Bally bonds better; Dura notes steady; Airline stubs gain altitude; Solutia edges higher

By Stephanie N. Rotondo

Portland, Ore., June 1 - Traders reported Friday that Bally Total Fitness Holding Co. continued to gain in its bonds just a day after the company announced a pre-packaged bankruptcy plan.

The plan was announced late Thursday and prompted heavy activity toward the end of the day. Friday saw less activity but another 3-point increase.

Dura Automotive Systems Inc. attempted to recover from its Thursday beat down but instead ended the day essentially unchanged. A trader speculated that previous gains in the automotive parts maker's debt had been due to short covering, while profit takers caused the recent losses.

As Northwest Airlines Corp. joined its compatriot Delta Air Lines Inc. and flew out of bankruptcy Thursday, both companies' bonds firmed on Friday.

The bonds, which are now trading in stubs, were seen weaker Thursday but managed to rally at the close of the week to end about a point higher.

Elsewhere, Solutia Inc.'s bonds have been quiet, a trader said, but were seen edging their way higher throughout the week. The trader was unsure whether the bonds' performance was prompted by the completion of the company's Dequest business sale.

Overall, Friday was a slow, quiet day ahead of the weekend.

"A lot of people have already left for the day," a trader said just before the closing bell.

When asked what was going on to spur such inactivity, another trader said, "The weekend is around the corner, that's what is going on."

"It is like this week never had a chance to get started," said yet another trader, commenting on the overall lack of movement over the course of the week.

Bally's sees more gains

Fitness operator Bally's pre-packaged bankruptcy plan has prompted a 9.5-point gain in the company's notes, a trader said, but he was a little confused as to why.

"It doesn't quite make sense, to go up that strong," he said. "People must like that plan."

The trader said he saw the 9 7/8% notes due 2007 trade around 95.75, and that the notes were trading flat without accrued interest.

Another trader said the subordinated debt was moving around 96 bid, 97 offered and the 10½% notes due 2011 at 102 bid, 103 offered.

At another desk, a trader saw the 9 7/8% notes up as much as 5 points on the session at 94.5 bid, 95.5 offered but did not know if they were trading flat. He saw the 10½% notes 3 points better at 103.

Elsewhere another trader saw the 9 7/8s "trading with due bills" at 96 bid, 98 offered, while the 10½% notes were at 101 bid, 103 offered.

If two-thirds of the company's bondholders approve the plan - a vote is expected in mid-June - Bally's will file Chapter 11 protection, the company said yesterday. The proposed plan would cut $150 million in debt and raise $77.5 million in new funding.

Under the plan, holders of the subordinated notes would receive stock and $150 million of new subordinated "toggle" debt with 1½% interest. The toggle bonds would pay 13% if Bally chooses to pay with bonds instead of cash.

Dura unchanged

After "taking a beating" Thursday, Dura Automotive Systems managed to hold tight to close unchanged, a trader said.

The trader quoted the 8 5/8% notes due 2012 at 50 bid, 50.25 offered, after trading as low as 49 on the day. Another source pegged the 9% notes due 2009 at 12.5 bid, 13.5 offered.

The first trader said the recent losses could be attributed to the Rochester Hills, Mich.-based company's poor monthly operating results, but it could also be due to profit taking.

"They had a huge run up in a short period of time," he said, which he said was likely caused by short covering.

"I think there could be some profit taking and some disappointment in the numbers," he added.

Elsewhere in the auto sector, Dana Corp.'s 6½% notes due 2008 were 0.75 point better at 97 bid, 98 offered.

Also among the autos, a source called Delphi Corp.'s 6.55% notes due 2006 a point better at 112 bid, 113 offered.

Airline stubs firm

A trader said airline stubs gained a little altitude, just one day after Northwest Airlines exited bankruptcy protection.

The trader said Northwest stubs were trading in the 14.5 levels, with the different issues moving in the "same zip code," give or take a half point or so.

Fellow new bankruptcy graduate Delta also saw its stubs firm, closing the day at 7 bid, 7.25 offered, up from Thursday's closing levels just under 7.

The trader also noted that Delta's stock had gone up, gaining 50 cents, or 2.62%, to $19.55.

Northwest's stock also firmed, gaining $1.18, or 4.69%, to $26.33.

Solutia edging higher

As it completed the sale of its Dequest business, a trader noted that Solutia's bonds had been "quiet" but were "creeping up this week," with "better bids" floating around the Street.

He slated the 7 3/8% notes due 2027 at 91.5 bid, 92.5 offered and the 11¼% senior notes due 2009 at 102.25 bid, 103 offered.

When asked if the closing of the sale was the catalyst for the debt's firmness, he was unsure but said "maybe it is always a good thing that you close a sale. It doesn't hurt."

The trader said there could have been some concern that sale would not go through and, when it did, that could have moved the bonds.

The company said Friday that it had sold Dequest, its water treatment phosphonates business, to Thermphos Trading GmbH for $67 million in cash, subject to a working capital adjustment. Solutia will continue to operate the Dequest production facility under a lease and operating agreement.

Transmeridian a name to watch

A name that has been getting attention of late - but very little trades - is Transmeridian Exploration Inc., a trader said.

The oil and gas drilling and exploration company has been struggling recently and is looking toward a June 15 coupon payment on its 12% notes due 2010, currently in the 95.75 bid, 96 offered context.

"The company clearly has to raise money soon," he said. "There is speculation that people are starting to feel the pressure."

He noted that even the preferred paper has gotten heavier, falling to around 90 from its previous level of 104.

Broad market mixed

A trader saw Solo Cup's 8½ notes due 2014 up a point on the bid side, unchanged on the offered, at 89 bid, 90 offered. Another source saw the bonds at 89.75, up from 88 at Thursday's close, with trading described as busy.

No fresh news was seen on the Highland Park, Ill.-based maker of paper and plastic cups and dishes.

Elsewhere, a trader saw InSight Health Services Corp.'s 9 7/8% notes due 2011 up 2 points at 36 bid, 39 offered.

He saw Calpine Corp. mostly unchanged, except for the 8½% notes due 2008, which were up a point at 122.5 bid, 123.5 offered.

Tembec Inc. was unchanged, its 8 5/8% notes at 58 bid, 60 offered.

Movie Gallery Inc. was likewise steady, its 11% notes due 2012 at 86 bid, 88 offered.

And another trader saw Linens 'n Things zero-coupon discount notes due 2014 unchanged at 85 bid, 86 offered.

Paul Deckelman contributed to this article.

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