Delphi hangs in, even with union vote; AMR gains; upsized Belvedere prices

By Paul Deckelman and Paul A. Harris

New York, May 16 - Delphi Corp. bonds - which were seen in retreat on Monday on a combination of profit-taking off hefty recent gains and investor unease over the likelihood that its unionized workers would vote to give their leaders authority to call a strike against the beleaguered company, were seen pretty much hanging in at little-changed levels - traders said they were mixed - even on the unsurprising news that the rank-and-file had, indeed, given their union chiefs the green light to call a strike. However, investors in the notes of General Motors Corp. - for which Delphi is the single biggest parts supplier - took the bonds lower as even as a strike potentially came a step closer.

They also took the American Airlines parent AMR Corp.'s notes up after the Fort Worth, Tex.-based top U.S. airline carrier raised cash via a stock sale.

In the primary market, Belvedere SA's upsized offering of euro-denominated seven-year notes was heard to have successfully priced. Junk bond primary market sources meantime saw Range Resources Corp. getting ready to price a quickly-shopped offering of 10-year notes on Thursday. Pre-deal price talk emerged on Unifi Inc.'s secured eight-year notes and on Superior Energy Services Inc.'s planned placement, also of eight-year paper.

Back in the secondary market, the news that Delphi's roughly 23,000 hourly employees represented by the United Auto Workers union had voted to give their leaders the authorization to call a strike should the bankrupt Troy, Mich.-based auto parts manufacturer try to void their negotiated contract and unilaterally impose a sharply lower pay and benefits scale came as a surprise to exactly nobody. Some 95% of the employees at 21 Delphi plants voted for the strike authorization.

Even though the expected approval was cited by one or two market participants Monday as a catalyst behind lower Delphi bond prices that session, once it was actually announced there was little further erosion seen in the company's bonds.

A trader saw the bonds mixed, with Delphi's 6.55% notes slated to come due later next month down ¾ point at 76.75 bid, 77.75 offered, and its 7% notes due 2029 at 75 bid, 76 offered, up ¼ point. A second trader actually called the bonds firmer, pegging the '06s at 78.5 bid, 79.5 offered and the '29s at 76 bid, 77 offered, "up a couple."

A market source at another desk called the 6.55s unchanged at a shade over 77, while the '29s were down ¾ point at 74.25.

Delphi, which filed for Chapter 11 protection last year in part due to the impact heavy labor costs have had on its operations, is trying to get the courts to approve junking the current contract. Whether the company would actually do so if the court said yes in another subject, since it would surely lead to a strike that might kill the embattled Delphi altogether and cause great harm to its single largest customer, GM. The court maneuvering may be just a negotiating tactic as Delphi tries to get GM and the UAW to help it lower its costs without a strike. GM, which spun Delphi off in 1999, has already agreed to fund early-retirement buyouts for up to 13,000 Delhi workers and to take back another 5,000.

GM dips on Delphi vote

Although GM has much to lose in the event of a strike, several key executives, including its CEO and chief financial officer, have recently expressed optimism that a strike could be averted, even as the Delphi employees were voting to authorize one.

However, GM's 8 3/8% notes due 2033 were seen down a point at 75 bid, 75.5 offered, in apparent reaction to the Delphi vote, a trader opined. He saw the 8 3/8% notes due 2031 of the giant carmaker's General Motors Acceptance Corp. financial arm down ¾ point at 93 bid, 93.5 offered.

Visteon steady, Dana firms

Also in the automotive realm, Visteon Corp.'s bonds were seen little changed on the news that the Van Buren Township, Mich.-based parts maker had secured $1.5 billion of new financing. Its 8¼% notes due 2010 were steady at 93.75 bid, 94.5 offered, while its 7% notes due 2014 were perhaps ¼ point off at 83.25 bid, 84.5 offered.

A trader saw bankrupt Toledo, Ohio-based parts maker Dana Corp.'s bonds a bit firmer, and cited market speculation - apparently sparked by a news report - that billionaire investor Carl Icahn was supposedly buying Dana bonds in order to be in a position to have a major ownership stake in the company when it reorganizes. Several other market sources, however, said they had not heard any such buzz. Dana's 7% notes due 2028 were up half a point at 80 bid, 81 offered.

