Six Flags down on numbers; Calpine up; Tembec edges higher; Swift loans, bonds rally

By Stephanie N. Rotondo

Portland, Ore., July 27 - A day after a major market upheaval, a trader saw "decent two-way flows," though most names were still lower Friday.

Another trader called the general market "pretty much unchanged," adding that morning trading saw the lows of the day and then the bond market rebounded a bit.

"I thought maybe we would have a little more action," said another trader.

Still, activity was pretty heavy in Six Flags Inc.'s bonds, which dropped several points as the company posted a wider second-quarter loss.

Traders, however, were mixed in their reactions to the figures. One indicated that the numbers were as expected, while another called them weaker.

News that it was looking into an alternative reorganization plan may have helped steady Calpine Corp.'s bonds, a trader said. The bonds, which dropped as much as 10 points in the previous session, gained slightly but were still lower than their recent highs.

But one analyst is weary of the plan, speculating that it could create more investor nervousness.

Meanwhile, Tembec Inc.'s bonds, which have been beat down of late as the Canadian dollar strengthened, were seen edging their way upward. A trader said the move was likely due to the loonie losing steam.

Phoenix-based Swift Transportation Co. Inc.'s capital structure has been lower recently, with sector troubles putting pressure on the bank debt and bonds. A trader said rising oil prices, slowing retail demand and increased deadheading - driving without a load - have all contributed to the recent drops.

However, Friday saw the company's term loan and bonds rally, prompted by a better-than-expected financial release.

Six Flags' notes dip

Amusement park operator Six Flags was the name of the day, as traders reported the company's bonds dipped on lower quarterly figures.

A trader said the bonds ended the day 2 to 3 points lower after moving down as much as 10 points on the session. He quoted the 9 5/8% notes due 2014 at 79.25 bid, 80 offered, the 8 7/8% notes due 2010 at 87.75 bid, 88.75 offered and the 9¾% notes due 2013 at 80.75 bid. 81.75 offered.

At another desk, a trader saw the 9¾% notes at 80 bid, 81 offered and the 9 5/8% notes at 79 bid, 80 offered, which he called "down a couple points."

The company posted a wider loss in the second quarter of 2007, prompted by higher costs associated with marketing and with in-park maintenance. The company said it had a net loss of $50.9 million, compared with a loss of $45.1 million for the same quarter the previous year.

Revenues and admissions, however, increased: revenues gained 6%, while attendance gained 3%.

The first trader said that, while the numbers were lower, they were not that terrible.

"I thought they were OK," he said. "But I guess a credit like that is going to trade down."

In fact, he continued, the figures were in line with what he expected, and attendance was "slightly better than expected," noting hat he forecasted attendance to be flat.

The second trader, however, gave a different viewpoint.

"They were weaker numbers than anyone expected," he said, adding that other factors were likely involved in the bonds' drop.

One such factor was the attention paid to recovery models and how those might be interpreted. He said that recovery in this scenario was largely supported by the company's various real estate holdings and their worth in the event of liquidation.

But, "people are losing confidence in real estate values," he said.

Calpine stabilizes

A trader said that news that Calpine had opted to look at another reorganization plan may have helped steady the company's bonds, though they were still lower than they had been prior to Thursday's market plunge.

The trader saw the notes rebounding a little from their Thursday lows, with the 8½% notes due 2011 - which fell from around 126 to 110 bid, 111 offered in the previous session - at 115 and the 8½% notes due 2008 at 112 bid, 114 offered.

In a Thursday filing with the bankruptcy court overseeing its case, Calpine said it had been contacted by "certain parties" who had developed an alternate plan to the company's "waterfall" plan. The company said it wanted to take some time to look over the new proposal, and the hearing on its disclosure statement was therefore postponed until Sept. 11 from Aug. 8.

"That is weird," the trader said of the company's choice to not disclose who the "certain parties" were.

But an unnamed analyst saw that as simply the company "playing it conservative."

However, "my guess is it is probably the equity guys," he said, noting that the bondholders would not argue with the present recovery model of par plus accrued interest. The equity holders, however, are "more vulnerable."

Still, the analyst sees the company willingness to look at the new plan as disconcerting, at least from an investor standpoint.

"They have already moved forward with the original plan," he said. "The wheels are in motion."

