Tembec gains; Delta stubs dip; Primus better; Bally quiet on news; Iridium steady

By Stephanie N. Rotondo

Portland, Ore., June 8 - As the fairly quiet week came to a close, traders were calling the day everything from "painful" to "better, but spotty."

"It felt like some of the bids filled back in today," trader said. The distressed bond market had hit a lull as Treasuries took a hit, bringing down the equity market with them.

"[The bond market] rallied back with the equity rally," he said. "Guys were trying to find some beaten-down names to get into."

Still, it was a "typical Friday," another trader noted, and many names that were active earlier in the week saw lighter volume at the end of the week.

However, Tembec Inc. managed to not only stay active over the week, but also to see gains throughout.

But market players are confused as to why the Canadian forest products company's debt is gaining while the Canadian currency is strengthening.

"It doesn't make sense," one trader said.

Meanwhile, Delta Air Lines Inc.'s stubs fell off a bit despite a report earlier in the week that May traffic was up almost 6%.

Primus Telecommunications Group Inc. was another name that maintained its gains despite an overall heavier market. Traders have not been able to identify what is causing the increases, but there is some speculation that a stock run up could be the catalyst.

When Bally Total Fitness Holding Co. announced last week that it had developed a prepackaged bankruptcy plan, the company's bonds got active, pushing up the debt's value significantly.

But interest in the notes seems to be waning, as fresh news came out and the bonds barely moved.

As it waits for a decision in its case against its former parent Motorola Inc., Iridium LLC's notes are holding steady, though they traded only in odd lots Friday.

Tembec gains

While many names remained fairly quiet over the week, Tembec's bonds stayed active.

A trader said the 8½% notes due 2011 were "well traded," pegging the bonds at 57.5 offered, 58 bid. He also saw the 7¾% notes due 2012 around 76.

At another desk, a trader quoted the 8 5/8% notes due 2009 as "up a bunch" around 64.

But traders across the board have been at a loss to explain why the debt is firming.

Typically, the bonds tend to react to the strength, or weakness, of the Canadian dollar. As one trader explained it, as the currency goes up, the bonds should go down.

However, that has not been the case.

The currency has been gaining momentum over the week, with one trader noting that $1 is equivalent to C$1.06.

"[The bonds] are going the wrong way," he said. "If the Canadian dollar is strong, then Tembec should go down.

"It doesn't make sense," he said.

Another trader mentioned that some bondholders are starting to show concern, as they feel the company has not said or done anything that would warrant a run up in the debt.

Delta dips

Delta's stubs have been losing altitude over the last few days and the closing session of the week was no different.

A trader pegged the paper at 6.5 bid, 6.625 offered, down about a point.

The most recent losses come despite the Atlanta, Ga.-based company's announcement earlier tin the week that May traffic was up.

The airline posted a 5.9% increase in system traffic with a capacity increase of 0.6%. Load factor for the month was 80.8%, an increase of 4.1 points from 76.7% in February 2006.

Primus better

Satellite communications provider Primus Telecommunications held on to its weekly gains, despite traders feeling that the overall market was heavy.

A trader quoted the 14¾% second-lien notes due 2011 up a couple points to 104.75, though he said the issue "doesn't trade much." The 3¾% notes due 2012, which trade more frequently, were also seen firming a couple points to 67.75.

Earlier in the week, a market participant said there was buzz of an asset sale that could be causing the gains. Another trader, however, said that the rumor had been out for some time.

The trader did mention that the stock has "had a good run, so I don't know if people are speculating that something is going on."

Shares of the common stock closed up 8 cents, or 8.79%, to 99 cents - a 20 cent increase since May 30.

Bally's quiet on news

Fitness operator Bally's has seen its bonds quiet down after the initial excitement in the name caused by the announcement that the company had formulated a pre-packaged bankruptcy plan.

Fresh news that a company shareholder was objecting to the plan did little to spur more activity in the company's debt.

A trader quoted the 9 7/8% notes due 2007 at 95.25 and the 10½% notes due 2011 at 93.375. Another trader, however, said he has "not seen a thing in Bally in several days."

The company's second-largest shareholder, Liberation Investment Group, wrote a letter to the Chicago-based company's board that said the plan was unfair to shareholders, as it cancelled all existing stock and only gave current debt holders rights to future reorganized shares.

"By approving this restructuring, the board, management and those interests who now clearly control the company have abandoned their fiduciary duties to shareholders. The board's flawed process led to this regrettable result," according to the letter written by Liberation Investment Group's attorney.

"My clients believe that there is significant value for shareholders that the board has decided to (give) to creditors in the pre-packaged plan," the letter said, arguing that the company did not search for viable alternatives, such as asset sales.

Under the restructuring agreement announced last week, existing senior subordinated notes would be reduced by $150 million by swapping the debt for a new class of notes, common equity and the right to participate in a $77.5 million rights offering.

Iridium steady

A pending ruling in its case against Motorola has prompted Iridium's name to pop up more often among traders.

A trader said the defunct company's debt is staying around the 20 mark. The four issues are currently trading within a few points of each other.

The bonds were seen getting better earlier in the week as lawyers from each side gave closing arguments in the case against the company's former parent.

The case - sent back down to the bankruptcy court by the appeals court - centers around the creditors' contention that Motorola maintained control of Iridium, even after the company split off and went public. It was Motorola's continued involvement, they allege, that led to the downfall of the Iridium.

Auto sector mixed

Dura Automotive Systems Inc. gave up some of its recent gains in its bonds to close a few points lower, a trader said. He slated the 8 5/8% notes due 2012 at 64 bid, 65 offered.

Another trader saw the 8 5/8% notes "actually down a little bit" after having risen each session earlier in the week, with the bonds down 2 points to 64 bid, 66 offered. He saw the 9% notes due 2009 a point lower at 15 bid, 16 offered.

Another trader also saw the bonds lower, with the 8 5/8% bonds at 64 bid, 65 offered.

The first trader meantime saw Dana Corp.'s bonds about 2 points better across the board, with its 6½% notes due 2008 at 101.5 bid, 102.5 offered.

Meanwhile, Remy International Inc.'s 8 5/8% notes due 2007 were seen trading around 97 bid, 97.25 offered in mid-afternoon trading.

Broad market mixed

Outside of the automotive sector, Doral Financial Corp.'s floating-rate notes due 2007 came off a little to close at 99, a trader said.

The trader also said that Fedders Corp.'s 9 7/8% notes due 2014 were "up a little" at 38.

Another trader also saw Fedders' notes 2 points better at 35 bid, 37 offered.

He also said saw Insight Health Services Corp.'s 9 7/8% notes due 2011 down a point at 32 bid, 34 offered.

Aveta loan down

Aveta Inc.'s term loan "was all over the place" and ended up trading lower by a couple of a points on the day as the company held a private lender call at 3 p.m. ET on Friday, according to a trader.

The term loan ended the session at 77 bid, 78 offered, down about 4 points from previous levels, the trader said.

Although details about the call were unavailable, it was said that the company's struggling Puerto Rico business was the focus.

Aveta is a Fort Lee, N.J., for-profit company focused on Medicare Advantage and the health care needs of the chronically ill.

Sara Rosenberg and Paul Deckelman contributed to this article.

© 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.