Tembec bonds steady; Calpine debt actively quoted; Bally notes quiet on plan approval

By Stephanie N. Rotondo

Portland, Ore., Sept. 17 - Investors were hesitant Monday ahead of a Tuesday meeting of the Federal Reserve, where the central bank is expected to make yet another rate cut.

"A lot of things are quoted, but there is not a lot of trading," a trader said.

The trader said he was unsure if the pending rate cut would have a big effect on the junk sector but hoped that more selling would occur soon.

"We may get a rally off of a rate cut, but I don't know how long it will hold up," he said.

"I don't know what is going to jumpstart this market for the last couple of months of the year," he added. "It's frustrating."

It has seemed of late that even fresh news is slow to move the distressed market. For example, Tembec Inc.'s bonds were quiet and unchanged on news that the company was temporarily pulling out of the North American lumber market due to pricing concerns.

Power producer Calpine Corp. saw its bonds "actively quoted," though the structure was mixed on the day. Traders said the 8½% notes due 2008 were up as much as 3 points from Friday, but other issues were called unchanged or down slightly.

Bally Total Fitness Holding Co. has spent very little time in bankruptcy since it filed its pre-packed plan of reorganization on July 31. The company received approval on its plan Monday and hopes to emerge from Chapter 11 protection before the end of the month. As many of the company's noteholders approved of the plan ahead of its filing, it was no surprise that the bonds were relatively inactive during the session.

Tembec steady

Tembec's bonds have maintained their levels, despite the company temporarily pulling its lumber off the market.

"I don't know what [temporarily] means," a trader said. "Evidently, it sounds like no one cares too much."

The trader called the 8½% notes due 2011 unchanged at 45.25. Another trader pegged the 8 5/8% notes due 2009 at 49 bid, 51 offered, "same as Friday." Elsewhere, a trader also called that issue unchanged at 49 bid, 50 offered.

The forest products company said Friday it would pull out of the North American lumber market, as its current prices do not reflect the increasing value of the Canadian loonie.

A new adjusted price list is expected to be released this week.

"They can't sell anything," a trader said. "They are crushed on the currency exchange."

With that in mind, the trader opined that the best thing for the Canadian company to do was "stack up and wait."

Calpine notes actively quoted

A trader said Calpine's bonds were "quoted quite a lot, but [there was] not a whole lot of price movement."

The trader said the 8½% notes due 2008 were up a point to 102 bid, 103 offered, while the 8½% notes due 2011 were at 101 bid, 102 offered.

At another desk, a trader saw "some better bids for Calpine," with its notes due 2008 at 102 bid, 103 offered, up 3 points from late Friday, but added that "it doesn't look like any other issues are up." In fact, he said other issues were down, including its 0.75% notes due 2015 (a busted convertible issue), which dropped to 82 bid, 84 offered from last week's levels around 93 bid, 95 offered, and its 6% notes due 2014, which fell to 79 bid, 81 offered from 82 bid, 84 offered. He was unsure why, saying it must be "something in the bankruptcy."

Another trader mentioned that Calpine's equity was "not happy," slipping 25 cents, or 17.48%, to $1.18.

The trader added that, while the bonds were not down, they could be "held up by valuation of the company," as the bondholders are getting equity, not cash post-bankruptcy.

The San Jose, Calif.-based company is continuing its struggle to get its disclosure statement approved. In a news release issued Monday, Rosetta Resources Inc. said it filed an objection to the reorganization plan due to, among other things, the allegations that the sale of Calpine's oil and gas business to Rosetta equaled an insider transaction.

Bally bonds quiet on plan OK

Chicago-based Bally Total Fitness is looking to exit bankruptcy this month, as a bankruptcy court approved its reorganization plan.

Not surprisingly, traders reported little activity in the fitness chain operator's bonds, as most debt holders were on board with the company's pre-packaged plan.

A trader said the 10½% notes due 2011 and the 9 7/8% notes due Oct. 15, 2007 were trading at 105 and 83, respectively.

The trader noted that he saw little to no markets in the debt, adding, "There may not be bonds to trade."

Under the company's pre-packaged plan, Harbinger Capital partners will invest $223.6 million in the chain, making the private equity firm the new owners. Senior noteholders will receive new notes with 13% interest, while subordinated holders will receive an immediate cash payout of $123.5 million. The remaining balance will be funded through a new $200 million issue of subordinated notes. Equity holders will divvy up $16.5 million.

Bally filed for Chapter 11 protection on July 31 and expects to exit bankruptcy by the end of the month.

Homebuilders, mortgage lenders better

Beazer Homes USA Inc.'s bonds were called down about "1 to 2 points across the board," a trader said. Its 8 5/8% notes due 2011 fell to 74 bid, 76 offered, its 8 3/8% notes due 2012 to 73.5 bid, 75.5 offered and its 6 7/8% notes due 2015 to 71.25 bid, 73.25 offered.

The fall was attributed to the homebuilder's banks cutting its mortgage subsidiary's available credit by 82.5%, to just $17.5 million from $100 million.

Meanwhile, Technical Olympic USA Inc.'s bonds were mixed on the day. A trader said the 8¼% notes due 2011 were up half a point at 67.5 bid, 69.5 offered, while its 9% notes due 2010 were unchanged at 69 bid, 71 offered.

At another desk, a trader said the 9% notes traded at 69.5. He also saw the 10 3/8% notes due 2012 at 33.5 bid, 35.5 offered and the 8¼% notes offered at 68.25.

Among the struggling mortgage lenders, Thornburg Mortgage Inc.'s 8% notes due 2013 edged up half a point to 86.5 bid, 87.5 offered. Fremont General Corp.'s 7 7/8% notes due 2009 were also up a half point to 87.5 bid, 89 offered. Another source, however, saw those bonds higher, ending up almost 2 points at just below the 91 level.

Blockbuster move 'interesting'

Movie rental chain Blockbuster Inc.'s bonds are continuing to move upward, something one trader deemed "interesting."

The trader said the 9% notes due 2011 traded up to 88.25 early in the day and then closed with a market of 88.75 bid, 89.75 offered. The bonds closed Friday at 87.75.

"They continue to improve," the trader said, though he said there was "no information to support that price movement."

Elsewhere in the sector, Movie Gallery Inc.'s 11% notes due 2011 were quoted up at 37.75 bid, 38.5 offered. Another source placed the bonds at 36 bid, 38 offered.

Broad market mostly up

Like a "bad penny," Hines Horticulture Inc.'s bonds traded at 71.

"They keep coming up," a trader said of the 10¼% notes due 2011.

Activity in James River Coal Co.'s 9 3/8% notes due 2012 quieted down after a small flurry of activity Friday. A trader pegged the notes at "74 bid, 75 offered, maybe even 75 bid, 76 offered."

Neff Corp.'s 10% notes due 2015 were "up a couple" of points at 75 bid, 76 offered.

A trader saw Spectrum Brands Inc.'s 7 3/8% notes due 2015 down a half point to 73 bid, 74 offered.

In the automotive realm, Federal Mogul Corp.'s bonds moved up 1 point at 76 bid, 78 offered.

A trader said he "didn't see anything doing" in Remy International Inc.'s bonds. He pegged the 8 5/8% notes due 2007 at 108 bid, 110 offered and 11% notes due 2009 at a wide 107 bid, 112 offered, both unchanged on the day.

Delphi Corp.'s 6.55% notes due 2006 were up a half point at 83 bid, 85 offered, while Dana Corp.'s 6½% notes due 2008 were unchanged at 80 bid, 82 offered.

Paul Deckelman contributed to this article.

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