Le-Nature's bank debt moves up; Technical Olympic bonds, shares dive

By Paul Deckelman and Sara Rosenberg

New York, Nov. 7 - Le-Nature's, Inc.'s term loan B was a couple of points higher on Tuesday, traders in the bank debt market said, even though there were no new developments in the company's Chapter 11 case.

Elsewhere, Technical Olympic USA Inc.'s bonds and shares plunged as bankruptcy fears circulated about the Hollywood, Fla.-based homebuilder, as one of the lenders to its troubled Transeastern joint venture said the company was obligated to step up and bail the venture out - something Technical Olympic says it is not obligated to do. Transeastern's bank debt meanwhile gyrated around.

Le-Nature's loan pushes up

Le-Nature's' term loan B closed out the day quoted at 47 bid, 50 offered, but had gotten as high as 50 bid, 53 offered during trading hours, a trader said. By comparison, on Monday the bank debt went out at 43 bid, 45 offered.

A week ago, disgruntled shareholders of the Latrobe, Pa., manufacturer of flavored bottled water and other beverages filed an involuntary Chapter 7 bankruptcy petition against Le-Nature's in the U.S. Bankruptcy Court for the Western District of Pennsylvania amidst claims that the company falsified documents, showed discrepancies in financial results, diverted funds and destroyed documents.

However, last Friday the company - now being run by a turnaround firm caretaker administration after the judge removed the company's chief executive officer and certain other senior management personnel - asked that Pittsburgh court for approval to convert the case from a Chapter 7 liquidation to a standard Chapter 11 reorganization proceeding. The court okayed that move, agreeing with the company's assertion of a "substantial likelihood" of a successful reorganization, and of the company having more value as an ongoing entity than if it is liquidated.

Le-Nature's 9% notes due 2013 meantime remained at the 14 bid, 15 offered level at which those bonds had finished Friday's dealings, and where they had remained all of Monday's session.

A week ago, traders said, those bonds were trading around the par bid level - but they swooned badly last Wednesday on the news of the revelations about the company's problems, falling to levels below 10. After an inconclusive Thursday, the bonds moved back up to around the 14 level Friday on news of the move to change the Chapter 7 proceedings into a Chapter 11 case.

Technical Olympic tumbles

A trader saw Technical Olympic's 10 3/8% notes due 2012 at 83.5 bid, 84.5 offered, down 6 points on the session.

Those bonds fell in line with a nosedive in the company's New York Stock Exchange-traded shares, which lost $3.79 (35.13%), ending at an even $7 per share. Volume of 13.1 million shares was nearly 20 times the usual turnover.

The slide was triggered by investor fears that the company might be forced to bail its floundering Transeastern Florida joint venture and might even face bankruptcy - speculation which at this time is strictly unconfirmed and unofficial.

Technical Olympic tumbled after it revealed in an 8-K filing with the Securities and Exchange Commission on Monday that Deutsche Bank, the lead bank for a group of lenders to Technical Olympic's troubled Transeastern homebuilding venture, said in letters to the homebuilder that "TOUSA has an obligation to undertake funding initiatives to stabilize the borrower."

Deutsche was demanding payment under certain guaranties entered into in connection with Transeastern's bank debt.

The letters allege that the Transeastern has failed to comply with certain of its obligations pursuant to the credit facilities and as a result multiple potential defaults and events of default have occurred, which allegedly triggered Technical Olympics' obligations under the guarantees.

The shares and the bonds retreated even as Technical Olympic shot back that it is in talks with the lenders about the situation, but added it does not believe any obligations related to financing the venture have been triggered.

It blamed Transeastern's problems on heavy debt and a weak Florida housing market.

Transeastern's term loan meanwhile ended the day wide after trading up by a few points during the session, according to a trader.

The loan went out at 75 bid, 80 offered, but the bid did get as high as 77 during market hours before coming in, the trader said.

Previously, the bank debt was right around the 75 context.

"This isn't really new news for Transeastern, the trader remarked. "If anything it just brought more attention to Technical Olympic," the trader remarked.

Sea Containers firmer again

Sea Containers Ltd.'s bonds were seen better for a second straight session in the wake of the bankrupt Bermuda-based maritime and railroad transportation company having rejected recent contentions by the United Kingdom's pension regulatory agency that that body might have to issue a demand - known as a financial support direction, or FSD - that Sea Containers make a payment into one or more of its pension schemes.

A trader saw Sea Containers' 10¾% notes that were to have come due this past Oct. 15 up another point Tuesday to around 70 bid, 71 offered after rising 2 points on Monday.

"We don't accept it is reasonable or appropriate of the regulator to issue FSDs," the company said. "We are in the middle of a restructuring...the two (U.K.) pension funds are involved in that restructuring."

Sea Containers said that pension fund members "will be ranked on an equal footing with bond-holders and other creditors. We are keen to let these discussions play out."

Sea Container's filed for Chapter 11 last month after failing to redeem the $115 million of 10¾% when they came due.

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