Doral mixed on FBOP pullout; Delphi up on union pact; Technical Olympic down

By Stephanie N. Rotondo

Portland, Ore., June 25 - Doral Financial Corp. announced Monday that one of the bidders for Doral, FBOP Corp., was opting not to go through with its proposal.

The news did little to affect Doral's bonds or preferred issues, but the equity was sent down more than 30%.

"The preferreds are at the top of the capital structure," a trader said. "As long as Bear Stearns gets its deal done, they don't care [what happens]."

The trader did note, however, that it would be interesting to see what Bear Stearns, the original bidder for the financial institution, would do with the company.

"This could be a difficult moment in history for them," he said. "They are really piling into all this debt."

Meanwhile, Delphi Corp. has tentatively reached an agreement with the United Auto Workers unions, prompting the automotive parts maker's bonds to firm.

The company has been in talks with the union for some time, looking for wage and benefit cuts. But until now, the union has rejected every proposal.

As the talks dragged on, groups looking to invest in the company have gotten nervous. In fact, Cerberus Capital Management indicated it might pull out of a deal to infuse the company with badly needed capital if the company did not come to terms with its unions.

Technical Olympic USA Inc.'s foundation is a little shaky these days, as renewed subprime woes - fueled by the Bear Stearns hedge funds fallout - and investor impatience are putting pressure on the company's debt.

A poor housing sector cannot be good for the Hollywood, Fla.-based homebuilder either. The National Association of Realtors reported Monday that existing home sales fell for a third time in May, slipping to the lowest level in four years. Median sales prices also declined for a record 10th consecutive month, and unsold homes inventory reached the highest level in 15 years.

Doral structure mixed

Doral announced that rival bidder FBOP decided not to go through with its proposal to acquire an 80% stake in the struggling Puerto Rican bank, which sent Doral's equity crashing.

The bonds, however, along with the preferred issues, stayed relatively stable, as one trader said holders of that paper "don't care."

According to another trader, "[FBOP] did their due diligence and said nope," apparently finding more problems than were expected.

"Now [the] Bear Stearns group [is] stuck with buying this," the trader said. "Bet they are not thrilled."

Shares of Doral's common stock plummeted 49 cents, or 30.63%, to $1.11 - still well over Bear Stearns' offer price of 63 cents per share.

"I cannot understand that, after FBOP said yuck, folks are paying more than the 63 cents," the second trader said.

The floating-rate notes due 2007 are maintaining their 99 levels, while the 4¾% preferred issue was off slightly from its highs, quoted at 143.

Still, neither the debt nor the preferred paper traded in the uproar, though the second trader did mention that the preferred was "for sale."

The pullout, however, was not entirely unexpected. Bear Stearns had stated in a letter to the bank's board of directors that FBOP has a history of backing out of deals, something many market players kept in mind when discussing the rival bid.

FBOP, the company's second-largest shareholder, has said it will now support the Bear Stearns buyout.

Delphi bonds up

Delphi bonds were seen gyrating on the back of the news that the Troy, Mich.-based automotive parts manufacturer had reached an accord with one of its unions.

A trader quoted the 6½% notes due 2009 "up small" at 120.5, while another trader saw the 6.55% notes due 2006 at 119.5 bid, 120.5 offered, "maybe higher."

The plan with the United Auto Workers union - which is being taken to member workers for ratification - includes which plants the company plans to keep and those likely to go on the auction block, as well as wage reductions.

Reaching an agreement with the union clears one obstacle out of the way for Delphi to reach its goal of exiting Chapter 11 by the end of the year. The company still has other unions to deal with, as well as completion of an equity investment plan.

Technical Olympic lower

As subprime woes and the Bear Stearns hedge fund fallout continue to have a wider effect on the market, Technical Olympic is "drifting lower," though on no news specific to the company.

A trader slated the 9% senior notes due 2010 at 94 bid, 95 offered.

The trader attributed some of the dip in the name to the subprime issue but also said that, as the company drags out resolving its issues with its Transeastern JV, "people assume the worst."

Linens n'Things active

In a market that has been relatively active, a trader said that Linens n'Things has remained fairly mobile, as the company's bonds move under 80, "down into the realm of distressed."

The trader pegged the floating-rate notes around 78.0625 bid, 78.5 offered.

There was no fresh news out on the company, but the trader said that news that Apollo Capital - the owner of the retailer - was financing an exit facility for Marcal Paper could have sparked interest in the name.

Calpine up, quiet

Calpine Corp.'s bonds were quiet after last week's run-up in the notes, prompted by the filing of the company's reorganization plan. A trader pegged the 8½% notes due 2008 up a couple points at 124 bid, 125 offered and the 8½% notes due 2011 at 130 bid, 131 offered.

About the plan, the trader said it has "got a lot of work to it. It won't be the final plan."

"But folks seemed to like it initially," he added.

Broad market dips

Hines Horticulture Inc.'s 10¼% notes due 2011 were seen at 80.5, though the trader noted it was a small trade. He added that the last trade of any significance was about a week ago at 79.

The trader said 155 East Tropicana LLC, also known as Hooters, was also more active, trading at par 1/4. He said he did not know why the paper, which is usually quiet, was picking up in activity, but "maybe we'll hear something soon."

At another desk, a trader saw Fedders Corp.'s 9 7/8% notes due 2014 at 34 and Solutia Inc.'s 6.72% notes due 2037 "off a little" at 89.5 bid, 90.5 offered, but he did not know why.

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