Tousa notes slip; Tekni-Plex, Pliant bonds lower; Tembec dips on dollar; Buffets gains

By Stephanie N. Rotondo

Portland, Ore., Nov. 7 - The goings-on in the equity markets put added pressure on the distressed bond market Wednesday, pushing most names at least 2 to 2.5 points lower.

"Today is a disaster," a trader said.

"Another ugly day," said another. He attributed said ugliness to the "financial turmoil" in the broader market.

"Everything is lower," a source said. "As you could imagine [with the equity markets dropping]."

"The whole market is repricing," said another trader. "All risk is being repriced. It is very difficult to sell in this market."

"It is a buyer's market," he continued. "But nobody's buying."

Technical Olympic USA Inc.'s bonds fell as the company announced it had hired a restructuring team to help the struggling homebuilder go over its options.

"That's telling me they are going to be filing," a trader said.

Meanwhile, the packaging sector was weaker as a whole, though traders could not explain why. Names like Tekni-Plex Inc. and Pliant Corp. both fell 2 to 3 points on the day.

As the Canadian dollar came off its record highs, Tembec Inc.'s bonds suffered. Traders reported the bonds were down as much as 5 points during the session, though in general, the name has been rather quiet.

One name bucking the downward trend of the day was Buffets Holdings Inc. The restaurant operator's bonds have been staging a quiet comeback since getting whacked down almost 20 points on Monday. One trader said it was "hard to say" what was prompting the gains.

Tousa notes dip

Technical Olympic's bonds fell 2 to 3 points during the session, spurred partly by a weaker broad market and partly by news that the homebuilder would delay filing its 10-Q for the third quarter by a week.

The bonds were also weighed on by the announcement that the company had hired restructuring team Kroll Zolfo Cooper LLC.

A trader quoted the 9% notes due 2010 down at 44.5 bid, 46.5 offered and the 10 3/8% subordinated bonds likewise lower at 9 bid, 9.25 offered.

Another trader also pegged the senior bonds at 44.5 bid, 46.5 offered. He added that the subordinated issues - which also include the 7½% notes due 2011 and 2015 - ended the day at 8 bid, 10 offered.

At another desk, the 9% notes were called down 1.5 points at 45 bid, 47 offered.

Another trader quoted the 8¼% notes due 2011 also down 1.5 points at 46 bid, 48 offered.

The Hollywood, Fla.-based company said it would delay filing its third-quarter results until Nov. 14, after the market closes. The delay was attributed to impairment and abandonment charges it expects to report. The company also said it would not hold a conference call to discuss the results.

When asked if the marketplace was worried about what the restructuring group would advise the company to do, one trader said he expected the advisers would "tell them to fold up the tents."

But in recent weeks, it seemed that bondholders have wanted the company to file for bankruptcy. So why did the bonds react how they did?

"That was before the second-lien [term loan] was perfected," a trader said of the lack of excitement at a potential filing. "Now it is harder to argue that they were damaged by adding more debt on top...now it is fraudulent transfer versus preference."

The trader also speculated that it was possible the market felt like third-quarter numbers would not be as bad as were expected.

"Maybe [now] people realize that numbers are really bad and not even an act of God can save them," the trader said.

Elsewhere in the sector, a trader called Beazer Homes USA Inc.'s bonds down 2 points across the board, with the 8 5/8% notes due 2011 closing the day at 78.75 bid, 80 offered. The trader said the notes had been at 80 bid, 81 offered.

Hovnanian Enterprises Inc.'s bonds were also lower by a couple of points, the trader said. He pegged the 6¼% notes due 2015 at 73.5 bid, 75.5 offered and the 8 5/8% notes due 2017 at 80.5 bid, 82 offered.

Both Beazer and Hovnanian announced earlier this week that they expected fourth-quarter results to be dismal.

Meanwhile, WCI Communities Inc.'s bonds were "down, but not crazy down...they are hanging in there." The trader quoted the 9 1/8% notes due 2012 at 77 bid, 78 offered.

Tekni-Plex, Pliant lower

The packaging industry as a whole took a hit Wednesday, but it was unclear what had scared investors away from the sector.

