Movie Gallery gains despite filing delay; Transeastern term loan up

By Paul Deckelman and Sara Rosenberg

New York, Nov. 14 - Movie Gallery Inc.'s bonds moved up Tuesday, even as the Dothan. Ala.-based Number-Two U.S. video chain operator said it would delay filing its quarterly results due to possible accounting irregularities. However, the company did release some preliminary figures - and these were considered better than expected.

Elsewhere, troubled Florida homebuilding joint venture Transeastern saw its term loan rise, after 50% parent Technical Olympic USA Inc. held its third quarter earnings conference call, according to a trader.

In the automotive arena, bonds of some of the suppliers continued to struggle, notably Dura Automotive Systems Inc. and Remy International Inc.

However, Collins & Aikman Corp.'s badly battered bonds rose after the bankrupt Troy, Mich.-based auto interior components maker said that it would abandon plans to come out of bankruptcy as a standalone company and instead focus its efforts on selling itself, either whole or piecemeal.

Good show by Movie Gallery

A trader saw Movie Gallery's 11% notes due 2012 jump to 66 bid, 68 offered, up 4 points on the session. However, another trader characterized the movement in the company's bonds as "up and down." He saw the notes get as good as 67 bid, 68 offered before dropping back from those highs to end at 65 bid, 66 offered, which he called up a point on the day.

Movie Gallery said it would delay filing its results, citing possible accounting problems.

Normally, that would be a signal for noteholders and shareholders to sell - but the company also did release some favorable preliminary numbers.

For the quarter, revenues rose 2% to hit $583 million, surprising Wall Street, which had been expecting sales to drop to $556 million.

Same-store sales, a key retailing industry metric, fell just 0.4% - a better showing than the 1.4% drop recently turned in by Movie Gallery arch-rival Blockbuster Inc. While the company's Hollywood Video chain suffered a 1.9% decline in same-store sales, its eponymous corporate cousin Movie Gallery' s comps actually went up 3%.

Transeastern bank debt better

Transeastern, a Technical Olympic joint venture, saw its term loan rise during trading on Tuesday after Technical Olympic held its third -quarter earnings conference call, according to a trader.

The term loan closed out the day at 82 bid, 84 offered, up about a point when compared to previous levels, the trader said.

"I think they made some comments on the call that made people feel a little better," the trader added.

As previously reported, in September management of Transeastern distributed financial projections that indicated that it would not be able to support its current debt structure, and therefore began discussions with lenders to try to remedy the situation.

These discussions are still ongoing and the outcome is currently unknown and is expected to remain unknown for some period of time.

In early November, Technical Olympic received letters from Deutsche Bank, the administrative agent on the Transeastern loans, demanding payment under guaranties in connection with Transeastern debt.

However, Technical Olympic has asserted that it is not required to undertake funding initiatives to stabilize the joint venture under the loan guaranties. The dispute is still ongoing.

Technical Olympic is a Hollywood, Fla.-based designer, builder and marketer of single-family residences, town homes and condominiums.

Dura in retreat

Dura Automotive's bonds were driving on the downside, with a trader seeing the bankrupt Rochester Hills, Mich.-based automotive systems maker's 8 5/8% notes due 2012 falling as low as 22 bid before coming slightly off that low to end at 24 bid, 25 offered, down 2 points on the session. He saw Dura's 9% notes due 2009, which had already been trading at only 5½ cents on the dollar, dip further to 3 bid, 4 offered.

Another trader said the bonds "got hit a little" on the way to their 2 point loss at 24-25.

Dura's planned financing of its bankruptcy meanwhile came under fire as hedge funds that claim to own most of Dura's $225 million of second-lien debt filed objections to its financing arrangements on Monday with the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing its restructuring.

They claimed that Dura's plan to borrow $300 million in debtor-in-possession financing and use $125 million of that to pay off the first-lien holders would jeopardize their rights.

The court is scheduled to hear arguments on the objections next Monday.

Remy is routed

Also driving hard to the downside was Remy International, whose bonds have already been getting drubbed over the past several sessions, following the Anderson, Ind., automotive electronics and electrical parts maker's disappointing earnings reports last week.

A trader saw Remy's 8 5/8% notes drop back to 77.5 bid, 79.5 offered, down from 81 bid, 83 offered on Monday.

He also saw Remy's subordinated 11% notes down a full 6 points to 30 bid, 32 offered, while its 9 3/8% notes were off 5 points at 27 bid, 29 offered.

Another trader saw the 9 3/8s down 3 points to 29 bid, 31 offered, down from 32 bid, 34 offered previously.

Standard & Poor's meantime said it lowered its corporate credit rating for Remy to CCC from CCC+.

The agency said that the downgrade stems from Remy's inability to improve "very weak" earnings and cash flow, leaving the company with shrinking prospects for meeting its December 2007 maturity of its $145 million senior notes.

S&P noted that Remy recently lowered its earnings guidance for 2006 to a range that is not sufficient to cover the company's cash interest expense. It further said that ratings reflect Remy's "very aggressive leverage," weak EBITDA, near-term debt maturities and limited liquidity.

Collins & Aikman climbs

But not all of the auto parts and systems makers were on the slide Tuesday. Collins & Aikman's 10¾% notes were seen up about a point to 5 bid, 6 offered.

That followed the company's announcement that it has now shifted its focus to selling itself, either whole or in parts, rather than emerging from court protection as a stand-alone company. The company had earlier said in its reorganization plan filed with the Detroit bankruptcy court, that it envisioned emerging from Chapter 11 as a standalone company. But it said that recent production cuts by major customers and expected deterioration in the U.S. auto sector prompted the decision to change its focus.

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