Bally bonds boosted; Doral debt firmer; Movie Gallery bonds gain, bank debt softens

By Stephanie N. Rotondo

Portland, Ore., July 17 - Fitness club operator Bally Total Fitness Holding Co. saw its bonds firming Tuesday after the company announced it had received an extension on its forbearance agreements.

The company has plans to file a pre-packaged bankruptcy plan. So far, 63% of its senior debtholders and 80% of its subordinated debtholders have agreed to support the plan. The voting deadline is July 27.

Meanwhile, Doral Financial Corp. is making its way toward a buyout deal, as it met one more condition of a Bear Stearns-led buyout bid.

A judge approved a settlement agreement between the struggling financial institution and those who brought securities lawsuits against the company. The lawsuits were filed in 2005 after the company announced that it would need to restate financial statements from 2000 to 2004.

As the company's bonds gained for the second straight session, the market was at a loss to report what occurred at a shareholders meeting held Tuesday.

With no fresh news out on the movie rental chain, Movie Gallery Inc.'s bonds continued to improve, apparently spurred by rumors circulating in the marketplace.

Overall, traders said the day opened generally weaker, with most names in distressed closing lower to unchanged.

Bally bonds boosted

Chicago-based Bally Total Fitness saw its bonds improve during the session as the company announced it had secured extensions on its forbearance agreements.

A trader quoted the 10½% notes due 2011 up 2 points at 108. He also saw the 9 7/8% notes due 2007 offered at 95. Another trader pegged the senior notes at 107.5 bid, 109 offered.

At another desk, a trader saw Bally's senior notes half a point better at 107.5 bid, 109.5 offered and likewise saw the 9 7/8s at 95 bid, 97 offered and declared that "there was no real change there."

Elsewhere, a trader saw the subordinated bonds lose a point, closing at 94 bid, 96 offered.

Another market source saw the Bally bonds gyrating around before ending lower, although trading was not very busy.

While the 101/2s got as good as around the 108 area intraday, up about 2 points from Monday's finish, by the day's end, the bonds were being quoted at 105, actually down a point.

The 9 7/8s likewise were seen having firmed perhaps half a point, to around 93.5, before coming off that peak to finish actually down about 1 point or 1.125 point, around the 92 level.

The fitness center operator received approvals from a majority of its debtholders to extend the previously obtained forbearance agreement to July 31. The company also said that it was continuing to solicit votes for its proposed pre-packaged bankruptcy plan. To date, 63% of the senior noteholders and 80% of the subordinated noteholders have agreed to support the plan.

However, Bally has also entered into a confidentiality agreement with Liberation Investments and Harbinger Capital Partners - both of which are shareholders in the company - and due diligence discussions have begun and are expected to be completed by Friday.

Doral firms

Struggling Puerto Rico-based bank Doral saw its bonds firm after a judge approved a settlement in securities lawsuits against the bank.

The settlement satisfied a condition of the Bear Stearns-led buyout - which was scheduled to be voted on at a shareholders meeting Tuesday.

A trader called the floating-rate notes due Friday up another point, on top of the previous day's 1-point gain, to close the day at 98.5 bid, 99 offered.

According to the settlement, Doral and its insurers will pay about $129 million and improve corporate governance.

At press time, there had been no word on whether shareholders had approved the $610 million buyout deal from the Bear Stearns-led equity group.

Movie Gallery better

After two straight sessions of gains that put its bonds at least 10 points up, Movie Gallery's debt continued to firm for the third day in a row.

A trader said he saw the 11% notes due 2012 open weaker around 36.5 but come back to close slightly higher than the previous day at 37.5 bid, 38.5 offered.

At another desk, a trader called the bonds up 1.5 points at 37.5 bid, 39.5 offered.

While other traders reported the bonds firming, another trader said that after two days of strong gains Friday and Monday, the bonds due 2012 "stalled out," seeing the bonds plateau in the 37 bid, 38 offered area around where they had finished on Monday.

But still another trader saw them having risen and tightened up a bit, going to 38 bid, 39 offered from prior levels at a somewhat wider 37 bid, 39 offered.

Another market source meantime saw the bonds gyrating around in pretty active dealings, bouncing around in a 6-point range between 34 on the low end and 40 on the high end, before coming to rest at around the 38 level, about a point above the opening and 1.5 points up from Monday's finish.

Though there has been no fresh news out on the company, it seems that various rumors might be what are sparking the boost.

The second trader said he heard that holders of the Dothan, Ala.-based company's second-lien term loan had signed a forbearance agreement, though he added he was unable to confirm that rumor.

The trader said he had also heard that perhaps it was one big buyer that was pushing up the bonds' value.

"It gives folks a reason to jump in," he said of the market buzz.

There was also brisk debate over whether Movie Gallery might be a buyout candidate - perhaps by larger industry rival Blockbuster or by the up-and-coming new power in the movie rental industry, Netflix Inc.

However, Movie Gallery's first-lien term loan was lower Tuesday, with traders attributing the fall to the overall market weakness rather than to any credit-specific news.

The company's first-lien term loan B ended the day at 95½ bid, 96½ offered, down from 96 bid, 97 offered, the trader said.

The bank debt has been on people's radars ever since the company announced that it is considering a number of strategic alternatives, including asset divestitures, recapitalizations, alliances with strategic partners and a sale to or merger with a third party.

Autos mixed

In the distressed auto realm, a trader saw Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 as having retreated to 70 bid, 72 offered, down 3 points on the day. He saw no fresh news on the credit to explain the dip.

Previously, the 8 5/8% notes had firmed smartly since the July 4 holiday break on the news of the bankrupt Rochester Hills, Mich.-based components maker's plans for a large asset sale and a debtholder-financed equity rights offering.

The trader also saw bankrupt Troy, Mich.-based parts maker Delphi Corp.'s bonds up 1 point "across the board," its 6.55% notes that were to have come due in 2006 firming to 118.75.

Broad market mixed

Technical Olympic USA Inc.'s bonds were edging higher on the session. A trader said the 10 3/8% notes due 2012 opened at 72.5 bid, 73.75 offered, then moved up to 73.5 bid, 74 offered by lunchtime.

Elsewhere, a trader said he saw Sea Containers Ltd. 10¾% notes that were to have come due last year around 91.

Linens n'Things' floating-rate notes attempted to trade higher on the session, trading into a 71 bid earlier in the day, a trader said. But the bonds lost steam toward the end of the trading day, closing lower at 69.5 bid, 70.5 offered.

"Nobody is wanting to play," the trader said.

Meanwhile, a trader saw Hines Nurseries Inc.'s 10¼% notes due 2011 down 3 points at 72.5 bid, 74.5 offered.

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.