Delphi revolver up, bonds down following Chapter 11; Delta DIP dips

By Paul Deckelman and Sara Rosenberg

New York, Oct. 11 - Delphi Corp.'s revolver was hotter than a pistol Tuesday, while its term loan was also solidly stronger in the wake of the troubled Troy, Mich.-based automotive components supplier's weekend Chapter 11 filing. However, the company's junk bonds headed in the opposite direction, all converging several points lower on the session and trading flat, or without their accrued interest.

Elsewhere, Delta Air Lines Inc.'s new debtor-in-possession loan, which just began trading around on Friday, was being quoted a bit lower Tuesday, when the debt markets returned from their extended Columbus Day holiday.

Delphi's revolver and term loan both traded up immediately following the company's announcement that it filed for Chapter 11, and levels held in there throughout Tuesday's session as people are playing the yield to call, according to traders.

The revolver was quoted at par bid, 100.25 offered, up smartly from Friday's levels of 98.5 bid, 98.75 offered, and the term loan was quoted at 102.75 bid, 103.25 offered, somewhat higher compared to Friday's levels in the 102.125 bid, 102.625 offered context, one trader said.

"The interest will be current throughout bankruptcy, so it's yield-to-call paper," a second trader remarked in regards to why the bank debt would actually rise on the news.

As for the term loan's 102 call protection - to which some market participants had attributed the paper's hanging in around the 102 area throughout all the weeks of bankruptcy uncertainty - many seem to think that under Chapter 11, this feature will likely not be enforced, the second trader explained.

Over in the bond pits, meantime, Delphi's bonds were gyrating around at lower levels in the wake of the filing, which occurred over the weekend, with everybody off for Columbus Day; a trader explained that as the market had been closed Monday, there was pent-up investor anxiety to get out of the issue, which explained both the heavy volume of dealings, and the solid fall most of the issues took.

The drop was most obvious in the company's benchmark 6.55% notes due 2006, which on Friday had been quoted finishing up anywhere from 60 to 64.5 bid, with most participants quoting those bonds around 60 bid, 62 offered.

In Tuesday's dealings, one trader saw the bonds go as low as 55 bid and as high as 57, before finally settling in around 56.5 bid, 57.5 offered, with "a lot of trading" going on in the issue. He saw all of the company's other bonds - its 6½% notes due 2009, 6½% notes due 2013, and 7 1/8% notes due 2029 - all trading in that same area, as the issues have finally converged.

Another market source agreed with the first trader's assessment of the activity level, noting that at least $70 million of the 7 1/8s had changed hands, counting only those trades for $1 million or more face amount of the bonds, and about $68 million of the 6.55s.

The latter bonds, he said, were on "a little bit of a wild ride," opening 58.25 Tuesday morning, then plunging as low as 54.5, before coming off that low to end around 56, around the same level at which the 7 1/8% notes traded after losing a point off Friday's levels.

Yet another trader saw the Delphis "settle in, everything on top of each other," and trading flat at 57 bid, 58 offered.

After a long struggle against rising raw materials costs and sagging sales, Delphi filed for Chapter 11 bankruptcy protection Saturday in the U.S. Bankruptcy Court for the Southern District of New York and hopes to emerge from the reorganization in early- to mid-2007.

The company listed $17.1 billion in assets and $22.17 billion in total debt, including $2.58 billion in pre-bankruptcy lender debt, $500 million of the 6.55% unsecured notes, $500 million in 6½% 2009 unsecured notes, $500 million in 6½% 2013 unsecured notes, $500 million in 7 1/8% debentures and 561.78 million shares of common stock.

The plan is to finance global operations going forward with $4.5 billion in debt facilities plus additional committed and uncommitted financing lines and/or securitization facilities in Asia, Europe and the Americas.

Proposed financing includes $2.5 billion borrowed from pre-bankruptcy revolver and term loan facilities, and a commitment for up to $2 billion in senior secured 24-month debtor-in-possession financing, comprised of a $1.75 billion revolver and a $250 million term loan that will be led by JPMorgan Chase Bank and Citigroup Global Markets, Inc.

Other auto names sink

Traders saw other automotive names lower, on sector sympathy, with the biggest name out there - GM - particularly lower, understandable since the Detroit auto giant becomes liable for some of Delphi's contractual labor expenses following the Chapter 11 filing.

The auto giant's benchmark 8 3/8% notes due 2033 were seen having dipped below 72 bid after having opened at 75 - itself below the levels recently seen in a 77-79 context.

"Everything in the sector was down in sympathy," a trader said, quoting bankrupt Troy, Mich.-based Collins & Aikman Corp.'s 10¾% notes due 2011 dropping to 48 bid, 50 offered from prior levels around 50 bid, 52 offered.

And he saw the 12% notes due 2013 of bankrupt Novi, Mich.-based automotive frame maker Tower Automotive at 88 bid, 89 offered, down a point on the session.

Delta DIP lower

Elsewhere, Delta Air Lines' $1.9 billion debtor-in-possession financing facility saw levels drop by about a quarter of a point across the board in what was described as a choppy secondary loan market, according to a trader.

The $600 million term loan A fell off to 102.25 bid, 102.75 offered from 102.125 bid, 102.625 offered; the $700 million term loan B fell off to 103 bid, 103.5 offered from 103.25 bid, 103.75 offered; and the $600 million term loan C fell off to 102 bid, 102.25 offered from 102.125 bid, 102.625 offered, the trader said.

The bankrupt Atlanta-based airline's DIP just began trading this past Friday.

A trader in distressed bonds meantime said that Delta's notes were little changed at 17.5 bid, 18.5 offered.

He also saw bankrupt Delta rival Northwest Airlines Corp.'s bonds unchanged in the upper 20s, while yet another bankrupt rival, United Airlines, saw its bonds steady in a 13.5-14.5 context.

Mirant down

Back on the ground, the trader saw Mirant Corp.'s recently strengthened bonds and convertible notes in retreat, although he saw no fresh news out about the bankrupt Atlanta-based power generating company.

He quoted Mirant's 7.40% notes due 2004 dipping two points from Friday's levels at 121 bid, 123 offered, while its 7.90% notes due 2009 were also down two points, at 123 bid, 125 offered. Its 2½% convertible notes due 2021 were three points lower at 104 bid, 106 offered. Its 5¾% converts due 2007 lost two points to end at 115 bid, 117 offered.

Mirant's bank debt followed the bonds lower, dropping from last week's 114 to 110 bid, 112 offered.

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