Confusion hurts Tembec notes; Dura dips on numbers; Analyst: Buy TOUSA seniors

By Stephanie N. Rotondo

Portland, Ore., May 31 - Confusion spurred a downward journey for Tembec Inc.'s bonds Thursday as investors began selling their holdings amid fresh news.

But, as it turned out, the news was not at all to do with the Canadian company but with another U.S.-based company of the same name.

Once the market had figured out its error, Tembec's debt tried to rally but still ended lower on the day - attributed instead to the Canadian dollar.

Meanwhile, a narrower loss did little to help Dura Automotive Systems Inc. sustain its run. Instead, the bonds dipped as much as 5 points during the trading day.

Technical Olympic USA Inc., also known as TOUSA, has seen little activity of late, but one analyst believes there is a good buy in the company's debt - especially considering that, in the event of a bankruptcy, there is total debt coverage.

The last day of the month saw many traders tying up loose ends, creating an even quieter day than had been reported Tuesday.

"It's worse than last week," one trader said. "The whole market felt weak today. People are just kind of afraid to step in."

Confusion hurts Tembec bonds

Forest products company Tembec opened the morning lower, a trader said, spurred by fresh news.

However, the news was not related to the Canadian business, but a U.S.-based company also called Tembec. The confusion led Tembec's bonds to dip earlier in the day, but they managed to rally slightly, though still ended lower.

A trader said the bonds were down about 4 points over the week, related to the Canadian dollar. He pegged the 8 5/8% notes due 2009 at 58 bid, 58.5 offered, the 8½% notes due 2011 at 51 bid, 52 offered and the 7¾% notes due 2012 at 50.5 bid, 51.5 offered.

"People figured it out," he said of the morning's mix-up. "It was quite funny though."

Dura dips on numbers

Despite a narrower loss for April, Dura Automotive's monthly numbers were not looked on favorably, and the bonds dipped as a result.

A trader quoted the 9% notes due 2009 at 12.75 bid, off about a point from the previous day. The 8 5/8% senior notes due 2012, however, took a good size hit, losing as much as 5 points to close at 50.25 bid, 50 5/8 offered.

The Rochester Hills, Mich.-based company posted a $7.66 million operating loss for the four weeks ended April 29, with $82.05 million in total sales, the company said in its monthly report filed with the Securities and Exchange Commission.

April's operating loss compared to an $11.5 million operating loss for the five weeks ended April 1.

The trader called the bonds a "headline risk," adding, "They had a nice run, too. Now they are kind of retracing."

Analyst: TOUSA a good buy

A trader saw Technical Olympic's 10 3/8% notes due 2012 at 80.5 bid, 82 offered, while a market source pegged the 9% notes due 2010 unchanged at 95.25.

Though traders have reported that activity in the Hollywood, Fla.-based homebuilder's notes has slowed, one analyst believes the bonds are a good investment, especially the 9% notes.

Vicki Bryan, a new analyst at Gimme Credit LLC, wrote in her report released Wednesday that despite a housing slump, the assumption of its Transeastern joint venture's debt and a lack of guidance for the coming year, the company's senior notes have considerable upside.

"We think the senior notes demonstrated good trading support in the low 90s, and we like the asset coverage and the 11% yield, with perhaps additional upside from consent fees (additional borrowing is allowed only if interest coverage is at least 2.0 to 1)," she wrote. "We prefer the 9% issues due 2010 given the shorter maturity and more advantageous covenants which include negative pledge and cross default language."

The analyst issued a buy recommendation on the notes.

Northwest exits Chapter 11

Northwest Airlines Corp. formally emerged from bankruptcy, and a trader saw its bonds now trading as stubs, "which took about 60 points out of 'em."

He quoted the stubs issued to holders of the former 10% notes due 2009 trading at 13 bid, 14 offered, way down from 73 bid, 75 offered, the level at which the bonds had last traded, before the company's emergence.

The trader also saw the stubs attached to Delta Air Lines Inc.'s former bonds unchanged.

Delphi unchanged

Traders saw little going on in Delphi Corp. despite several news items out about the bankrupt Troy, Mich.-based auto components maker. One saw its 6.55% notes due 2006 at 116 bid, 117 offered, unchanged.

Another said he "didn't see much action."

News reports said that private equity firms Highland Capital Management LP and Pardus Capital Management are looking into a possible investment in Delphi, although nothing is definite.

Highland confirmed in an SEC filing the fact that it last week had signed a confidentiality agreement with Delphi to serve as a possible co-investor in a business relationship with Delphi along with Pardus - which signed a similar agreement with Delphi in April.

Should such a deal materialize, it would be an ironic development - since Delphi had previously spurned 7.8% owner Highland when it put forward an alternative investment proposal versus the $3.4 billion equity plan that Delphi had developed last year with Cerberus Capital Management LP, Appaloosa Management LP and other investors.

The Highland filing did not make clear whether any Pardus proposal would complement that $3.4 billion plan or would rival it.

Delphi investors were meantime also digesting the latest news regarding the company's ongoing talks with former corporate parent General Motors Corp. and the United Auto Workers union on ways to cut Delphi's bloated labor costs, one of the factors that drove it into bankruptcy. While some recent reports have painted the situation in optimistic terms, UAW chief Ron Gettelfinger on Thursday had harsh words for Delphi, saying its executives were drawing "obscene bonuses." He said the union has no set timeline for reaching a deal.

Insight, Calpine, Fedders steady

After Wednesday gains, InSight Health Services Corp. closed Thursday's trading unchanged, a trader said.

The trader also saw Fedders Corp.'s bonds unchanged at 36.5 bid, 37.5 offered. He said there was no news or any real interest in the paper as of yet.

"When it starts getting hot, that might help the name," he quipped.

Calpine Corp. was also deemed unchanged, perhaps off a point, on very light volume.

Paul Deckelman contributed to this article.

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