Tousa bonds, loans slip as borrow reduced; Delphi bonds drop on plan amendments

By Stephanie N. Rotondo

Portland, Ore., Oct. 30 - Technical Olympic USA Inc. and Delphi Corp. dominated trading, traders reported, as both put out news that had investors scrambling.

Technical Olympic filed an 8-K late Monday, which said that it had completed its amendments on its revolving credit facility and first-lien term loan. The amendments, among other things, modify pricing and reduce the amount of borrow available to the struggling homebuilder.

The company also said that is was looking to asset sales to help raise cash - but one trader does not believe that is going well. The trader also heard that the debt holders are looking to hire an adviser.

Whether it was the fact or the rumor, Technical Olympic's debt slipped during the session, with the bonds losing as much as 5 points on the day.

Meanwhile, Delphi said that the current credit crunch was making it difficult to borrow the necessary funds to fulfill its current reorganization plan. To that end, the company said it was looking to amend its plan, which would likely reduce payouts to its creditors. The automotive parts supplier's bonds fell as much as 6 points during the session.

Other names in the automotive realm were also weighed down by Delphi's news. Dura Automotive Systems Inc.'s senior paper - which has been retreating of late - fell back around 3 points, while Federal-Mogul Corp.'s bonds slipped as well.

Both companies are looking to exit bankruptcy soon but have yet to secure exit financing.

"Anybody trying to come out [of bankruptcy] by the end of the year will be affected by the Delphi news," a trader said.

The market was also waiting to see what the Federal Reserve would do after its two-day meeting, which began Tuesday. While some market players do not see an interest rate decrease really having an effect on the market, others disagree.

"It will help open up credit, which is what a lot of companies need right about now," said a trader.

Tousa bonds, loans slip

Technical Olympic's bonds were weighed down by news that the company had completed its amendments on its revolver and first-lien term loan, thereby reducing its borrowing ability.

A trader said the bonds "puked down" 5 points, its senior paper - the 9% notes due 2010 and the 8¼% notes due 2011 - closing at 55 bid, 56 offered, while the subordinated debt - the 10 3/8% notes due 2012, the 7½% notes due 2011 and 2015 - ending the day at 13 bid, 14 offered.

Another trader pegged the 9% notes at 54 bid, 56 offered, the 8¼% notes at 55 bid, 57 offered and the 7½% notes due 2011 at 13.5 bid, 15.5 offered.

At another desk, a trader said the 8¼% notes fell to 55 bid, 57 offered from 59.5 bid, 61.5 offered. Its 9% notes due 2010 fell to 55 bid, 57 offered from 59 bid, 61 offered, and its 10 3/8% notes due 2012 retreated to 13 bid, 14 offered from 14 bid, 15 offered.

Another trader saw the 9% bonds at 57 bid and the 10 3/8% notes at 12.25 bid, 13.25 offered, both down 2 points on the day.

The first trader said the borrow reduction was "not a hell of a lot," noting that the company also said it would look to asset sales to raise cash.

"Surprise," he said dryly. "That's something new and different. They have only been talking about that for three years."

The second trader said he heard that the company was having problems with potential asset sales.

"They are not going well, as far as the numbers that they would receive," he said.

Also in the rumor mill, the trader said he heard debt holders are looking to hire advisers.

"That's the last step before filing," he said. "I think they will file sooner than later."

The Hollywood, Fla.-based homebuilder's bank debt was also lower, with some speculating that it was just following the bonds down.

The revolver and first-lien term loan were both quoted at 97½ bid, 98½ offered, off by about half a point from previous levels, a trader said.

The second-lien term loan was quoted at 89½ bid, 90½ offered, off by about 2 points from previous levels, the trader continued.

"The second-lien was down a point due to a PIK payment they made, so it's really only down one point," the trader added.

Late Monday, Technical Olympic filed an 8-K with the Securities and Exchange Commission, which stated that its revolver and first-lien term loan amendment was successfully completed.

Under the amendment, the revolver was reduced by $50 million, amounts that can be borrowed under the revolver prior to Dec. 31 was limited and the revolver pricing grid was changed so that pricing can range anywhere from Libor plus 250 basis points to Libor plus 525 bps depending on ratings and leverage.

In addition, first-lien term loan pricing was increased to Libor plus 500 bps, compliance with certain revolver and first-lien term loan financial covenants was waived and the definition of material adverse effect was changed under the two tranches.