AMR better on equity sale

AMR's 9% notes due 2012 were seen up half a point at 98.25 bid, 99.25 offered, helped, a trader said, by the news that the carrier raised $400 million of fresh cash by an offering of new stock priced at $26.80 per share. The money will be used for general corporate purposes.

Even as AMR's bonds were gaining altitude, its New York Stock Exchange-traded shares were coming down to earth, losing $2.03 (7.35%) to finish at $25.60. Volume of 9.6 million was nearly double the norm. Besides the expected unfavorable reaction to a 7% dilution to the company's 196-million share float with the issue of 15 million additional shares, matters probably weren't helped by an uptick in global oil prices. Light sweet crude for June delivery closed at $69.53 on the New York Mercantile Exchange, up 12 cents on the session. Crude price movements are frequently considered a barometer indicating likely future price trends for distillates such as jet fuel - an increasingly costly part of the operations of AMR and its various rivals.

On the downside, Werner Holding Co. Inc.'s 10% notes due 2007 languished at around a 30-31 context, market participants said, following Monday's announcement by the Greenville, Pa.-based maker of industrial ladders that it had not made the scheduled May 15 interest payment on the bonds, and was instead in talks with its creditors on a potential reorganization. Those bonds had traded in the mid 30s last week, but dipped to around 31 on Monday on the news.

"I was not seeing a lot of quotes in it," a trader said, adding "it didn't seem like that big an event."

Amkor declines

Amkor Technology Inc.'s notes were seen lower, with the Chandler, Ariz.-based high-tech manufacturing services company's 7¾% notes due 2013 seen down more than a full point at 92 bid, a market source said. At another desk, a source saw those same bonds off more than two points at 91.5 bid.

The easing followed the company's sale of new 10-year notes and convertible debt. The new junk bonds proved to be unattractive to investors in the secondary market, and have been trading a bit below their par issue price. Its New York Stock Exchange-traded shares have also been weaker over the last several sessions, especially after Susquehanna Financial Group analyst Andrew Biggs on Monday downgraded the stock to "negative" from "neutral" previously, warning that Amkor could be badly impacted by a potential slowdown in the semiconductor industry.

Retailers weak

Elsewhere, a trader said that retailers were "off a touch" and healthcare "off a little bit" as "the whole market was a little softer."

A source spotted the Banc of America Securities High Yield Index spread-to-worst at 323 basis points, 7 bps wider, at Tuesday's close.

Among the retailing names the market was watching Tuesday was Saks Inc., which announced quarterly numbers - results which "looked great because of the sale" of some of the Birmingham, Ala.-based department store operator's divisions, "but if you take the sales out, the numbers were kind of crappy." He saw Saks' 8¼% notes due 2008 at 103 bid, down ¼ point.

At another desk, a trader saw Sak's 7½% notes due 2010 at par bid, 101 offered and its 9 7/8% notes due 2011 at 109.75 bid, 111.5 offered, both unchanged on the day.

Beside its most celebrated property, the eponymous luxury retailer Saks Fifth Avenue, the company has operated a number of other chains aimed at a more middle-market clientele, but has been looking to unload those operations to concentrate on Saks Fifth Avenue, its Saks Off 5th outlet stores and its saks.com online retailing business. While its profit rose to $81.5 million (60 cents per share) for the fiscal first quarter ended April 29 from $16.2 million (11 cents per share), a year ago, 54 cents of those earnings were attributable to a one-time gain on the sale in March of the company's Northern Department Store Group to Bon-Ton Stores Inc.

Besides that sale of the Northern Division, which included the Carson Pirie Scott, Bergner's, Boston Store, Herberger's, and Younkers nameplates, Saks last year sold several of its southern chains - Proffitt's and McRae's - to Belk Inc., while in January Saks said that it was exploring strategic alternatives for its Parisian store chain, which operates in the Southeast and the Midwest. The company also operates a chain of specialty apparel stores, Club Libby Lu.