A trader said that Tekni-Plex's 12¾% notes due 2010 were lower at 63 bid, 65 offered, while Pliant's 11 1/8% notes due 2009 were also weaker at 82 bid, 83 offered.

"I haven't heard any news," the trader said. "Maybe a fund is liquidating, trying to get out of the sector."

Another trader called Tekni's 12¾% notes down 5 points since the beginning of the week at 63 bid, 65 offered. He said the 8¾% senior notes due 2013 were just 1 to 2 points lower at 91.75 bid, 92.5 offered.

That trader said Tekni was recently downgraded, with a negative outlook.

The trader deemed Pliant's debt down 2.5 points on the day at 84.5 bid, 85.5 offered. He called the bonds down 3.5 points over the week.

At another desk, a trader said Tekni's 12¾% notes were down almost 4 points to 63.875, while Pliant dipped 3 points to 82.5.

In the rest of the sector, Solo Cup Co.'s 8½% notes due 2014 lost 1 point to 85 bid, 86 offered in very busy trading.

Another trader saw the bonds at 85.75 bid, 86.25 offered.

Yet another trader saw the bonds at 85.5 bid, 86.5 offered, down 3 points on the day, and said that "the whole packaging sector is having trouble because of increased raw materials prices."

Constar International Inc.'s 11% notes due 2012 were 3 points lower at 67 bid, 69 offered.

Tembec softer

Tembec's bonds were softer as the Canadian loonie fell from its record highs.

A trader said that while the forest products company's debt has been "pretty quiet" recently, all issues were "a little weaker." He placed the 8 5/8% notes due 2009 down 5 points on the day at 45 bid, 47 offered. He also saw the 7¾% notes due 2012 - which he called the most active issue of the day - lower at 37.5 bid, 38.5 offered and the 8½% notes due 2011 at 39 bid, 40 offered.

Another trader called the debt down "a couple points, tied to the weakness of the Canadian dollar." He said the 8 5/8% notes ended the day around 46.

A source said the 8 5/8% notes lost 2 points, ending at 45 bid, 47 offered, while the 8½% notes lost 1.5 points to close at 39.

Tembec competitor and sector peer Ainsworth Lumber's 6¾% notes due 2014 retreated to 61 bid, 63 offered from 62.5 bid, 64.5 offered, and its 7¼% notes due 2012 dropped to 65 bid, 67 offered from 67.5 bid, 68.5 offered.

Buffets bonds creep up

Buffets' notes started the week off on the wrong foot - the restaurant operator posted its first-quarter results, which prompted the bonds to lose almost 20 points.

But since then, the bonds have been slowly creeping back up - though traders can only speculate as to why.

A trader quoted the 12½% notes due 2014 better at 49 bid, 50 offered. Another trader called the debt up 3 points around 50.

Yet another trader saw Buffets' notes push back up to 50 bid, 52 offered from 46 bid, 48 offered.

Another called them up 4 points at 48.5 bid, 50.5 offered.

The second trader said it was "hard to say" what could be causing the gains, whether it was short covering or "one big buyer."

"When the whole market is getting slaughtered and this one is going up, something is going on," he said, noting that it was likely the debt was "driven up on technicals."

Still, with a likely breach of its maximum leverage ratio covenants looming, "[They will] have to come up with something good to get around the covenant breach," another trader said dryly.

Broad market lower

A trader called Primus Telecommunications Group Inc.'s 14¼% notes "somewhat active," closing the day at 102.5 bid, 103.5 offered. The 8% notes due 2014 ended "a little lower, maybe a half point," at 57.5 bid, 59.5 offered.

Ashtead Group plc's bonds were called down 1 to 2 points, with the 8 5/8% notes due 2015 at 93 bid, 94 offered and the 9% notes due 2016 at 94 bid, 95 offered.

Retailers at large were weaker, a trader said. Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2014 ended the day at "89-ish," while Bon-Ton Stores Inc.'s 10¼% notes due 2014 closed at 84.5.

Delphi Corp.'s bonds were "down a few more points," a trader said. He quoted the 6½% notes due 2009 at 82 bid, 83 offered.

Calpine Corp.'s debt was "hit a little late in the day." The 8½% notes due 2008 fell a couple points to 112.

Paul Deckelman contributed to this article.

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