Tousa seniors better; Motion Satellite, TerreStar up; Retailers down; Fremont General boosted

By Stephanie N. Rotondo

Portland, Ore., Oct. 10 - Activity in the bond market picked up Wednesday, and many names in the junk sector seemed better, if not unchanged.

Traders reported that Technical Olympic USA Inc.'s senior paper was moving up on momentum gained in the previous session. One trader attributed the increase in the notes to a rumor of a possible merger in the sector.

Meanwhile, Tuesday's news that AT&T Inc. will buy wireless airwave licenses from Aloha Partners LP prompted other names in the spectrum-related industry - such as Motion Satellite Ventures and TerreStar Networks Inc. - to improve on the day.

Top-store sales are expected Thursday and it is likely market players are already expecting the worst. At least, that was one trader's opinion as to why retailers like Bon-Ton Stores Inc., Linens n'Things and Claire's Stores Inc., were growing weaker. But the trader also speculated that a dipping stock market was not helping.

"[The bonds] were probably driven by a weaker equity market and were giving back gains they had gotten over the last few days," he said.

Fremont General Corp.'s bonds gained as much as 2 points during the session, prompted by the news that a Harbinger Capital Partners-led fund reported a 9% stake in the mortgage company.

"It was a good day, a fun day," a trader said. "Things are getting done; there are some names to look at."

Tousa senior bonds better

Technical Olympic's senior debt continued its rally from the previous session, while the subordinated paper moved lower.

A trader said the 9% notes due 2010 "gained a little momentum," closing the day around 68, while the 8¼% notes due 2011 ended the day at 66 bid, 67 offered. The trader said the 10 3/8% subordinated notes due 2012 fell to around 25.

"I think we will see a widening in the capital structure," the trader said.

Another trader also called the senior paper up, the 8¼% notes at 66 bid, 67 offered and the 9% notes at 67.5 bid, 68.5 offered. He said the bonds went higher during the session but came off of their highs.

The trader attributed the increase to a rumor that Toll Brothers Inc., a Pennsylvania-based homebuilder, was looking to buy out Hovnanian Enterprises Inc. He noted that potential sector integration was good for everybody.

At another desk, a trader said the senior issues were up as much as 3 points on the day but closed about 1 point higher. He pegged the 9% notes at 67.5 bid, 68.5 offered.

Elsewhere in the sector, Hovnanian's 8 7/8% notes due 2012 were quoted at 76.5 bid while its 7¾% notes due 2013 were seen at 73.5 bid, 74.5 offered.

A trader also saw Beazer Homes USA Inc.'s 8 7/8% notes due 2015 offered at 79.5. Another trader called that issue unchanged at 79 bid, 81 offered.

MSV, TerreStar up on AT&T news

Tuesday's news that AT&T will buy spectrum from Aloha Partners prompted other spectrum-related names to gain as much as 4 points on the day.

A trader said Motion Satellite Ventures' 0% notes due 2013 were "running," up 3 to 4 points at 66 bid, 68 offered. Another trader said the bonds - which he noted is a rarely quoted issue - where relatively active with a 66 bid.

The first trader also saw TerreStar Networks' 15% notes due 2014 up 2.5 to 3 points at 104.5 bid, 106.5 offered.

"Anything spectrum related has got hot again," he said.

AT&T will pay $2.5 billion to Aloha Partners for its wireless airwave licenses. The licenses include about 72 of the top 100 markets in the 700-megahertz band. The transaction is expected to close within six to nine months.

Elsewhere in the telecommunications sector, a trader quoted Primus Telecommunications Group Inc.'s 14¼% second-lien paper at 102.5 bid, which he called unchanged.

Another trader echoed that figure and said he also saw the 12¾% notes due 2009 at 98.75. He said the 8% notes due 2014 were at 67.5 bid, 68.5 offered, "where they have been for a while." He added that the bonds were "trading into the bid."

When asked what might be going on to move the bonds, the trader said, "There is nothing going on. It is just a good piece of paper."

The trader said that there was still hope that the 12¾% notes would get called - "there's not many left [outstanding]," he said - and the 14¼% notes are "just a great piece of paper." Still, he said he doubted the bonds would sell at 102.5, and they would likely move to 104 before it even traded.

Retailers weaker

Retailers were called weaker, attributed to a dropping equity market, a trader said.

The trader called Bon-Ton's 10¼% notes due 2014 down a point at 96.5 bid, 97 offered from the previous day's closing levels of 97.5 bid, 98 offered. He added that "Claire's, Dollar General, Burlington, they were all off a little today."

Another trader said Claire's 10½% notes closed at 80.25, while Linens n'Things floating-rate notes ended the day at 71.25 bid, 72 offered.

The first trader noted that top-store sales reports are expected Thursday and those numbers "will dictate the direction" the bonds move.

"I think people were already expecting that numbers were going to come in weaker," he said, given that stores such as Target and Lowe's have lowered their expectations for the quarter.

Fremont notes boosted by investor stake

Mortgage lender Fremont General saw its bonds gain 2 points during the session after a group of investors led by Harbinger Capital Partners announced its stake in the company.

A trader said the 7 7/8% notes due 2009 closed up at 92.5 bid, 94 offered, while another called the bonds 2 points better at 94. Another trader said the bonds had a high print of 94.24 and a low of 92.5.

The Harbinger-led hedge fund reported in a Schedule 13G filing with the Securities and Exchange Commission that it had a 9% stake in the company.

"What is interesting is that the fund had huge returns in the mortgage area - by being very short," a trader said.

"The best guess of book value on [Fremont] is so wide," he added, "But it would seem that if you hold your breath the bonds will give you a nice return."

Calpine edges up

Calpine Corp.'s unsecured debt was "quoted a lot," a trader said, as the company won approval on its make-whole deal with holders of those issues.

The trader quoted the 8½% notes due 2011 at 118.5 bid, 119.5 offered and the 8½% notes due 2008 at 114.5 bid, 115.5 offered.

"Nothing really changed drastically," he conceded.

The trader said the 6% convertible issue also traded with a 91 bid, 92 offered market.

Another trader said there was "some activity" in the bonds, deeming them "up a little."

He placed the 2011 paper at 119 bid, 119.5 offered and the 2008 issue at 114.5 bid, 115 offered.

Under the terms of the deal, an informal group of unsecured noteholders - which include holders of the 2011 paper - will agree to reduce its make-whole premium claims to $54.5 million from $109 million.

Broad market mixed

Movie Gallery Inc.'s 11% notes due 2012 "continue to come in," a trader said, slotting the bonds wide at 30 bid, 33 offered. Another trader saw Blockbuster Inc.'s 9% notes due 2012 at 91 bid, 92 offered.

A trader said Transmeridian Exploration Inc.'s 12% notes due 2012 traded "a bunch" at 97.

"God only knows what is going on there," he said, noting that the company has been "radio silent."

Dura Automotive Systems Inc.'s subordinated debt, the 9% notes due 2009, was called unchanged at 1 bid, 2 offered.

A trader was surprised at that, as the junior noteholders have filed their appeal against the company's current plan of reorganization and rights offering.

"No one has paid any attention," he said. "That does not bode well, but we will see."

The trader quoted the 8 5/8% senior notes due 2012 at 50.5 bid, 52 offered.

Federal-Mogul Corp.'s bonds are continuing to run up, a trader said, placing the bonds at 90.5, up half to three-quarters of a point. He attributed the gain to news that PepsiAmericas Inc. had withdrawn its objection to the automotive parts supplier's reorganization plan, which clears a major obstacle in the company's bankruptcy case.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.