Thornburg gyrates on UBS opinion; Countrywide easier on funding woes; Wynn up on Macau optimism

By Paul Deckelman and Paul A. Harris

New York, Sept. 11 - Thornburg Mortgage Inc.'s bonds gyrated around at mostly higher levels on Tuesday, in line with a rise in the Santa Fe, N.M.-based mortgage lending company's stock, which got a vote of confidence from UBS Investment Bank. However, after having posted early gains in relatively restrained trading, the bonds were seen having surrendered their early advance, dropping back to trade about unchanged.

Another mortgage-lender name, Countrywide Financial Corp., was seen easier, pushed lower by news reports that the Calabasas, Calif.-based lending giant is putting together another multi-billion dollar bailout plan.

Housing names were meantime mixed, with beleaguered Beazer Homes USA Inc.'s bonds seen down 2 points or more across the board, while Tousa Inc. - the former Technical Olympic USA Inc. - was higher by around the same amount, pretty much across the board.

Outside of the recently hard hit and volatile mortgage and housing sectors, traders saw Wynn Resorts Ltd.'s bonds up, investors apparently enthused about the company's prospects for its Macau casino operation.

A high yield syndicate source said that while the CDX index was up a little on Tuesday the cash bonds of certain names were a little wider on the day.

The source spotted the high yield tracking CDX index at 94 11/16 bid late in the afternoon, and marked it up about 1/8 point on the session.

The primary market was meantime fairly quiet, although prospective issuer Univar NV was heard by syndicate sources to be readying a $600 million offering of senior subordinated notes to support the company's pending leveraged buyout.

Thornburg rides roller coaster

Thornburg's 8% notes due 2013 were seen by a market source as having opened up more than 4 points on the session at around the 90.5 level. But after gyrating around a little, they were seen having dropped back to around the 86 level where they had finished off on Monday.

A trader at another desk saw its bonds at 86 bid, 87 offered, in healthy two-sided trading, versus Monday's finish at 85.5 bid, 87.5 offered, "so it's tightening."

Another trader saw the bonds having gotten as good as 90 "at one point," before settling back down to end unchanged at an "87ish" level.

Thornburg's New York Stock Exchange-traded shares moved up by $1.08 cents, or 8.79%, to $13.37. Volume of 6.6 million shares was about 1½ times the norm.

The shares jumped and the bonds jumped around - for a while anyway - as UBS upped its recommendation on the shares to buy from neutral previously, although it at the same time reduced its price target on them to $18 from $27. The brokerage said in a research note that that it looks like the worst is over for Thornburg, which earlier in the summer was virtually frozen out of the capital markets for a time when the market for mortgage-backed securities collapsed and was forced to sell some of its loan portfolio at a loss, sell a new issue of convertible preferred stock and arrange a big bank loan to get the capital it needed to stay in operation and keep making loans.

UBS analyst Omotayo Okusanya said that Thornburg would likely survive the current market turmoil, and runs only a low risk of having to declare bankruptcy, and even then, only if credit market fundamentals were to deteriorate even further.

He said that his upgrade "is primarily based on our longer-term view that the credit markets will eventually stabilize for low credit risk assets such as AAA-rated jumbo prime mortgages." The analyst also said that management has positioned the company to benefit from any interest rate cuts which the Federal Reserve might choose to make.

Countrywide looks for cash

That good news about the mortgage sector did not extend to other issuers, notably Countrywide Financial.

Tuesday's editions of the New York Post reported that Countrywide - which just last month got a big cash infusion from Bank of America, which purchased $2 billion in convertible preferred securities - has retained advisors to help it structure another such bailout transaction. The Post said that the company is working with Goldman Sachs Group Inc. and law firm Wachtell Lipton Rosen & Katz to cut a deal similar to the one it made with Bank of America.

J.P. Morgan, Citigroup, and several hedge funds are among the potential backers, the paper said, adding that such a deal could be announced by the end of the month.

Countrywide said that it does not comment on rumors but added that it has already taken "decisive steps" to stabilize its business.

Countrywide "said thanks for the $2 billion [which it got from B of A] - but now we need more," a trader said, calling the company's burgeoning financial needs "a bottomless pit" and noting that the news had driven the company's shares down a little. However, he said that the company's 5.80% notes due 2012 had actually moved up about ½ point to 91 bid, 92.5 offered, even in the face of the seemingly bad news.

But another trader said that Countrywide "got its cash infusion" from B of A, "and it's been drifting about ½ point every day for days" on continued investor pessimism about the extent of the mortgage industry's cash crunch. The 3¼% notes due 2008, which had run up to around the 94.8 level initially, are around 93 now.

"It's not a lot of drift," the trader said, "but it is a little weaker."

