Spectrum boosted; Charter notes drop; WCI debt dips; Retailers heavier on slower sales

By Stephanie N. Rotondo

Portland, Ore., Nov. 8 - It was all about the numbers Thursday as several names in distressed land filed their quarterly figures amid mixed results.

While most of the market felt weaker, Spectrum Brands Inc.'s bonds went against the grain, gaining as much as 5 points on the day. The consumer products company posted a narrower loss for its fourth quarter of 2007 and increased net sales.

Charter Communications Inc., however, did not fare as well. The cable operator posted a wider quarterly loss well below market expectations, which caused its bonds to drop as much as 7 points.

Also not performing up to par was WCI Communities Inc. The homebuilder also posted a wider loss, attributed to, among other things, the number of defaults recorded over the quarter. Those bonds dipped as much as 6 points during the session.

The retail sector continues to feel heavy, pressured by dipping consumer confidence and turmoil in the broader market. As retail sales for October came out, Bon-Ton Stores Inc. and Linens n'Things both saw their bonds weakening.

With a long weekend quickly approaching, some market players were away from their desks - which could account for the day's light volume.

But another trader blamed the "flaky" equity markets for investors' hesitation.

"There is light volume because the stock market is flaky again," he said. "People are wondering what to do again."

Spectrum boosted by numbers

Spectrum Brands' bonds managed to buck the downward trend of the general market, prompted by better-than-expected quarterly numbers.

A trader deemed the 11¼% notes due 2013 better by 5 points at 86.5 bid, 87.5 offered. He also called the Rayovac battery maker's numbers "good."

Another trader called the bonds "much better," up 3 to 4 points. He pegged the 11¼% notes around 86, while the 7 3/8% notes due 2015 ended the day around 74.

"That was the outlier of the day," he said.

At another desk, a trader said the bonds were "shooting higher after numbers," placing the debt up as much as 6 points on the day. He quoted the 11¼% notes at 86 bid, 86.5 offered, calling that paper the "most active issue."

"It was one of few companies that beat expectations," the trader said of the company's financials.

The consumer products company posted a narrower fourth-quarter loss than the previous year at $333 million. That compared to $439.4 million for the same quarter of 2006. Net sales were also seen better, gaining 13% to $548.2 million.

Charter dips on poor 3Q

The market expressed disappointment in Charter Communications' bonds as the company's corporate debt fell as much as 7 points.

A trader, who said that Charter's losses on the session were "leading the way" in an overall weaker market, quoted the 11% notes due 2015 at 89 bid, 90 offered, down 7 points.

The cable operator controlled by Paul Allen reported a wider third-quarter loss for fiscal 2007, missing analysts' expectations.

The company posted a loss of $407 million, or $1.10 per share, for the quarter compared to a loss of $133 million, or 41 cents per share, in the year-ago quarter. Revenues increased 10% to $1.53 billion, up from $1.39 billion in the third quarter of 2006.

Analysts were expecting a loss of 89 cents on revenues of $1.53 billion.

WCI posts numbers, bonds 'whacked'

WCI Communities bonds got "whacked," a trader said, after the homebuilder released its third-quarter results.

The trader called the 7 7/8% notes due 2013 down 5 to 6 points around 72, off from the previous day's closing levels of 77 bid, 78 offered.

Another trader said WCI's 9 1/8% notes due 2012 lost 3 points to close around 74.5.

"Their numbers were not particularly good," he said, adding that some of the homebuilder's convertibles issues were down as well.

WCI's term loan also dropped in trading, a trader said.

The term loan was quoted all over the place, with the basic range being 94 bid, 96 offered, the trader said. On Wednesday, the term loan went out at 95½ bid, 96½ offered.

For the three months ended Sept. 30, the Bonita Springs, Fla.-based homebuilder reported a net loss of $69.7 million, compared to a net income of $10.7 million in the third quarter of 2006. Revenues decreased significantly to $166 million from $425.6 million. The company attributed their weak numbers to the number of defaults reported during the quarter.

"Demand continues to be unpredictable from week to week, and we saw an increase in defaults and cancellations during the third quarter," said Jerry Starkey, president and chief executive officer, in a press release. "While lower demand and increased defaults have severely hampered our earnings, we continue to expect significant cash flow in the fourth quarter to result in about $210 million to $460 million of cash flow for the full year ($200 million to $450 million from operating activities and $10 million from investing activities)."

