Spectrum bonds quieter, lower; Tropicana, Trump slipping; Financing woes continue for Delphi

By Stephanie N. Rotondo

Portland, Ore., Feb. 8 - With little news this week to generate activity, the distressed bond sector saw decidedly lackluster trading volume - and Friday was no different.

"I think the market is just exhausted," said one trader, referring to the volatility in the equity markets, which has some investors hesitant to make any moves. "The beat down continues."

"I think everyone is just trying to get out before their market positions are knocked down even more," he added.

Given the urge to "get out," Friday's market was once again weaker, though lacking in any real activity.

Spectrum Brands, which had been relatively active in the previous session on bad quarterly numbers, quieted down in Friday trading. Still, a trader said that the bonds continue to be quoted lower.

In the gaming arena, Tropicana Entertainment LLC, also known as Wymar Operating, saw its debt slip for the second time this week. According to several news reports, solicitation packets will soon be mailed out to interested buyers of the Atlantic City Casino. Fellow New Jersey resident Trump Entertainment Resorts Inc. has also seen its bonds decline.

It may seem like beating a dead horse, but concerns abound for Delphi Corp.'s exit financing. Investors have grown worrisome recently, as there has been no word on the progress of the search. The automotive parts supplier's bonds have in the meantime been slipping, losing at least 8 points over the week.

Spectrum quieter, lower

After posting what one trader called "terrible" numbers Thursday, Spectrum Brands' debt continued to deteriorate, though trading in the name was light.

"I think there was only one round lot trade around 83," a trader said of the 11½% notes due 2013.

Another trader quoted the 11½% notes at 81 bid, 83 offered.

"Nobody can figure out why that bond is still trading at that level," the trader said. "I mean they are down 4 to 5 points on the week, but that came mostly after the numbers."

Another source pegged the 7 3/8% notes due 2015 at 67 bid, 68 offered, also weaker.

The Rayovac battery maker reported a wider quarterly loss Thursday, attributed to a combination of early shipment requests and discontinued operations. However, net sales decreased only slightly.

It's a bust for Atlantic City casinos

Potential buyers of the struggling Tropicana casino will soon be receiving information packets, as the bidding process is set to begin.

The casino and hotel was forced into a sale after the New Jersey Gaming Commission denied the company's license renewal application. Since then, there have been at least two firm offers for the Atlantic City property. According to news reports, the casino operator will send packets to at least a dozen would-be suitors.

But despite a looming sale, the bonds declined for at least the second time during the week. A trader deemed the 9 5/8% notes due 2014 softer by 1.5 points at 57.5 bid, 58 offered.

Elsewhere in the gaming sector, Trump Entertainment's bonds have also been on the losing side of the fence, its 8½% notes due 2015 closing the week at 70 bid, 71 offered. A trader said the bonds lost 2 to 3 points over the week.

Another source placed the debt at 71, down about a point on the day.

Delphi financing woes continue

The beat goes on for Delphi, as its search for exit financing seems to be never ending.

With investor concern growing about whether the financing will be found - and what the terms will be once it is nailed down - the automotive parts supplier's corporate debt continues to weaken.

A trader said Delphi paper - which has been trading on top of one another - lost another couple points, ending at 32 from 34 bid, 35 offered previously.

Another trader quoted the bonds at 31.5 bid, 33.5 offered.

The second trader believes that the company will find financing - eventually. There has been market buzz that some revisions might be made to the proposed exit facility, and some players have said the changes are likely.

Dana Corp. had to make revisions to its exit financing in an effort to shore up investors in a tight credit market. That company's term loan B broke for trading Thursday at a discounted price.

Housing rally helps Standard Pacific

A sector-wide stock rally, a mortgage bailout and more rate cuts from the Federal Reserve have served to boost the housing industry, a trader said.

The trader attributed those factors to recent gains in Standard Pacific Corp.'s bonds. The homebuilder's debt was "up a little, not much," on the day, its 6½% notes due 2008 at 94 bid, 96 offered. The trader called that up 5 to 6 points over the week.

The 9¼% subordinated notes due 2012, however, were off slightly during the session at 53 bid, 56 offered, "but it was mainly odd lots," the trader said.

Given the small bit of breathing room the whole sector has gotten recently, with the rate cuts and a government plan to help those hurt by the mortgage crisis, the trader was somewhat optimistic about the Irvine, Calif.-based company's future - at least for the near term.

"They will at least get through [the 2008] maturity," he said.

Meanwhile, Tousa Inc.'s bonds have bucked the overall trend among its fellow homebuilders. A trader said the Hollywood, Fla.-based company's 9% senior notes due 2010 fell 4 points during the week, ending Friday at 53.5 bid, 55 offered.

LandSource loan firms

LandSource Communities Development LLC's first-lien term loan B gained some ground on Friday after news emerged that the company's five-day forbearance/amendment agreement was passed by lenders, according to a trader.

The first-lien term loan B was quoted at 74 bid, 76 offered, up from 69 bid, 71 offered on Thursday, the trader said.

The forbearance/amendment agreement keeps the company out of default under a borrowing base covenant.

As part of the agreement, pricing on the first-lien term loan B was raised to Libor plus 475 bps from Libor plus 275 bps.

In addition, lenders are getting a 12.5 bps fee.

As was previously reported, the company is facing non-compliance with the borrowing base covenant as a result of a new appraisal on its land that showed deterioration in the underlying value of that land.

The company needs $800 million to bring it into compliance with the covenant and cover a cash-flow shortfall over the next two years. However, the sponsors are only willing to put in $300 million.

Originally, the company wanted to get a 60-day forbearance agreement, but lenders wanted to keep the issue closely monitored, which is why such a short-term resolution was obtained.

LandSource is a joint venture between Lennar Corp., LNR Property Corp. and MW Housing Partners. Its primary investment is the Newhall Land and Farming Co., which owns 15,000 acres in Santa Clarita Valley, Calif.

Sara Rosenberg 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.