Dura's subordinated notes slip; Spectrum Brands' bonds dip; Movie Gallery firms

By Stephanie N. Rotondo

Portland, Ore., July 13 - Dura Automotive Systems Inc.'s subordinated notes took a hit Friday as the company filed its reorganization plan term sheet along with a rights offering agreement.

Under the agreement, certain holders of the senior debt will backstop a rights offering. All senior notes also will be converted into new common stock in the reorganized company. The subordinated notes, however, are not mentioned in the plan, giving many market players the impression that holders of that issue will receive nothing post-bankruptcy.

Meanwhile, Spectrum Brands Inc., the maker of Rayovac batteries and other consumer products, lowered expectations for its fiscal 2007 results, which prompted the bonds to slide Thursday. The fall continued into Friday trading.

Movie Gallery Inc.'s bonds recently experienced a fall of their own - the term "freefall' comes to mind - but Friday saw the bonds getting better. Traders reported that the notes moved as much as 4.5 points higher, though the reason for the gains was unclear.

Dura subs dip

Dura's subordinated notes took a hit as the company filed its reorganization plan, which is being backed by three of its senior noteholders.

A trader quoted the 9% notes due 2009 as "offered freely at 8," down from the day's starting levels around 13.5. At another desk, a trader saw the bonds start the session at 11 bid, 12 offered and then fall to 3.5 bid, 7.5 offered.

Another trader saw Dura's 8 5/8% senior notes due 2012 closing at 73 bid, 74 offered, up 3 points on the session, but saw the subordinated 9% notes due 2009 at a wide 5 bid, 9 offered, which he called a 7-point loss.

Another trader saw "decent-sized" trading in the Dura seniors, up 1.5 to 2 points from Thursday, at 73.5 bid, 74.5 offered.

According to the second trader, the automotive parts manufacturer's plan to exit bankruptcy does not address the subordinated notes.

"As it stands, most people believe the subordinated noteholders are not getting anything," he said, adding that the senior notes will receive some recovery but will not be made whole.

"The subordinated noteholders are going to have to get pretty organized and see who should drive the train," he said. "They need to create a serious nuisance."

Under the plan, Pacificor, LLC, Bennett Management Corp. and Wilfrid Aubrey LLC - holders of Dura's senior debt - will backstop a rights offering, valued at somewhere between $140 million to $160 million. The plan will pay second-lien claims in full as well as convert all senior notes and general unsecured claims into new common stock in the reorganized company.

Spectrum Brands falls

As it lowered its financial expectations for fiscal 2007, Spectrum Brands saw its bonds continue to slide.

A trader pegged the 11¼% notes due 2013 around 85, adding that the debt traded as low as 82 on the session.

Another trader saw bonds "quoted a lot Friday," with the Atlanta-based consumer products company's 7 3/8% notes due 2015 at 75.5 bid, 76.5 offered, up a point on the day with "a huge amount" of the bonds traded - this despite the company's warning Thursday that it expects lower 2007 sales and EBITDA.

He also saw "a huge amount" of Spectrum's 11¼% notes, which he said closed at 86 bid.

A trader who had seen the 111/4s fall as much as 5 points in the last hour of trading Thursday into the mid-80s from the day's prior peak levels on its reduced guidance, which was announced late Thursday afternoon, saw the bonds closing Friday at 85 bid, 86 offered, which he called down a point.

On Thursday, Spectrum Brands said it expected to see full fiscal-year sales of $2.63 billion, down from the previous forecast of $2.65 billion. The company also lowered its EBITDA forecast to $260 million to $264 million, down from the previous expectations of $282 million.

Movie Gallery notes better

Movie Gallery bonds gained as much as 4.5 points on the session, but traders had varying explanations for the surge.

A trader saw the 11% notes due 2012 "up a lot" at 28.25 bid, 29.25 offered, which he called 4.5 points better. Another trader pegged the bonds up 3 to 4 points at 27.5 bid, 28.5 offered. At yet another desk, a trader said he saw the debt last trade around 29.

