid, 125 offered, adding that there are "all kinds of ridiculous bids or offers around," but this was a "real bid, and real offer."

"Nothing actually traded there yet," he said, "but once that trade prints, it will light a fire under things."

Meanwhile, Dura Automotive Systems Inc.'s senior paper slid 1.5 points, a trader said, slotting the 8 5/8% notes due 2012 at 51 bid, 53 offered. He said there was "nothing in the juniors," calling the 9% notes due 2009 unchanged at 3.25 bid, 4.25 offered.

Among other names in the automotive realm, Dana Corp.'s 6½% notes due 2008 were down a point to 82 bid, 84 offered, while Delphi Corp.'s 6.55% notes due 2006 fell half a point to 100.5 bid, 102.5 offered.

Broad market mixed

A trader said Linens n'Things' floating-rate notes traded in the high-60s.

Movie Gallery Inc.'s 11% notes due 2012 were called quiet at 24.5.

Chipmaker MagnaChip Semiconductor Ltd.'s 8% notes due 2014 "firmed and tightened," a trader said, to 61.5 bid, 63.5 offered from Tuesday's level of 60 bid, 65 offered. Other issues in the name were pretty much the same, with its 6 7/8% due 2011 at 78 bid, 80 offered and its floating-rate notes due 2011 at 82 bid, 84 offered.

Calpine Corp.'s 8½% notes due 2008 were seen holding steady at 108 bid, 110 offered.

Feeling firmer were Spectrum Brands Inc.'s bonds. A trader called the 11¼% notes due 2013 up 1.5 points to 86 bid, 87.5 offered, while the 7 3/8% notes due 2015 linked to the Rayovac moniker were a half point better at 74 bid, 75 offered.

A trader saw more activity in Fedders Corp.'s bonds. He quoted the 9 7/8% notes due 2014 at 16.25 bid, 17.25 offered. He attributed the rise in activity in the name to more people being at their desks and the fact that "there are not a lot of $16 bonds out there."

Paul Deckelman contributed to this article.

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