Homebuilders dip; Buffets unscathed by downgrade; Calpine bonds better; Salton quiet

By Stephanie N. Rotondo

Portland, Ore., Oct. 2 - It was yet another quiet day in Tuesday's distressed debt marketplace, attributed to many players being in Arizona for a Deutsche Bank high-yield conference.

One sector that was seen moving was the homebuilders. Traders said names such as Technical Olympic USA Inc. and Standard Pacific Corp. were weaker on new housing data that showed a decrease in pending home sales.

A rating downgrade did little to deter investors from Buffets Inc., the restaurant operator whose eateries include HomeTown Buffet and Old Country Buffet. The bonds have been edging higher ever since posting its quarterly numbers, which were not very good.

Calpine Corp.'s bonds experienced a rally, though traders were not sure why. One trader speculated that something was going on with the company's bankruptcy court case but said the equity committee's current motion was not it.

Traders seemed surprised that Salton Inc.'s bonds lacked activity after the company announced it had signed a definitive merger agreement with APN Holdings Inc. The merger will make Harbinger Capital Partners a majority shareholder in the new company.

Homebuilders lower on housing data

Homebuilders were called mostly lower as pending home sales hit a record low.

A trader said Technical Olympic's bonds were "quoted quite a bit." He said the 9% notes due 2010 were "virtually unchanged" at 63 bid, 64 offered, while the 10 3/8% subordinated notes due 2012 were "a little bit lower" at 29 bid, 31 offered.

Another trader called the 9% notes lower at 63.5 bid, 64 offered, however. He also said the 10 3/8% notes were higher, offered at 31.

The trader also saw the 8¼% notes due 2011 at 60 bid, 62 offered.

At another desk, a trader said Standard Pacific's debt was "kind of getting beat up." He quoted the 9¼% notes due 2012 at 62 bid, 64 offered, noting that the bonds were closer to 70 last week. He also saw the 6½% notes due 2008 down 7 points over the week at 85 bid, 87.5 offered.

The trader noted that WCI Communities Inc.'s bonds were "hanging in there."

Another trader saw Technical Olympic's bonds - which had risen solidly on Monday - as having fallen, its 8¼% notes and 9% notes each down 2 points on the say, to 59 bid, 61 offered and 61 bid, 63 offered, respectively. He called the 10 3/8% notes unchanged at 28 bid, 30 offered.

The trader also saw Standard Pacific's 9¼% notes at 67 bid, down 1 point, while its other bonds were "not much changed."

One trader did see action in WCI Communities' 9 1/8% notes due 2012, which were unchanged at 82 bid, 84 offered.

Elsewhere, a trader said Technical Olympic's 9% bonds opened at 61 bid, 62 offered, down from 64 bid, 65 offered on Monday but bouncing back from its lows to end at 63.5 bid, 64 offered. The 8¼% notes dropped to 60 bid, 61 offered, down 2 points on the day, while the 7½% subordinated notes due 2011 were unchanged at 27.5 bid, 29 offered.

However, Beazer Homes USA Inc.'s bonds seemed to buck the lower trend.

A trader saw Beazer Homes' bonds higher, in line with a more than 12% gain in the company's shares, as homebuilder stocks gained for a second straight day. Beazer's 8 5/8% notes due 2011 rose to 80 bid, 82 offered from prior levels around 76.5 bid, 78.5 offered.

Among its other issues, the trader saw Beazer's 8 3/8% notes due 2012 at 78 bid, 80 offered, its 6½% notes due 2013 and 6 7/8% notes due 2015 both at 74 bid, 76 offered and its 8 1/8% notes due 2016 at 80 bid, 82 offered.

"The shorter and the longer bonds were up 3 to 4 points," he said, "while the rest were up 1 to 1.5 [points]."

In its seasonally adjusted index released Tuesday, the National Association of Realtors reported that pending sales for existing homes fell 6.5% from July to 85.5 in August. The reading was the lowest it has been since the inception of the index in 2001.

Despite the losses incurred in the corporate debt, homebuilders' equities seemed to rally, attributed to an analyst's report that stated the sector had reached its lows.

Yet another trader saw homebuilder names up a little "because the equity gained, because we saw the lower pending sale numbers for existing, and it was not as bad as everyone was expecting."

Buffets unscathed by downgrade

Buffets Restaurants' bonds have been edging higher despite its recent poor quarterly performance and, more recently, a downgrade by Moody's Investors Service.

A trader pegged the 12½% notes due 2014 at 70 bid, 72 offered, while another said he saw the notes also offered at 72.

"They have been quoted a fair amount recently," the trader said.

Another trader saw no movement in Buffets debt, pegging the 12½% notes at 70.5 bid, 71.5 offered.

The downgrade from Moody's was attributed to the company's weak performance. The ratings agency lowered the senior unsecured notes to Caa2 from Caa1, with a negative outlook.

Calpine bonds move up

Calpine bonds were seen rallying as the company's equity committee asked the bankruptcy court to halt a vote on its approved reorganization plan until appellate proceedings were over.

One trader, however, said that news likely had little to do with the gains.

"If you are a bondholder, you don't want the equity committee to get anything," he said. He added that the gains could, however, have something to do with what is going on in the court case, though he had no idea what.

The trader said Calpine's 8½% notes due 2011 hit a high of 118 on the session, before settling back in to 116 bid, 117.5 offered, still higher on the day.

Another trader said Calpine's debt "seemed to be crankin'." He quoted the 8½% paper at 116.5 bid, 117.5 offered, adding that the issue was trading at 108 bid, 109 offered.

Another trader saw nothing going on in Calpine debt, but elsewhere a trader saw its 8½% notes up 1 point at 117 bid, 118 offered.

Under the San Jose, Calif.-based company's approved plan, creditors will be paid in full, while shareholders will receive about $1.94 per share.

Salton notes quiet on merger

Salton's bonds were relatively quiet as news came out that it had inked a definitive merger agreement with APN Holding, better known as Applica.

One trader said he saw no activity in the name, while another said he was trying to sell the 12¼% notes due 2008 at 99.

"But no one was willing to go that high," he said. He added there was "not much trading in the bonds."

As a result of the merger, Applica will become a wholly owned subsidiary of Salton, best known for its George Foreman grills. Subsequently, Harbinger Capital Partners, owner of APN Holdings, will become a majority shareholder in Salton.

Broad market mixed

Tembec Inc.'s debt was deemed "about the same" by one trader. He pegged the 8 5/8% notes due 2009 at 45 bid, 45.5 offered and the 7¾% notes due 2012 at 39.5 bid, 40.5 offered.

Another trader saw the 8½% notes due 2011 trade at 41.5.

That trader also said that he saw Iridium LLC's bonds quoted a fair bit and said they have fallen to around 3.

"It's ridiculous," he said. "I guess things didn't work out as well as everybody thought," citing the satellite provider's lawsuit with former parent Motorola Inc.

The trader said Blockbuster Inc.'s 9% notes due 2011 were "slightly higher" at 91 bid, 92 offered.

James River Coal Co.'s 9 3/8% notes due 2012 were placed at 80.75 bid, 81 offered.

A trader said Trump Entertainment Resorts Inc.'s 8½% notes due 2015 have been "quoted a lot lately," pegging the bonds at 84 bid, 84.5 offered.

MagnaChip Semiconductors' 8% notes due 2014 were quoted at 69 bid, 71 offered.

Paul Deckelman contributed to this article.

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