Technical Olympic notes lower on withdrawn guidance; Federal-Mogul bonds better, Delphi lower

By Stephanie N. Rotondo

Portland, Ore., Oct. 3 - Probably the most exciting event in the distressed market Wednesday came shortly - very shortly - after trading was technically closed for the day.

Just minutes after the closing bell, Technical Olympic USA Inc. issued a press release, which stated the company was withdrawing its yearly guidance for 2007 and 2008. This prompted a flurry of post-market activity, and the homebuilder's bonds fell as much as 5 points on the day.

Meanwhile, Federal-Mogul Corp.'s bonds edged higher in regular market activity. Other names in the sector, such as Delphi Corp. and Dura Automotive Systems Inc., were seen slightly better to unchanged during the session.

In fact, many traders were lamenting the lack of movement in the marketplace, a trend that has continued for some time.

A trader in distressed debt characterized the session as "a mostly blah day. I didn't see much razzle-dazzle in anything."

"I am sorry to say it is still very quiet," another trader said.

It is so quiet, it seems, that not even fresh - and perhaps positive - news is working as a catalyst to prompt any movement.

Such is the case with Transmeridian Exploration Inc. and IMAX Corp.'s bonds. In the last few days, both companies have released "good" news, but their bonds have remained eerily quiet.

Tousa dips on guidance withdrawal

Just minutes after the market closed, Technical Olympic released news that it had withdrawn its yearly guidance for 2007 and 2008.

That prompted a flurry of post-close activity in the name, and the homebuilder's bonds dropped as much as 5 points.

One trader said the 9% notes due 2010 slid 5 points to 59 offered. Another trader quoted the notes at 56 bid, 60 offered.

"That's quite a puke down," he quipped.

The trader also saw the 10 3/8% notes due 2012 printing below 30. He said the last trade was 29.5.

At another desk, a trader said Technical Olympic's paper was "down a few points, probably 3 points" on the day. He pegged the 9% notes at 59 bid, 62 offered and the 10 3/8% notes in the high-20s.

Another trader called the 9% notes down a point at 60 bid, 62 offered. He said there had been "some activity in that one," but he allowed that, while there had been "some volume," relatively speaking, it really was "not much."

In its press release, the Hollywood, Fla.-based homebuilder said its decision to withdraw its guidance was based on the current market conditions affecting the sector. The company also said it did not expect to provide further guidance "in the near future."

"Conditions in all of our markets weakened more than we anticipated due to a number of factors including: recent severe liquidity challenges in the credit and mortgage markets, diminished consumer confidence, increased home inventories and foreclosures, and downward pressure on home prices. All of these factors have contributed to lower gross sales and higher cancellation rates," said Antonio B. Mon, president and chief executive officer, in the release. "We remain focused on executing our asset management initiatives, generating cash, paying down debt, and evaluating all opportunities to de-lever the balance sheet to correctly position Tousa for the current challenging housing market."

"What a shock," a trader said, with just a hint of sarcasm. "Generating cash, paying down debt. That's interesting. How are you going to do that?"

"What a joke," he added.

Elsewhere in the sector, a trader said he saw Hovnanian Enterprises Inc.'s 8 7/8% notes due 2012 at 76 bid, 78 offered. He added it was just small pieces.

A trader deemed Beazer Homes USA Inc.'s bonds "maybe a touch higher - nothing much." He saw its 8 1/8% notes due 2016 at 79.5 bid, 80.5 offered, up perhaps a point, on "not a lot of volume - it was not very active."

The trader also called Standard Pacific Corp.'s 7% notes due 2015 unchanged at 71 bid, 73 offered on "not a lot of volume."

Automotive sector better, unchanged

The automotive sector was slightly better to unchanged on the session, led by Federal-Mogul.

A trader said Federal-Mogul's bonds have been "creeping up a little bit." He placed the bonds - which trade on top of one another - around 86.

Another market source pegged the notes at 85.5, up 1 point.

At another desk, a trader saw Federal-Mogul's 7½% notes due 2004 up 1 point at 85 bid, 86 offered.

Meanwhile, Delphi's paper was "maybe a little lower," a trader said, as the company asked the bankruptcy judge overseeing its case for more time to begin soliciting votes on its reorganization plan.

The trader said the 6.55% notes that were to have come due last year were "for the most part unchanged" at 91.5 bid, 92.5 offered.

Another trader saw Delphi's 7 1/8% notes due 2029 down perhaps a point at 93 bid, 94 offered, although he said that "I can't say that I saw a lot of activity."

Delphi, which recently won court approval on its plan, said it needed to delay a shareholder vote on the plan so that it could continue negotiations on its proposed $7.1 billion exit facility.

Dura Automotive Systems' senior debt was deemed better, the 8 5/8% notes due 2012 up 1 to 1.5 points at 48.5 bid, 49.5 offered.

"I don't think it's been trading much recently," a trader said of the issue.

The trader added that he did not see anything in the subordinated debt, though holders of the 9% notes due 2009 are continuing to fight a rights offering plan that would leave them in the cold.

News, no activity in TMY, IMAX

With the market relatively quiet of late, it is not always a surprise when fresh news neglects to prompt movement in a name.

But one trader was surprised that recent news in two distressed names - Transmeridian Exploration and IMAX - did very little for the debt.

Early Wednesday morning, Transmeridian said it would resume production at its South Alibek field in Kazakhstan, which was closed in late June. The next month, the company said it was looking for prospective buyers and had scheduled several presentations throughout Europe.

Early last week, the oil drilling company's bonds were moving higher, causing speculation that a buyer had been found. But as production began again, the trader was confused.

"The first question is why bother if you are going to sell?" he said.

Still, the news should have sparked some type of movement in the corporate debt.

"It didn't trade," the trader said of the bonds. "That's the strange thing."

IMAX's bonds, which rarely trade anyway, should have seen some activity on Tuesday's news that it had entered into a joint venture with Regal Cinemas Inc., a unit of the world's largest theater chain. The agreement includes five IMAX theaters.

But, to the trader's dismay, nothing happened.

"The bonds still haven't traded," he said, exasperated.

Broad market mixed

Tembec Inc.'s 8½% notes due 2011 were called unchanged at 41.5.

A trader said there was "very light trading" in Linens n'Things floating-rate notes, placing the bonds around 69.5.

Spectrum Brands Inc.'s bonds were "up a couple points," a trader said. Explaining the gains, the trader speculated that the 11¼% toggle notes due 2013 - which he said were supposed to increase to 11½% effective Oct. 2 but are now at 11% - had its coupon paid in cash. He said the bonds were around 89.5 in the previous session and traded up to 92 during the trading day.

A trader said James River Coal Co.'s 9 3/8% notes due 2012 were "bid up" to 81. He said that was unchanged on the day but still up at least 2 points over the last few days.

Paul Deckelman contributed to this article.

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