Delphi bank debt and bonds better on numbers, call; Delta continues retreat

By Paul Deckelman and Sara Rosenberg

New York, Aug. 8 - Delphi Corp.'s bank debt and its bonds were seen on the rebound Monday after the Troy, Mich.-based automotive components supplier released second-quarter numbers and sought to calm financial community fears about its statements Friday indicating it might file for Chapter 11, as well as the news it has dipped into its previously undrawn revolving credit availability.

Also, Delta Air Lines Inc. bonds continued to get smacked around for yet another session, as bankruptcy buzz swirls around the troubled Atlanta-based Number-Three U.S. air carrier.

Delphi's revolver and term loan both ticked higher from Monday morning opening levels, with sources pointing to financial results and the tone of the company's conference call that followed the release of those numbers as the impetus.

The revolver closed out the session quoted at 94.75 bid, 95.75 offered, up from opening levels of 93.5 bid, 94.5 offered, according to a trader. And, the term loan closed out the session quoted at 101 bid, 102.5 offered, up from opening levels of 100.5 bid, 101.5 offered, the trader said.

"The company reported decent numbers this morning and the conference call had a positive tone to it," the trader explained.

Over in the bond trading pits, a similar phenomenon was seen.

Those bonds had "gotten murdered" on Friday, a trader said, after release of the news about the restructuring talks, the possible bankruptcy scenario, the $1.5 billion credit facility drawdown, and the swift condemnation of that move by all of the major credit rating agencies.

Delphi's benchmark issue, its 6.55% notes due 2006, had dropped about 10 to 12 points on that session, ending somewhere in the mid-80s. The trader attributed the carnage to "anticipation of much-worse-than-expected quarterly results," as well as investor angst about the reasons for the revolver drawdown.

However, on Monday, "the conference call said they hadn't spent any of that money, and basically, they took it for strategic reasons - and that they had about $3 billion of liquidity" (see related story elsewhere in this issue).

All of that, he said, calmed investor jitters, and "the market got a bit more comfortable" about Delphi, taking the 6.55s back up to 91 bid, 92 offered late in the day from their opening levels at 86.5 bid, 87.5 offered, "a decent rebound," the trader said - although he noted that the bonds were "still six or seven points down from where they were on Thursday."

He saw the 6½% notes due 2013 finishing at 77 bid, 78 offered, well up from the levels around 73 bid, 74 offered to which those bonds had fallen Friday.

Another trader saw Delphi's 6.55s get up to 89.5 bid, 90.25 offered, versus an opening level at 87.25 bid, 88.25 offered.

Yet a third trader saw the 6.55s gain three points on the session to end at 89 bid, 91 offered, the 61/2s two points better at 75 bid, 77 offered and the company's 7 1/8% notes due 2009 four points better on the day at 72 bid, 74 offered.

A market source saw Delphi as a "mixed bag," with its 6½% 2013s up 1½ points at 75.5 bid, although he added that Delphi's 61/2s due 2009 were down 1½ points at 80.5

Equity market players were not as impressed as junk marketeers. Delphi's New York Stock Exchange-traded shares were up a mere seven cents (1.41%) to $5.03, although the volume of 16 million shares was four times the norm.

For the quarter, Delphi reported revenues of $7 billion, down from $7.5 billion in the prior year, and a net loss of $338 million or a loss of $0.60 per share, compared to net income of $143 million or earnings of $0.25 per share last year.

"While we are pleased with our regional performance, it is apparent that we must immediately address the U.S. legacy issues," said Robert S. Miller, chairman and chief executive officer, in a company news release. "We are engaging our major unions in discussions to seek modifications required to implement our restructuring plan, as well as with GM to seek related financial support. As we announced on Aug. 5, we drew $1.5 billion under our revolving credit facility to make additional cash readily available to finance our operations to the extent required during our restructuring discussions with our unions and GM.

"If these discussions do not lead to the implementation of a plan that addresses our existing legacy liabilities and the resulting high cost of U.S. operations, we will consider other strategic alternatives, including chapter 11 reorganization for our U.S. businesses, to preserve the value of the company and complete our transformation plan," Miller added in the release.

All eyes have been on Delphi ever since Friday, when the company announced that it initiated the draw under its $1.8 billion revolving credit facility - a move that sparked downgrades from all three rating agencies.

Moody's Investors Service downgraded Delphi's senior secured credit facility to B3 from B1 and corporate credit rating to Caa1 from B2, with the outlook remaining negative. Standard & Poor's downgraded Delphi's senior secured credit facility to B- from BB- and corporate credit rating to CCC+ from B+, with a developing outlook. And, Fitch Ratings downgraded Delphi's credit facility to B from BB-, with the company remaining on Rating Watch negative

Exide down, Collins steady

Also among troubled automotive credits on Monday, a trader saw battery maker Exide Technology's 10½% notes due 2013 retreat to 71 bid, 74 offered, from 75 bid, 77 offered previously.

Meanwhile, he saw "no real change" in Collins & Aikman Corp.'s 10¾% notes due 2011, hanging in at 30 bid, 32 offered.

Delta down again

Elsewhere, Delta Air Lines bonds continued to spiral back down to earth, with the company's benchmark 7.70% notes due 2005 - which up until recently traded far above its other issues - continuing to take the biggest dive, as the company's capital structure continues to compress, a possible sign that large segments of the financial community believe that a restructuring scenario, probably done by the courts, is coming soon.

A trader saw those 7.70s fall all the way to a wide 28 bid, 33 offered from 37 bid, 39 offered Friday, and saw Delta's 10% notes due 2008 three points lower at 18 bid, 19 offered, saw its 7.90% notes due 2009 off two points at 17 bid, 19 offered, and estimated its 8.30% notes due 2029 off a deuce at 16 bid, 18 offered.

He also saw Northwest Airlines Corp.'s bonds, which have been falling more or less in tandem with Delta's, also heading lower, though not quite so dramatically. He quoted the Eagan, Minn.-based Number-Four carrier's 8 7/8% notes due 2006 down two points at 54 bid, 56 offered, while its 9 7/8% notes due 2007 were a point lower at 43 bid, 45 offered. Northwest's 7 7/8% notes due 2008 were likewise a point down, at 36 bid, 38 offered, while its 10% notes due 2009 were two points off the pace at 37 bid, 39 offered.

Another trader saw the Delta 7.70s down not quite as much as the first trader, estimating the bonds at 34 bid, 37 offered, down from 38.l5 bid, 39.5 offered.

Anchor up but flat

The trader also saw Anchor Glass bonds better, following the company's Chapter 11 announcement.

The filing, the trader said, "came as no surprise," and the company's 11% notes due 2013 moved up to 63.5 bid, 64.5 offered from earlier levels at 61 bid, 62 offering. Those Anchor bonds are now trading flat - i.e. without the accrued interest - the loss of which essentially offsets the rise in the nominal price, traders said.

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