Tousa bonds slip; Pliant, Tekni-Plex better; Fedders cracks; Federal-Mogul unchanged

By Stephanie N. Rotondo

Portland, Ore., Nov. 14 - It was a mixed bag Wednesday as the distressed bond market attempted to rally with the equity markets but met resistance.

"Things were up this morning, then came back in," a trader said. "[The bond market] acted like it was going to go higher until the stock market started falling."

Another trader called the day "so-so," adding, "It opened firm but ended weaker."

"For the most part, the market had a pretty good tone," another source said.

Still, he said that in the market's current state, it was hard to get things done.

"If somebody wants to sell, they get punished," he said.

The market was still waiting to see what Technical Olympic USA Inc.'s quarterly numbers would be, and the anticipation pushed the homebuilder's bonds down about 2 points on the day. The quarterly results were not yet available as of press time.

Meanwhile, Pliant Corp. and Tekni-Plex Inc. both released numbers this week, which gave their bonds a boost. Last week, the bonds dropped as the market forecasted weak figures. But the results were not quite as bad as had been expected.

Fedders Corp.'s bonds have fallen from the mid-teens to single digits in recent days. Though there is no news driving the move, it is believed that someone is attempting to disengage from the name.

Despite news that the bankruptcy court approved its reorganization plan, Federal-Mogul Corp.'s bonds were deemed unchanged on the day. One trader categorized the event as "nothing special."

Tousa bonds slip

As the market waited for the numbers, Technical Olympic's senior bonds were pushed down about 2 points in anticipation of the quarterly release.

A trader quoted the 9% notes due 2010 and the 8¼% notes due 2011 around 40.5. Another trader called the debt "off a little bit" at 49.5 bid, 41.5 offered. The trader said the subordinated issues - the 10 3/8% notes due 2012 and the 7½% notes due 2011 and 2015 - closed around 7 bid, 10 offered.

"How much lower can they go?" the trader said of the junior paper. "Nobody wants these either."

Another trader said the 8¼% notes lost 1 point to 41 bid, 43 offered.

As of press time, Technical Olympic had not yet filed its 10-K. However, it is generally believed in the marketplace that the results from the third quarter will be dismal.

Numbers help Pliant, Tekni-Plex

The packaging sector staged a comeback as both Pliant and Tekni-Plex reported quarterly numbers that were not as bad as previously forecasted.

"The numbers were not as bad as people expected," a trader said.

The trader pegged Pliant's 11 1/8% notes due 2009 up at 85 bid, 86 offered from 81 bid, 82 offered in the previous session. He also said Tekni-Plex's debt "continued to run up from yesterday [when they released their numbers]," its 12¾% notes due 2010 closing the day at 60 bid, 62 offered, up from 53 bid, 55 offered.

Another trader called Pliant's debt "pretty active," hitting a high of 86 bid, 87 offered before coming in to close around 84.5.

"They traded in a pretty wide range today," he said.

The trader said Tekni-Plex's bonds moved into the low-60s at 60 bid, 62 offered "on the wide."

Elsewhere, a trader said Tekni-Plex's 12¾% notes were "rebounding from yesterday," up 3 points to 60 bid, 62 offered.

On Wednesday, Pliant posted its quarterly financial statement for the period ended Sept. 30. In its 10-K, the company reported net sales of $282.5 million, a 3.7% decrease from net sales of $293.4 million for the same period the previous year. Net income fell to $18.6 million, compared to net income of $377.4 million the year before.

Tekni-Plex filed its 10-K on Tuesday. The packaging supplier for the food, health care and consumer markets saw a 0.5% slip in net sales to $171.2 million, compared to $172 million in 2006. Its net loss rose to $25 million for the quarter, compared to a net loss of $14.9 million the previous year.

Both companies attributed their lower numbers in part to the higher cost of raw materials.

"Generally higher oil and natural gas prices, coupled with strong global demand for commodity chemicals and tight supplies, have resulted in generally higher costs for all of our key raw materials," Tekni-Plex said in its filing with the Securities and Exchange Commission. "We expect this trend to continue for the foreseeable future."

