Cooper-Standard active, stronger; Realogy debt better on numbers; YRC bonds dip as swap starts

By Stephanie N. Rotondo

Portland, Ore., Nov. 10 - Cooper-Standard Automotive Inc.'s bonds were the most active during the pre-holiday session, traders reported Tuesday.

Still, there was little in the way of an explanation for the heavy volume in the name, especially as the broad market was characterized as "subdued."

Meanwhile, Realogy Corp. bonds and bank debt were seen moving higher. The gains came as the company reported improved third-quarter results.

YRC Worldwide Inc. began a debt-for-equity exchange on Monday and, come Tuesday, traders saw the trucking company's bonds falling a few points on the day. One market player speculated that the deal might not be well received and that some bondholders might be holding out.

Overall, the market had a rather lackluster day, just barely reaching $1.3 billion in total high-yield volume. One trader said it was "definitely slowing down" just before the market closed.

But while the day's activity - or lack thereof - could be explained by the mid-week holiday, one source forecast the same kind of action through the remainder of the year.

"People are sitting on profits," he said. Some hedge funds have managed to do well thus far this year, he said, with 50% to 60% profit. "Why risk losing 10%?"

The bond market will be closed Wednesday in observance of Veteran's Day.

Cooper-Standard active, stronger

Cooper-Standard Automotive's 8 3/8% notes due 2014 were called the day's most active issue, though traders were at a loss to explain why.

One trader said about $50 million of the debt traded around 26, which he called "up a bit."

"Finally, something with a high-yield dollar price," he said.

Another trader quoted the issue at 26 bid, 27 offered.

There was no news out on the Novi, Mich.-based company to explain the sudden surge in activity - or the gains in value - though the first trader mentioned the company was seeking an exclusivity extension. However, that was reported in Prospect News last week.

Elsewhere in the automotive parts supplier arena, Lear Corp.'s bond came back in after running up on Monday, as the company exited bankruptcy.

A trader said Lear's issues were trading "down a little" at 75 bid, 76 offered.

"I think they peaked on too much euphoria and now they are settling back in," he said.

Realogy better with numbers

Realogy's debt structure got a boost as the company released its third-quarter results.

In the bonds, a trader said the 10½% notes due 2014 closed at 71 bid, 72 offered, while the 12 3/8% notes due 2015 ended at 53 bid, 54 offered. He called both issues up about 2 points.

Another trader pegged the 10½% notes at 71.75 bid, 72.25 offered, up from opening levels around 70.5.

"So that's up I guess," he said.

The 12 3/8% notes were meanwhile also seen better at 52.5 bid, 53.5 offered, compared with 52 bid, 52.5 offered.

But the 11% notes due 2014 were "not changed" at 66 bid, 66.25 offered, he said.

Realogy's strip of institutional bank debt was also higher, according to a trader.

The strip was quoted at 83 bid, 85 offered, up from 82.5 bid, 84.5 offered, the trader said.

For the third quarter, the company reported net income of $58 million, compared with a net loss of $50 million last year.

Net revenues for the quarter were $1.169 billion, compared with $1.341 billion in the third quarter of 2008.

EBITDA for the quarter was $253 million, compared with $129 million in the previous year.

As of Sept. 30, Realogy had $161 million of readily available cash and no outstanding balance on its $750 million revolving credit facility.

The company's senior secured leverage ratio was 4.94 to 1 at Sept. 30, which was in compliance with its credit agreement.

"The momentum that both Realogy and the real estate industry experienced during the third quarter was favorably impacted by the first-time homebuyer tax credit along with the seasonal strength of the third quarter," said Richard A. Smith, president and chief executive officer, in the earnings release.

"The tax credit has made a demonstrable impact on the housing market and the overall economy, which is why we commend Congress and the Administration for acting swiftly to extend and expand the tax credit through the first half of 2010. Stimulating the move-up or repeat-buyer market should maintain momentum in the fragile housing market and accelerate a broader economic recovery."

Realogy is a Parsippany, N.J.-based provider of real estate and relocation services.

YRC falls as swap starts

Overland Park, Kan.-based YRC Worldwide saw its bonds falling during the pre-holiday session, presumably on the back of the company's debt-for-equity swap, which launched Monday.

A trader said the 8½% notes due 2010 were "down a couple" around 69, versus 71 bid, 72 offered previously. Another trader also placed the issue around the 69 mark, though he called that down from 71.25 bid, 72 offered.

"The converts are down even more, I think," the second trader said. He placed the 5% convertible notes due 2023 around 63, down from the high-60s.

On Monday, the trucking company launched an exchange offer for the 8½% notes and its convertible notes. In return for their tendered debt, holders will receive a total of 42 million shares of common stock and $250 million of class A convertible preferred stock.

But one trader speculated that the losses in the bonds were tied to swap - that is, that investors were not too pleased with the deal.

"You have got a tough company," he said, explaining that YRC was not only "debt laden," but also a "fraction trucker." That means that the company carries less than full loads between destinations. For example, a load from Mississippi would be combined with a load from Texas, and so forth, on its way to its destination and could be taken on and reloaded at another point.

"Usually companies like that don't have a lot of debt," he said.

Indeed, the company said when it launched the exchange offer that if it was not successful, a bankruptcy filing would likely occur.

"Their notes mature next year and that's going to be a problem," the trader added. "I think this exchange, it only buys them some time."

The trader also noted that he heard some bondholder groups were electing not to participate in the swap.

The tender offer expires at 11:59 p.m. ET on Dec. 7.

Broad market mixed

In the rest of distressed territory, Clear Channel Communications Inc.'s 5½% notes due 2014 continued to gain ground, according to a trader.

The trader quoted the issue at 43 bid, 44 offered, up from 41.5 bid, 42.5 offered.

"That's up like 5 points in the last few days," he said.

Meanwhile, United Rentals Inc.'s 7% notes due 2014 were "kind of right where they have been" at 87.5. Though only $5 million traded, the trader opined that someone was "making room" for the company's new issue.

Another trader also deemed the debt unchanged at 87 bid, 88 offered.

Sara Rosenberg contributed to this article.

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