Casinos lower

The same trader also saw gaming names, which have been mostly little moved for the longest time "probably gave up a little ground here," with the bonds of Wynn Las Vegas LLC and Las Vegas Sands Inc. both off a point, "which are pretty big moves for that paper, because even with the market trading off, they had held in."

Las Vegas-based Wynn's 6 5/8% notes due 2014 were seen Tuesday around 96.75 bid. Its 12% second-mortgage bonds due 2010 - but which become callable on Nov. 1 - were unseen Tuesday, although last week, they were being quoted around the 110 area. The Las Vegas Sands 6 3/8% notes due 2015 closed around 95 bid.

Tenet down

The trader said that Tenet Healthcare Corp. "was getting a little softer, even on the short part of the curve," with the Dallas-based hospital operator's 6 3/8% notes due 2011 and 6½% notes due 2012 each down around a point. The former closed at 90 bid, 91 offered, off from 92 bid, 93 offered last week, "so they've given up some ground," while the latter eased to 89.5 bid, 90.5 offered.

All told, he said, things have "been quiet, with not a lot of activity going on. It's just been quiet."

Upsized Belvedere at talk

Meanwhile the primary market saw one issue price during the session as French spirits-maker Belvedere priced its upsized and oversubscribed €375 million issue on top of price talk.

And the eyes of the primary market began to shift toward the back end of the week as the Thursday-Friday period is expected to bring slightly more than $3.8 billion of issuance.

Tuesday's sole high-yield issue came out of Europe, where Belvedere SA priced an upsized €375 million issue of seven-year senior secured floating-rate notes (B2/B) at par to yield three-month Euribor plus 325 basis points on Tuesday.

The Credit Suisse-led deal came on top of the price talk and was increased from €300 million.

Proceeds will be used to finance the acquisition of Marie Brizard, to repay debt and for general corporate purposes. Proceeds from the €75 million upsizing will be used to pay down €46 million of priority senior debt and for general corporate purposes.

A buy-side source said that Belvedere was six-times oversubscribed and added that the new notes were up half a point in the secondary.

Range Resources brings $200 million

One company announced a bond deal on Tuesday.

Range Resources Corp. will market its $200 million offering of 10-year senior subordinated notes (B2/B) on Wednesday, and is expected to price its offering on Thursday.

JP Morgan has the books for the debt refinancing from the Fort Worth, Tex.-based independent oil and gas company.

Superior, Unifi for Wednesday

Also in the market from the energy sector, SESI LLC, a financing unit of Superior Energy Services Inc., talked its $300 million offering of eight-year senior notes (Ba3) at 7% to 7 1/8%.

That deal is expected to price on Wednesday via Bear Stearns and JP Morgan.

Also expected to price on Wednesday is Unifi Inc.'s $225 million offering of eight-year first-lien senior secured notes (Caa1/CCC+) via Lehman Brothers.

The deal was talked at a yield of 11% to 11¼% on Tuesday.

Week ends with a bang

Looking toward the end of the present week, tallying the deals that are in the market the Thursday and Friday session's are expected to bring slightly more than $3.8 billion of dollar-denominated issuance.

In addition to the Range Resources deal, mentioned above, the late week calendar includes:

• Reynolds American Inc.'s $1.65 billion senior notes in three tranches (expected ratings Ba2/BB) via Lehman Brothers, JP Morgan and Citigroup;

• Edison Mission Energy's $1 billion senior notes in two tranches (B1/B-) via JP Morgan, Citigroup, Credit Suisse, Merrill Lynch and Goldman Sachs;

• Education Management Corp.'s $760 million in two parts, a $320 million tranche of senior notes (B3/CCC+) and $440 million tranche of senior subordinated notes (Caa1/CCC+) led by Credit Suisse, Goldman Sachs, Merrill Lynch and Banc of America Securities; and

• American Greetings Corp.'s $200 million of 10-year senior notes (Ba2/BB+), via UBS Investment Bank and JP Morgan.

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