Another trader saw Residential Capital Corp.'s 6 1/8% notes due 2008 down ½ point at 83.5 bid, 85 offered.

ResCap's corporate parent, GMAC LLC, was also lower, with the former General Motors Acceptance Corp.'s 7¾% notes due 2010 quoted down about ½ point in busy dealings at 95.75, although its benchmark 8% notes due 2031 were seen by the same market source actually up about ¼ point, just below 90 bid.

Tousa up, Beazer down

In the housing arena, closely connected to the current troubles of the mortgage lenders, Beazer Homes's bonds were seen down 1½ to 2½ points "depending on the issue," a trader said. He quoted its 8 5/8% notes due 2011 down 1½ points at 77 bid, 79 offered, and said that the troubled Atlanta-based builder's other issues were down 2 to 2½ points.

He quoted its 8 3/8% notes due 2012 at 75.5 bid, 77.5 offered, its 6 7/8% notes due 2015 at 72.5 bid, 74.5 offered, and its 8 1/8% notes due 2016 at 74 bid, 76 offered.

Another trader saw the 2015s at 73, "not doing so good."

A trader saw Tousa's 8¼% notes due 2011 at 66 bid, 68, up from 64.75 bid, 65.25 offered previously. He saw all other company issues likewise up about 2¼ points across the board, with its 9% notes due 2010 at 67 bid, 69 offered and its 10 3/8% notes due 2012 at 31 bid, 33 offered.

And another trader saw Tousa "a tad better, not a lot," with the 9s at 67 bid, 68, up ½ to 1 point, the 10 3/8s a point better at 30 bid, and the 8¼ s up a point at 65.5 bid, 66.5 offered.

Yet another trader saw Tousa's 10 3/8% notes up 3 points at 31 bid, 33 offered, and its 9% notes due 2010 a point better at 67 bid, 69.

Wynn bonds a winner

Outside of the mortgage and housing names, a trader quoted Wynn Resorts' 6 5/8% notes due 2014 up 1½ points on the session at 96.75 bid, 97.75 offered. Wynn's stock was also higher, he said, up $7.89, or 6.37%, at $131.70.

He cited recent bullish assessments about Wynn's Macau operations by, among others, CNBC stock guru Jim Cramer, who counseled that investors wanting to play Chinese economic growth should buy the Las Vegas-based casino company's shares.

Cramer recently opined that Chinese capitalists are "the only true capitalists in the world right now" and that Wynn, which opened a glitzy new casino in the former Portuguese colony of Macau, now a part of China, is "the best way to play" the emergence of the Chinese investing class."

First Data fatigue

High yield market sources continued to tell Prospect News on Tuesday that fatigue has begun to set in for those who, for lack of action in the junk market, have been tuned into the $14 billion bank deal backing Kohlberg Kravis Roberts & Co.'s acquisition of First Data Corp.

A sell-side source, not in the deal, said that lately there has been too much news involving possible price and covenant concessions.

"What everyone wants is some clarity," the sell-sider added.

Having said it, this official added that word has circulated through the market that the $14 billion term loan B has been split into two tranches: a $9 billion first out tranche, and a $5 billion first loss tranche, the latter similar to the $600 million first loss tranche of Dollar General's credit facility.

The source added that the first loss tranche is essentially a second-lien tranche.

Other developments regarding covenants and pricing - which have been reported in the mainstream press - vary depending upon who is giving the color, the high yield sell-sider said.

Alltel could be first

This official told Prospect News that for those looking to see some signal that the high yield primary market might regenerate, the news that Baseline Oil & Gas is on the road with a $110 million senior secured notes deal (the first post-Labor Day offering to hit the road) provides little in the way of illumination, given the size of the deal, the perceived safety of the sector and the fact that the bonds are secured.

"For the primary market to regenerate there needs to be some clarity on the jumbo deals on the calendar," the official said, adding: "Right now the bond market is better than the bank market, and people seem bullish."

This sell-sider went on to say that the First Data bond deal, if it ever materializes, might not be the first megadeal to come to the high yield market, post-Labor Day.

Alltel Communications Inc.'s expected $7.7 billion bond offering has begun to appear on peoples' radar screens, the sell-sider said.

The bonds are backed by a $4.7 billion senior unsecured cash pay bridge loan and a $3 billion senior unsecured PIK option bridge loan via Citigroup, Goldman Sachs, Barclays and RBS Greenwich Capital.

The deal, to fund the acquisition of Alltel by TPG Capital and GS Capital Partners is expected in the fourth quarter.

The financing also includes a $15.5 billion credit facility and up to $4.6 billion of sponsor equity.

The sell-sider said that Alltel is less leveraged than First Data, its EBITDA is more clear, and added that the wireless sector is well understood by high yield accounts.

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