Movie Gallery bonds better; Doral notes boosted; TransMeridian debt, equity rebound

By Stephanie N. Rotondo

Portland, Ore., July 16 - Movie rental chain Movie Gallery Inc.'s bonds attempted to make a comeback Monday as the bonds gained 10 points during the session.

The bonds, which were beat down earlier this month when the company announced that it had failed to meet certain financial obligations under its credit facility, almost hit 40, which was up considerably from last week's lows in the low-20s.

News that a new bid had popped up for Doral Financial Corp. did little to move the struggling financial institution's bonds as the company and market players alike deemed the proposal unlikely, to say the least.

However, later in the day, the company said it had received approvals to go ahead with its $610 million recapitalization plan. That news prompted the bonds to gain about a point.

Meanwhile, TransMeridian Exploration Inc. got a boost in both its bonds and equity, though there was no clear explanation as to why. A trader speculated that the longed-for sale of the company might be nearing.

Traders were mixed in their general feelings on the day. One trader called the day "a typical Monday in the summer," while another said the market felt better.

"Things in general seemed a little weaker," said another trader. "It was pretty quiet."

Movie Gallery jumps up

Movie Gallery bonds took off during the first day of the trading week, gaining as much as 10 points on the session.

A trader said the 11% notes due 2012 moved as high as 38.5 before settling in the 37.5 area. He said that was still up from last week's lows around 22.

At another desk, a trader called the bonds "up a bit" at 37.5, adding that most trades were in the 37.5 to 38.5 range.

Yet another trader saw the bonds get a "big trade up," gaining 10 points in what he called a "short-covering rally." He saw the bonds hit an absolute high of 38.75, closing the day at 37 bid, 38 offered. Another trader quoted that market as well.

Traders speculated that the bonds were up as investors began to believe that the coupon payment would be made, though it is still several months away. It is also felt that the company will not be filing bankruptcy.

Still, others are weary of such rumors.

"The coupon is not worth 10 points," the last trader said.

"Maybe they signed some secret deal where they are the only ones getting the new Harry Potter DVD," he quipped, adding that he did not think even that would help the struggling movie rental chain in the long run.

Doral bonds boosted

A trader called a new bid for San Juan, Puerto Rico-based bank Doral "the oddest thing I have ever seen," while the company called the proposal "frivolous."

In an 8-K filing with the Securities and Exchange Commission, the company said it had received a bid from "a purported entity called Atlas Monetary International Trust," which the company called "entirely frivolous and incapable of action." Also in the 8-K, the company said that Atlas' irrevocable trustee, Andrew J. Cipollo, is a convicted felon, as well as a defendant in a lawsuit for trademark infringement and false advertisement brought by Doral.

The proposal offers, among other things, a purchase price of $3 per share of common stock, as well as a loan to cover all existing debt.

"That Doral story was the craziest of the day," a trader said. "The bonds responded by not trading."

However, later in the day, the bonds got a bit of a boost as the company announced that it had received the necessary approvals to complete its $610 million recapitalization transaction with Doral Holdings Delaware, LLC, along with approval to go forward with the sale of the bank's New York branches.

At the close of the market day, a trader said the floating-rate notes due later this week were up a point at 98.

A shareholder meeting will be held Tuesday to vote on the Bear Stearns-led equity investment proposal.

TransMeridian notes rebound

Oil and drilling exploration company TransMeridian saw its bonds and equity "strangely rebounding" during the trading day, according to a trader, though no fresh news has been released.

The trader pegged the 12% notes due 2010 at 93.5 and speculated that the company might be closer to a sale.

It is widely known that the company has been looking for a buyer. Last month, the company said it was continuing its efforts to sell its businesses. The company also said that it was temporarily curtailing production at some of its plants.

"When there is no news and you know they want to sell, that can be the only explanation for the movement," the trader said.

On the equity side, the stock moved up 32 cents, or 22.22%, to close at $1.76.

Homebuilders better

After weakening last week amid continued subprime mortgage woes and poor retailer performances, homebuilders were seen slightly better at the beginning of the week.

A trader saw Technical Olympic USA Inc.'s 9% notes due 2010 at 91, up from their recent bottom in the high-80s.

"I am not sure why they were up, maybe overreaction," the trader said.

Other traders noted that TOUSA's bonds were relatively active, but not as active as last week.

Another trader saw WCI Communities Inc.'s 9 1/8% notes quoted higher at 96 bid, 96.5 offered.

InSight actively quoted

InSight Health Services Corp.'s (IHSC) bonds received higher quotes, a trader said, but only odd lots traded during the session.

The trader placed the 9 7/8% notes due 2011 at 35 bid, 37 offered, which he said was slightly better. He said he expected the company's structure to improve as it moves closer to Aug. 1, the day the company is slated to exit bankruptcy.

InSight Health Services Holdings Corp., a subsidiary of IHSC, posted a $4.56 million net loss for May on zero revenues, according to its monthly operating report filed Monday with the SEC.

Broad market mixed

Spectrum Brands' bonds, which have been weakening amid decent activity of late, were seen quieter, which one trader called "strange."

A trader quoted the 11¼% notes due 2013 at 83.75, adding that the debt seemed to lose steam in the afternoon. At another desk, a trader saw the 7 3/8% notes slip 1.5 to 2 points to 74 bid, 75 offered.

Uno Restaurants Holding Co. saw its bond issue "rear its ugly head," a trader said, with the rarely traded 10% notes due 2011 at 87.5.

Meanwhile, Primus Telecommunications Group Inc.'s bonds were deemed unchanged, with the 12¾% notes due 2009 at 98 bid, par offered and the 3¾% notes due 2010 at 72 bid, 74 offered.

Liberty Corner, N.J.-based Fedders Corp. saw its bonds get weaker, with the 9 7/8% notes due 2014 down a point to 28 bid, which one trader called an all-time low.

Elsewhere, Dura Automotive Systems Inc.'s 9% subordinated notes due 2009 edged slightly higher with lots of quoting at 4 bid, 8 offered. The bonds closed last week at 3.5 bid, 7 offered.

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