Moody's Investors Service cut WCI's senior subordinated bonds to Caa3 due to the wider loss.

Other names in the housing arena lost ground as well, attributed to negative sentiment in the sector.

A trader said Technical Olympic USA Inc.'s bonds were active again, as "sellers are surfacing." The bonds slipped for the second straight session.

The trader said the 9% notes due 2010 hit "another all-time low" at 42 bid, 44 offered. The 8¼% notes due 2011 were also weaker at 44.

The trader said the subordinated issues - which include the 10 3/8% notes due 2012 and the 7½% notes due 2011 and 2015 - were trading "generically" at 8 bid, left offered.

"People are giving up on the subs," he said.

The Hollywood, Fla.-based homebuilder's first- and second-lien bank debt was also softer during market hours, following WCI's lead.

The first-lien term loan was quoted at 96½ bid, 97½ offered, down a half a point from previous levels, the trader said.

And, the second-lien term loan was quoted at 86 bid, 88 offered, down from Wednesday's levels of 87½ bid, 88½ offered, the trader added.

At another desk, a trader said there was a "bunch of activity" in Standard Pacific Corp.'s debt. He said that before the session, the paper had "not traded much recently."

The trader quoted the 7% notes due 2015 in the high-60s, calling the issue a "little lower." But it was the 9¼% notes due 2012 that got "beat up," closing down a "few points" to around 50.

Retailers hurt by October sales

The retail sector took a hit as retail sales for October were reportedly sluggish.

A trader said Bon-Ton's 10¼% notes due 2014 were "down a little" at 82 bid, 82.5 offered, pushed not only by sector trouble by also by a recent downgrade from Standard & Poor's.

Another trader said retailers were reflecting "negative sentiment" in the industry. He quoted Bon-Ton's notes at 82.5 bid, 83 offered and Linens n'Things' floating-rate notes at 61.5.

"Retail sales were particularly poignant to the high-yield market," said another trader. He said Linens n'Things' debt was "down a couple" at 61.

Ongoing concerns about the housing industry and increasing oil prices drove October sales to its lowest point since 1995. The International Council of Shopping Centers-UBS index rose 1.6%, lower than the expected 2.5% increase. The tally is based on same-store sales or on sales at stores open at least a year.

But as the holiday season looms, many are expecting even weaker numbers as consumer confidence drops.

Broad market weaker

Buffets Holding Inc., the operator of such dining establishments as Hometown Buffet and Old Country Buffet, saw its bonds continue to move up after losing almost 20 points at the beginning of the week.

"They fell so fast, they are just recovering slightly," a trader said. He pegged the 12½% notes due 2014 "a little higher" around 51.

Constar International Inc.'s 11% notes due 2012 continued to weaken just one day after the packing industry was seen softening on no apparent news. The bonds closed around 68.

Dura Automotive Systems Inc.'s 8 5/8% senior notes due 2012 were "a little lower," a trader said, even as the company made positive steps in securing exit financing.

"It's one thing to get exit financing," the trader said. "But I guess if you are a bondholder, you are going to get some type of security. With their numbers still being poor, what you get in exchange for the bonds might not be that great."

"They obviously don't like it and are trying to get out," he added. He quoted the notes at 33 bid, 34 offered.

A trader said Primus Telecommunications Group Inc.'s 8% notes due 2014 "seem to have stabilized." He placed the bonds at 57 bid, 60 offered.

The trader said he heard there was "one seller taken out and folks are looking to buy into the capital structure now because the company is willing to deal on swaps and debt-for-equity exchanges."

Movie Gallery Inc.'s first-lien term loan traded down on Thursday, still on no particular news, a trader said.

The first-lien term loan ended the day at 85½ bid, 86½ offered, down from 87 bid, 88 offered, the trader said.

On the corporate debt side, a trader said there was "not much going on" in the 11% notes due 2012. He quoted the bonds at 25.5 bid, 27.5 offered, adding, "most of the bonds are held by a handful of people."

Sara Rosenberg contributed to this article.

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