ACG, Vertis notes lower; Spectrum bonds edge higher; Autos quiet; Fedders steady

By Stephanie N. Rotondo

Portland, Ore., Oct. 1 - The first day of the fourth quarter turned out to be a quiet one in the distressed market, traders reported.

"It was kind of dead," a trader said.

"I am not seeing much; there is not much liquidity," another trader said.

Perhaps the biggest news of the day was related to the American Color Graphics Inc. and Vertis Communications Inc. merger. Vertis announced Monday that it had pulled its letter of intent.

On the news, American Color Graphics' debt lost as much as 9 points on the session, while Vertis slipped just 4 points.

Spectrum Brands Inc.'s bonds quieted down after Friday's surge in activity, which was prompted by an asset sale. Still, a trader said the bonds are continuing on their slow climb upwards.

In the automotive sector, Federal-Mogul Corp.'s debt was deemed unchanged by one trader, while another market source called the bonds lower. Regardless of the direction of the move, the bonds were considered to be quiet, along with most other names in the sector.

A bankruptcy judge approved Fedders Corp.'s debtor-in-possession order on the record, but also upheld objections from the company's creditors. The bonds were unchanged on the day.

ACG, Vertis notes lower

American Color Graphics, also known as ACG, was deemed the most active name in the distressed and high-yield markets, as its merger deal with Vertis Communications fell through.

One trader said the printing company's 10% notes due 2010 started to crack last week. He said the bonds closed Monday's session at 64 bid, 66 offered.

Of Vertis' debt, the trader said he did not see any activity.

Another trader called ACG's bonds down 7 points to 65 bid, 66 offered from 72 bid, 73 offered. He called Vertis' 10 7/8% notes due 2009 "down a couple points" at 92 bid, 94 offered, though he added that the debt was "not very active."

At another desk, a trader said ACG's notes "moved around a bit," with the last trade coming in at 65, down 6 points on the day.

Elsewhere, a trader saw ACG's 10% notes fall to 64 bid, 66 offered from 73 bid, 75 offered at the opening. Another trader saw the bonds down 6 points on the day at 64 bid, 66 offered, while Vertis' 10 7/8% notes were down 4 points at 92 bid, 94 offered.

Another trader saw the Vertis bonds at 93, which he said was 4 points lower.

In a press release, Vertis said it terminated its letter of intent with ACG, which expired on Sept. 29. Vertis said it sent a second offer with a deadline of Sept. 30 but received "no affirmative response."

The company said it was still interested in discussing options with ACG.

"That deal doesn't look like it's going to get done," a trader said. "I think they both have serious issues about being a stand-alone company anyway."

Spectrum bonds edge higher

After a flurry of activity in the previous session, Spectrum Brands' bonds toned it down slightly, though they continued to move higher.

A trader pegged the 7 3/8% notes due 2015 at 76 bid, 77 offered and the 11¼% toggle notes due 2013 at 88.5 bid, 89.5 offered.

"In reaction to the asset sale [Friday], the bonds were active," the trader said. He added that the paper has been slowly moving upward for some time now.

On Monday, Spectrum announced it had closed on its $225 million asset-based revolving credit facility. The company also said it used $200 million cash on hand to pay down its term loan.

Standard & Poor's said its rating on the household products company (CCC+/negative) was unaffected by either piece of news. Fitch Ratings gave the new facility a B/RR1 rating.

Auto names mostly quiet

The autosphere was "generally pretty quiet," a trader said, even as news on several names in the sector came out.

Federal-Mogul's bonds were called unchanged at 82 bid, 83 offered as news of a potential settlement with PepsiAmerica unraveled. Five out of six of Pepsi's insurance companies agreed to the terms of the settlement, but the one nay prompted the house of cards to tumble.

Another market source, however, called the bonds down 2 points to 82.

Federal-Mogul is hoping to exit its years-long bankruptcy case by the end of the year. A settlement with Pepsi would have likely made that more possible.

Elsewhere, Dura Automotive Systems Inc.'s bonds saw "no activity" despite the company filing an amended reorganization plan - which allows the company to exit bankruptcy as a private company.

One trader called the filing a "non-event."

Meanwhile, a trader saw Delphi Corp.'s 6.55% notes due 2006 unchanged at 91 bid, 93 offered and Dana Corp.'s 6½% notes due 2008 also unchanged at 81 bid, 83 offered.

Fedders DIP faces objections

Fedders' debtor-in-possession facility was approved on the record, though the judge upheld two objections from the official committee of unsecured creditors.

A trader quoted the 9 7/8% notes due 2014 at 15.5 bid, 16.5 offered, which he called "virtually unchanged." Another market source placed the notes at 16, also unchanged.

"All the bonds are pretty much tied up," he said, adding that he did not foresee a lot of trading in the bonds. "But positive news would be helpful."

The lenders of the DIP facility are discussing the objections with their clients.

Tousa bonds move higher

A trader said Technical Olympic USA Inc.'s debt "looked like it moved," with its 8.25% notes due 2011 up 2.5 points at 61 bid, 63 offered; its 9% notes due 2010 at 63 bid, 65 offered, up 2 points; its 10 3/8% notes due 2012 up 3 points at 30 bid, 32 offered; its 7½% notes due 2011 at 25 bid, 27 offered; and its 7.5% notes due 2015 at 24 bid, 26 offered, both also up 3 points.

At another desk, a trader saw the 10 3/8% notes up 3.5 points at 31 bid, 33 offered and said the news that the company had made its scheduled coupon interest payment on the 81/4s "is a favorable sign for Tech Olympic." He also noted "obviously, they took a big hit recently," and the current low price "makes the bonds more attractive."

However, he saw other homebuilders mostly lower, including Standard Pacific Corp.'s 6½% notes due 2008, down 1.5 points at 86 bid, 88 offered.

A trader saw Beazer Homes USA Inc.'s bonds unchanged.

Hovnanian Enterprises Inc.'s 8 5/8% notes due 2017 were seen with an 81.5 bid, which a trader called down about 4 points.

"That's nothing unusual for that bond actually," the trader said.

Broad market mixed

A trader saw James River Coal Co.'s 9 3/8% notes due 2012 in the high-70s. Another trader said the bonds traded between 79 and 80.

That's "not too many [bonds], but at least there was a trade," he said.

Tekni-Plex Inc.'s 12¾% notes due 2010 gained almost a point during the session after being "hammered" - at least in the words of one trader - last week on its quarterly numbers. The trader placed the notes at 67.75 bid, 68.75 offered.

Traders are calling the market on Winn-Dixie Stores Inc.'s stubs too high, given where the grocery store operator's stock is trading. One trader said the stubs had an offer of 10, while another said the bonds closed at 7 bid, 10 offered. The stock closed down 88 cents, or 4.70%, at $17.84.

"It doesn't make sense," the trader said. "There is not enough return and there is still some uncertainty about when or if distribution is going to come."

A trader saw Bon-Ton Stores Inc.'s 10¼% notes due 2014 off 1 point at 93.5 bid, 94.5 offered amid a generally lower retailing sector and saw Linens n'Things' floating-rate notes due 2014 also down a point at 68.5 bid, 69.5 offered.

Buffets Holdings' 12½% notes due 2014 were "trading pretty actively," a trader said, at 70.5 bid, 71.5 offered. He added that even so, there was little or no price movement.

Paul Deckelman contributed to this article.

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