Tembec edges higher; Charter Communications firms; Spectrum Brands' bonds active

By Stephanie N. Rotondo

Portland, Ore., Aug. 2 - A wider loss reported Thursday did not deter Tembec Inc.'s bonds from gaining slightly, traders reported.

The Montreal-based company's bonds were strong before the third-quarter conference call but came back a bit during and post-call. Still, the bonds were deemed better by at least a half point on the day.

Earnings were again pointed to as the catalyst for the gain in Charter Communications' bonds. The company reported a narrower loss for its second quarter of the year, attributed to a gain in subscribers. The bonds moved up as much as 2 points during the session.

Meanwhile, Spectrum Brands Inc.'s debt was seen "really active" by one trader. Another trader also saw the bonds firm, but did not think there was any specific reason for the increase. Instead, he pointed to volatility in the markets as the culprit.

Distressed homebuilder Technical Olympic USA Inc. saw its bonds rally back after sector pressure had pushed the bonds down in the previous session. One trader speculated that the gain was due to the settling of the company's debts related to its Transeastern joint venture. But another trader said that was unlikely, as the news was reported the previous day.

"It was not a really busy day," a trader said.

Another trader echoed that, quipping, "There is a Yankee game going on. We can talk about that."

Still, the trader said that morning trading saw an attempted rally, though it had "sputtered out," leading to a quiet afternoon.

At another desk, a trader said he saw "bids filling in late in the afternoon. The market seemed to rally."

Tembec edges higher

Forest products company Tembec saw its bonds edge higher leading into a conference call to discuss its third-quarter results.

A trader quoted the benchmark 8 5/8% notes due 2009 moving as high as 49.75 before the call began, then coming off a bit to close around 47, which he said was still "up a half point form the close."

"There have been wide markets [in these bonds] recently," he said, adding that it had not actively traded for a while.

Another trader pegged the bonds "up a couple points" at around 48.

The Canadian-based company posted a wider quarterly loss for the 2007 third quarter, which was attributed to a strong loonie - currently equal to C$1.06 per US$1 - and weak lumber prices, as well as an asset impairment charge for one of its paper mills.

The company showed a C$164 million loss for the quarter ended June 30, compared with a loss of C$6 million the previous year.

Tembec said liquidity was C$218 million, adding that it hopes to add another C$100 million in fiscal 2007 by way of asset sales and increased working capital facilities. The refinancing or repayment of debt is yet another strategic alternative the company is looking at.

Charter firms

St. Louis-based Charter Communications reported a narrowed second-quarter loss on Thursday, boosting its bonds 1 to 2 points, a trader said.

The trader quoted the 11% notes due 2015 around 101, while "more senior paper," like the 10¼% notes due 2010, was seen around par.

The cable operator attributed its better numbers to an increase in subscribers. The company posted a loss of $360 million, compared to a loss of $382 million in the same quarter the previous year.

Spectrum bonds active

Spectrum Brands' bonds were called active by a trader, while another trader called the bonds up about 3 points.

The first trader saw the 11¼% notes due 2013 at 77.75 bid, 78.5 offered and the 7 3/8% notes due 2015 - linked to the Rayovac Corp. moniker - at 67.75 bid, 68.5 offered.

The second trader placed the 11¼% notes at around 78. When asked what prompted the move, the trader said that is was likely due to the "momentum shifts" that have been occurring in the market of late, driving price volatility.

"It is not necessarily anything to do with the specific credit," he said.

Early last week, Spectrum said it expects to see cash flows in the neighborhood of $120 million to $140 million for the six-month period ending Sept. 30. Net debt was forecasted at around $2.4 billion.

The maker of Rayovac batteries and other consumer products scheduled a conference call for 8:30 a.m. ET on Tuesday to discuss its third-quarter results, which will be released earlier that day.

Technical Olympic better

After being weighed on by sector troubles in the previous session, Technical Olympic's bonds were "up a bunch," a trader said.

The trader pegged the 10 3/8% subordinated notes due 2012 up 3 points from the previous day's closing levels around 50 bid, 51 offered. He added that the bonds moved as high as 57.75 during the session.

Another trader called the debt "up a good bit," around 54, after opening around 51 and seeing the bonds trade as high as 55.

The first trader said he had heard the bonds moved up because "they accepted a deal they were working on last night."

That deal, actually announced Wednesday morning before a beat-down caused by rumors circulating on Beazer Homes USA Inc., was the settlement between the Hollywood, Fla.-based homebuilder and several of its lenders concerning its Transeastern joint venture.

The second trader, however, doubted that the now-old news could have caused the gains.

"The news came out yesterday morning and then the bonds were down," he said.

Still, he conceded that, while the settlement was good news, the chaos surrounding Beazer was worse.

Elsewhere in distressed homebuilders, a trader saw WCI Communities Inc.'s bonds trading. He quoted the 9 1/8% notes due 2012 at 82 bid, 84 offered and the 7 7/8% notes due 2013 at 76 bid, 78 offered, both of which he called down 20 points in the last couple of weeks.

Calpine up

A trader said it has been the "big buys, the Bank of Americas" and others of that ilk, that have been buying Calpine Corp.'s bonds.

"So they obviously think they know something," he said.

The trader saw the 7¾% notes due 2015 at 125 bid, 126 offered; the 8½% notes due 2008 at 117.25 bid, 117.75 offered; and the 8½% notes due 2011 at 118 bid, 119 offered.

Calpine's reorganization plan is coming under fire as California's attorney general claims the plan is unfair and flawed.

The state attorney general is asking the bankruptcy court overseeing Calpine's case to reject the plan, alleging that it illegally allows the integrated power company to eliminate a power supply contract with California.

Broad market mixed

Movie Gallery Inc.'s bonds were seen firming, with the 11% notes due 2012 catching a 22 bid, which a trader said was more like 19 bid, 20 offered in morning trading.

Another trader called Blockbuster Inc.'s 9% notes due 2012 better, as well, up 3 points at 85 bid, 86 offered. He said the previous day's market was 81 bid, 82 offered.

The first trader also saw Smithfield Foods Inc.'s bonds better, though he could not explain why.

"The market has mellowed," he said, noting that many credits were up. "Stronger credits are up more."

He said the 7¾% notes due 2013 were moving at 97.5 bid, 98.5 offered and the 7% notes due 2011 were at 97.5 bid, 98 offered.

At another desk, a trader said Sea Containers Ltd.'s bonds "actually traded," with the 10¾% notes due 2006 at 81.5 bid, 82 offered. He said that was down 5 points from its previous print round 86 bid, 87 offered, - "Before the market got kicked in the stomach," he noted - which he called "surprisingly low." He said he expected the notes to dip to around 83 bid, 84 offered.

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