Most market players were "pretty comfortable" with the original plan, he continued. "Everybody expected the plan to get confirmed."

"I would like to see more details," he said. But if the new plan consists of taking on more debt to take out the senior debt and then leave some recovery for the stockholders, "that will never happen in this market," he added.

Tembec edges higher

Forest products company Tembec saw its bonds edging higher as the Canadian dollar moved lower.

A trader saw the 7¾% notes due 2012 and the 8½% notes due 2011 around 42 bid, 43 offered and the 8 5/8% notes due 2009 at 46.5 bid, 47.5 offered.

"They were up on the day as the Canadian dollar started to devalue a little," he said, noting that the strength of the loonie plays a major role in the bonds' movement.

Another trader pegged 8 5/8% notes at 47 bid, 48 offered and the 8½% notes at 42 bid, 44 offered.

Swift loan, bonds rally

Swift Transportation's term loan B climbed on Friday after a pretty significant fall during the previous session as some financials emerged that were better than people had expected, according to a trader.

The term loan B traded as high as 91 and then settled in to close the day at 88 bid, 89 offered, up from 86 bid, 87 offered on Thursday, the trader said. On Wednesday, the paper was being quoted at 91 bid, 92 offered.

"There was some story about cash balance being better than people had thought," the trader said about the loan's positive momentum.

A bond trader also saw the company's bonds rally, with the 12½% notes due 2017 "bouncing" from the mid-60s to the mid-70s and then finally settling in at 72 bid, 73 offered.

On Thursday night, Swift announced that as of June 30, its cash balance was $171 million, of which $148 million is unrestricted, and credit available on its revolving line of credit exceeded $250 million.

The company also said that its EBITDA for the second quarter exceeded revenue and EBITDA reported for the first quarter of 2007.

Second-quarter financial results will be released to bank lenders and noteholders after the market closes on Aug. 14 so as to allow appraisers time to complete their work to support purchase accounting allocations among asset classes.

Participants in the company's term loan B can access the financial results through the Swift IntraLinks site hosted by Morgan Stanley, and qualified institutional investors that currently own or are considering purchasing the company's senior secured notes may access the information through a new IntraLinks site hosted by Swift.

Swift is a Phoenix-based truckload carrier.

Coal companies quieter

After actively trading in the previous session, coal company names quieted down, a trader said, closing "close to unchanged."

The trader said James River Coal Co.'s 9 3/8% notes due 2012 closed near 78 bid, 80 offered, about where they had been the day before. He also saw International Coal Group Inc.'s 10¼% notes due 2014 offered at 87 early on in the session, adding that the bonds had been at 95 bid, 96 offered just two days prior.

Though he said he had not heard anything specific on the companies to prompt a move, he said that he had heard rising inventories were the issue.

Recent reports have indicated that plans for new coal-based power plants have been scrapped, apparently bowing to environmental pressures. In fact, lawmakers in Nevada and Illinois have said they would stop any such plants from entering their states.

James River will hold a conference call on Aug. 8 to discuss its quarterly results.

Movie Gallery loan dips

Movie Gallery Inc.'s first-lien term loan gave up a couple more points in trading on Friday pressured by market conditions and Blockbuster's recently announced disappointing earnings results, according to a trader.

The Dothan, Ala.-based video rental company's first-lien term loan ended the day at 82 bid, 84 offered, down from 85 bid, 87 offered, the trader said.

In addition, the second-lien term loan was heard to be somewhere in the 40's, the trader remarked.

"I just heard that today. Last levels I heard were in the 60's. It's incredibly illiquid. The thing doesn't trade," the trader added about the second-lien loan.

On Thursday, Blockbuster announced second-quarter financial results that included a net loss of $35.3 million, or $0.20 per common share, as compared with net income of $68.4 million, or $0.31 per diluted common share, for the second quarter of 2006.

In addition, the Dallas-based provider of in-home movies and game entertainment saw total revenues decrease 2.8% to $1.26 billion for the quarter from $1.3 billion for the second quarter of 2006, and operating loss totaled $13.7 million, compared with operating loss of $2.1 million for the same period last year.

Furthermore, cash flow used for operating activities increased to $40.3 million from cash used of $23.3 million last year and free cash flow decreased $20.8 million to a negative $59.8 million from a negative $39 million.

Sara Rosenberg contributed to this article.

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