Furthermore, under the revolver, minimum operating cash flow requirements were established and compliance with weekly budgets is now required.

The homebuilder went on to say in the 8-K that although the amendment provides temporary relief, there are still many challenges including, among other things, its current level of debt.

To that end, the company said it is pursuing asset sales and is considering all available restructuring and reorganization alternatives and processes, including restructuring its capital structure and attempting to exchange some or all of its outstanding debt for equity.

The company has asked its bondholders to organize as a group in order to discuss such restructuring and reorganization alternatives.

When asked whether this 8-K filing was the impetus behind the drop in bank debt levels, the trader responded, "I don't think so. The filing came out yesterday. No one seems to know why it's down. The bonds are down, so maybe that's why. Once the bonds started to trek lower, the bank debt started to come off."

Delphi, other autos fall

Several names in the autosphere were "crushed," a trader said, as it was reported that Delphi would amend its reorganization plan - and potentially cut its payouts to General Motors and unsecured creditors.

A trader quoted the 6.55% notes that were to have come due last year at 91 bid, 92 offered, its 6½% notes due 2013 at 89.25 bid, 80.25 offered and its 7 1/8% notes due 2029 at 92.5 bid, 93.5 offered, all down about 5 points.

Another trader pegged the 2006 issue at 92 bid, 93 offered, versus the opening price of 97 bid, 98 offered.

Yet another trader said that Delphi's bonds "have been up and down today, and mostly down." He saw the 6.55% notes having opened at 95.5 bid, 96.5 offered, then trade as low as 87 bid, 89 offered, before ending at 91.875 bid, 92.875 offered.

Another trader saw those 6.55% bonds down 4 points on the day at 91 bid, 92 offered.

At another desk, a market source quoted the bonds at 92 bid, seeing them down nearly 4 points from Monday's close just below 96, and down some 6 points from Tuesday's high print at 98.

The first trader said the news caught many by surprise, and overflow could be seen throughout the sector.

The Troy, Mich.-based automotive parts supplier said in a court filing that the current credit crunch has made it all but impossible to borrow its original requested amount. Therefore, the company plans to amend its current reorganization plan, which does not provide the necessary $3 billion needed to pay claims from GM and unsecured creditors. Delphi said it expects GM will receive $750 million, instead of the original amount of $2.7 billion. Unsecured creditors would receive new equity in the reorganized company.

But the news did not bode well for other companies in the sector, which are still looking for exit financing. Dura Automotive's senior debt fell, as well as that of Federal-Mogul - both of which had hoped to exit bankruptcy by the end of the year.

A trader said Dura's 8 5/8% notes due 2012 fell 2 to 3 points to 39 bid, 40 offered, while Federal-Mogul's various issues - which trade in line with each other - slipped 2.5 to 3 points to 85 bid, 87 offered.

Another trader said the senior paper dropped to 38 bid, 40 offered from 41.5 bid, 43.5 offered, while Federal-Mogul's bonds dipped 2 points to 87 bid, 88 offered.

Investors in all of the auto supplier names, he said "were running for the hills."

Meanwhile, a trader saw Dana Corp.'s 6½% notes due 2008 fall to 78 bid, 80 offered from 82 bid, 84 offered and said that all of its other bonds "went down commensurately."

Broad market mixed

Blockbuster Inc.'s 9% notes due 2012 were "sitting around the 89 [bid], 90 [offered] mark," a trader said. Movie Gallery Inc.'s 11% notes due 2012 were also unchanged at 28 bid, 30 offered.

A trader said Hines Horticulture Inc.'s 10¼% notes due 2011 traded at 75.

"Buy shrubs," he quipped.

Meanwhile, Transmeridian Exploration Inc.'s 12% notes due 2010 dipped about half a point to around 95. Still, a trader noted that "the bonds trade so infrequently, it's hard to get excited about it."

Also softer was Tembec Inc.'s 8½% notes due 2011 at 42.5. Another trader said the 8 5/8% notes due 2009 lost 1 point to end at 50 bid, 51 offered.

Linens n'Things floating-rate notes fell a point to 65, while Bon-Ton Stores Inc.'s 10¼% notes due 2014 closed at 87.75.

Iridium LLC's bonds were offered at 3.

A trader quoted Calpine Corp.'s 8½% notes due 2011 down a point at 117 bid, 118 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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