But even as the figures decreased year over year, the results were not as scary as investors had previously thought. Last week, the packaging sector overall took a hit, and both Pliant and Tekni-Plex's bonds dropped from the fallout. Moody's Investors Service even went as far as to change its outlook on Tekni-Plex to negative from stable, which was partly attributed to the company's high leverage.

Fedders debt cracks

Liberty Corner, N.J.-based Fedders has seen its bonds start to crack in the past few days, though there has been no news to speak of regarding the name.

A trader said the 9 7/8% notes due 2014 were "crushed" early in the session at 5 bid, 8 offered.

"Game over," he said.

Another trader placed the bonds around 10, while at another desk, a trader deemed the debt down 2 points around 7.

"A large seller came in and started hitting bids," the trader said.

'Someone is looking to get out of the name, and the market made them suffer the pain," another trader said.

The performance of the manufacturer of air conditioners and other air quality solutions is also tightly bound to the housing industry. With that sector under pressure, it is likely that the market is not expecting good things from Fedders.

Federal-Mogul unchanged

It was all quiet on the Federal-Mogul front, as the automotive parts supplier got the green light to emerge from bankruptcy.

A trader called the bonds - which tend to trade in line with each other - unchanged at 84 bid, 86 offered. Another trader pegged the notes at 84 bid, 85 offered.

"I don't think you will see much more trading in the bonds anymore," the trader said.

"There is nothing really special to say on those," said another market source, with another trader noting, "It was not that big of a news story."

The Southfield, Mich.-based company announced Wednesday that the bankruptcy judge overseeing its case had confirmed its fourth amended plan of reorganization. The company, which filed for Chapter 11 protection in October 2001, is slated to emerge from bankruptcy by year's end.

UAL, Delta loans active

UAL Corp. and Delta Air Lines Inc.'s bank debt moved around during the session as rumors of a possible merger between the two companies hit the market, traders reported.

UAL, a Chicago-based airline, saw its term loan B end the day at 95 bid, 96 offered up a quarter of a point from previous levels, one trader said.

Delta, an Atlanta-based airline, saw its second-lien term loan trade up to 96½ bid, 97½ offered, but then it settled back in at 96 bid, 97 offered to end the day unchanged, a second trader remarked.

"They came out and denied the rumor so it was unchanged," the second trader said about Delta.

The trader went on to explain that UAL was able to keep its gains on the day because it trades lower than Delta.

Meanwhile, a trader said Delta's stubs - given to holders of its 8.3% notes upon exiting bankruptcy - got some action, ending the day up at 7 bid, 7.5 offered from 6.25 bid, 6.75 offered the previous session.

Trading mixed

Linens n'Things floating-rate notes tried to regain some of the losses they incurred in the previous session, traders said. One trader said the bonds were "up a little" at 59 bid, 59.5 offered from 57.5 bid, 58 offered.

Another trader, calling the debt "a little better," placed the bonds at 59 bid, 60 offered.

Elsewhere in the retail arena, Bon-Ton Store Inc.'s 10¼% notes due 2014 hit a high of 84 during the trading day, but came off their peak to close 82.5 bid, 83.5 offered.

Buffets Inc.'s 12½% notes due 2014 moved up to 56 bid, 57 offered, a trader said, while another quoted the paper at 55 bid, 57 offered.

Primus Telecommunications Group Inc.'s 8% notes due 2014 were called unchanged at 55.5 bid, 57.5 offered.

Bankrupt paper maker Pope & Talbot saw its 8 3/8% notes due 2013 lose a point to end the day around 32.

Also in the forest products sector, Tembec Inc.'s debt was deemed unchanged, its 8 5/8% notes due 2009 at 45.5 bid, 47 offered, its 7¾% notes due 2012 at 37 bid, 39 offered and its 8½% notes due 2011 at 38.25 bid, 39.75 offered.

A trader said Charter Communications Inc.'s paper "tried to push higher." The trader said the 11% notes due 2015 closed the previous day around 87 and then hit a high of 88.5 bid, 89 offered on Wednesday, closing at 87.5 bid, 88.25 offered.

Calpine Corp.'s 8½% notes due 2011 gained 1 to 1.5 points, a trader said, to end the day around 110.

Sara Rosenberg and Paul Deckelman contributed to this article.

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