Elsewhere, a trader saw Movie Gallery's notes due 2013 jump to 28 bid, 29 offered, up from prior levels around 24.5 bid. He said there was substantial activity in the credit, with "a good amount traded."

Another trader also pegged the bonds at 28 bid, 29 offered. He said that the gain was not due to any specific favorable news out about the troubled Dothan, Ala.-based video rental store chain but was rather just due to "people buying up distressed paper."

Besides the bond rise, he also saw the company's bank debt firmer, with its first-lien debt at 93 bid, 95 offered and its second-lien debt at 74.5 bid, 77.5 offered

A trader saw the Movie Gallery bonds start the day's trading at 25 bid, 26 offered, which he called up 3 points from prior levels, and end the session at 28 bid, 30 offered.

As for the reason for the gain, the first trader speculated that perhaps investors realized that the bonds should not being trading flat - though they have since last week's beat down that saw the notes go from around 80 to the low-20s.

"I think people are probably thinking they are maybe going to be paying the coupon," he said, which has an annual May 1 payment date.

But the second trader said that, while possible, if the bonds had begun trading with accrued interest, then the notes should fall.

"Maybe it is because they fell so far so fast," he said, adding that a stronger equity market could also be helping.

The third trader gave yet another possible cause, stating that it was likelier that the second-lien bank debt was trading higher, thus boosting the bonds.

"If that is made whole, then [the bonds] would be the fulcrum security," he said.

However, the second trader wondered how the struggling company could take out its entire debt structure.

"I don't know what would be left over for the bonds," he said.

Broad market mixed

Primus Telecommunications Group Inc.'s 12¾% notes due 2009 were deemed 1.5 points better at 98 bid, par offered, while the 3¾% notes due 2010 were called unchanged at 72 bid, 74 offered.

A trader saw InSight Health Services Corp.'s 9 7/8% notes due 2011 at 35 bid, 38 offered, adding there was not a lot of volume. He speculated that market players might be putting the finishing touches on their positions in the name and guessed that the company's when-issued stock should be hitting the market soon.

A trader said "there really was no activity" in Sea Containers Ltd.'s bonds, which had fallen about 1 point across the board, although there was a lack of fresh news out on the bankrupt Bermuda-based maritime and railroad transportation company.

Thursday's dealings left the company's 10¾% bonds that were to have come due last year at 91 bid, 93 offered, its 7 7/8% notes due 2008 at 87 bid, 89 offered, while its 10½% notes due 2012 ended at 90 bid, 92 offered.

A trader saw Technical Olympic USA's bonds "rallying back - they got beat up" earlier in the week on the problems of the housing industry, but "they're slowly coming back, and have stabilized," with its 10 3/8% notes due 2012 at 72.5 bid, 73.5 offered - "not a lot of change from [Thursday]," but he noted that in that prior session, the bonds had rebounded about 3 points on the day from recent lows.

Tembec firms

A trader called Tembec Inc.'s bonds up about a point, continuing the firmer trend seen Thursday in the Montreal-based forest products company's bonds, which is perhaps connected with the Canadian dollar backing away over the course of this week from the 30-year highs against the U.S. greenback, which it had hit at the start of the week.

He called Tembec's 8 5/8% notes due 2009 at 57 bid, 58 offered, which he called up a point on the day, while its 7¾% notes due 2012 were also seen a point better at 50.5 bid, 51.5 offered.

Canada's dollar has been trading at about US$0.95, its highest level in 30 years, this past week, although Friday's levels were notably below the levels seen the prior Monday. The strong loonie increases the costs of products such as lumber and paper sold by Tembec and other Canadian forest product companies in the United States and other foreign markets.

Aveta loan higher

Aveta Inc.'s loan continued to head higher during Friday's market hours still in reaction to the private side positive news that came out on Thursday regarding its Puerto Rico business, according to a trader.

The term loan ended the session at 86 bid, 88 offered, up on the offer side from 86 bid, 87 offered, the trader said.

However, the loan traded as high as 88 on Friday compared to a high of around 86½ on Thursday, the trader added.

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.

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