Delphi bank debt gains; Northwest steady as strike continues; Salton completes exchange offer

By Paul Deckelman and Sara Rosenberg

New York, Aug. 23 - Delphi Corp.'s revolving credit facility was stronger during Tuesday's session, bank debt traders said, although bond traders saw a mixed bag of trading results for the troubled Troy, Mich.-based automotive electronics manufacturers' notes.

Elsewhere, Northwest Airlines Corp. bonds pretty much remained steady to slightly higher, traders said, as the strike by 4,500 mechanics and other employees against the Eagan, Minn.-based Number-Four U.S. airline carrier moved into its fourth day with no significant service disruptions yet noted. However, there may be new turbulence ahead for Northwest and for troubled rival Delta Air Lines, Inc., with federal regulators training a wary eye on the two carriers' links with several foreign airlines in a marketing and scheduling alliance.

Salton Inc. bonds were meantime little changed as the Lake Forest, Ill.-based small appliance maker announced the end of its exchange offer aimed at taking out the bond issue that is coming due in December - with the swap offer achieving only part of its objective.

Delphi's revolver was being quoted at 96 bid, 96.25 offered, according to a trader who placed the paper up by about a quarter- to a half-point for no particular reason, other than market technicals.

On Monday, a different source had the revolver quoted at 95 bid, 96 offered, down by about half a point, because some banks were said to have been selling the paper.

"I don't think the bid ever got that low. It was more like 95.5 bid, 96.5 offered [Monday]," the trader argued.

As for Delphi's term loan, that remained basically unchanged during market hours, with levels quoted around 103 1/8 bid, 103 5/8 offered, the trader added.

Earlier this month, both the revolver and the term loan suffered some losses after the company revealed that it drew $1.5 billion under its revolver in order to have cash readily available to finance operations if needed.

But since then Delphi's bank levels have been steadily inching their way higher as investors have gotten more comfortable with the idea of a General Motors Corp. financial bailout and have started considering a potential Chapter 11 filing as less and less likely.

The bank debt, and the company's bonds, got a significant boost last week, when Lehman Brothers put out a bullish research note on the company and upgraded its stock to "overweight," essentially a buy signal, as it speculated that former corporate parent GM would extend a helping hand to its erstwhile subsidiary, much the same way Ford Motor Co. recently elected to help its troubled former subsidiary, Delphi rival Visteon Corp., which, like Delphi, was saddled with some unprofitable operations and high-cost labor contracts when it was spun off several years ago by its Big Three parent.

Since then, the bonds have come down off those highs, and on Tuesday, a trader said, Delphi was easier, with its 6.55% notes due 2006 down half a point at 92.5 bid, 93.5 offered, and its 6½% notes due 2009 a point behind at 86 bid, 87 offered.

A second trader saw Delphi's bonds down about three-quarters of a point across the board, with the 6.55s dipping to 92.25 bid, 92.75 offered from prior levels at 93 bid, 94 offered, while its 7 1/8% notes due 2029 eased to 76 bid, 76.75 offered.

Yet another trader saw the 6.55s unchanged on the bid side, but a little tighter overall, going to 92 bid, 93 offered from prior levels at 92 bid, 94 offered. He saw the 61/2s a point lower at 86 bid, 88 offered.

However, one trader saw Delphi better. Although he had the 6.55s unchanged at 92.5 bid, 93.5 offered, "the long guys looked better," with the 7 1/8s improving to 76.5 bid, 77 offered from 75 bid, 77 offered on Monday. He said that he had heard that Merrill Lynch put out a positive research report on the company - and, of course, there was "speculation the company will make a deal with GM - more of the same," he said.

Collins & Aikman bonds up

A trader saw bankrupt Troy, Mich.-based automotive interior components manufacturer Collins & Aikman Corp.'s 10¾% notes due 2011 two points better at 36 bid, 37 offered.

Northwest firm

Northwest Airlines bonds were "up a little," a trader said, quoting its 8 7/8% notes due 2006 as having pushed up to 66 bid, 67 offered from prior levels of 65 bid, 66 offered, and its 10% notes due 2009 as going home at 47 bid, 49 offered, up from 45.5 bid, 47.5 offered on Monday.

A market source at another shop saw the airline's 7 7/8% notes due 2008 initially gain a point, but then give half of it back, to close up only half a point at 47 bid.

However, another trader saw "not much happening" in Northwest paper, seeing it pretty much unchanged, with the 8 7/8s around 65 bid, 67 offered, the 9 7/8% notes due 2007 and the 8.70% notes due 2007 "right around 53-55, depending on what time of the day," and the 10s at 47 bid, 49 offered, "so no real [moves]. Pretty much all the runs you saw in the street were open-to-close a variation of half a point, depending on what time of the day it was, but no big swings or excitement there."

Overall, he said, "airlines were quiet," with Delta Air Lines Inc.'s benchmark 7.70% notes coming due on Dec. 15 "opening and closing unchanged, at 25 bid, 27 offered, with "no real trading."

Yet another trader said that Northwest was "up earlier, and then unchanged, although he did see the 8 7/8s slightly easier at 65 bid, 67 offered, off a point, and "the rest the same [as where they had been on Monday]."

A trader said that Northwest "gave up a little," quoting the 8 7/8s as having retreated half a point to 64.5 bid, 66 offered, and saw its 6 5/8% notes due 2023 at 51.5 bid, 52.5 offered.

He saw Delta's 7.90% notes due 2009 unchanged at 17.5 bid, 18.5 offered.

And another source said that there had been what he termed a "last-minute rally" in Northwest, which came from 5% down earlier to only about 1% down at the close, with "shorters eating dust."

While Northwest seems to be weathering the mechanics' strike, using a combination of supervisors, replacement mechanics and outsourcing to third-party contractors to cover its maintenance needs, and denying union assertions that the strike has proven to be a major disruption of its normal routine, there may be further trouble over the horizon for Northwest and Atlanta-based Delta, with reports saying that the Justice Department is recommending that the federal Department of Transportation reject by bid by Delta and Northwest to coordinate prices and scheduling with foreign airlines.

Members of the SkyTeam consortium - which also includes Air France, KLM Royal Dutch Airlines and Alitalia Airlines - are seeking an exemption from federal anti-trust regulations, which usually bar nominal competitors from acting in concert with one another. Complicating matters is the fact that Air France, Northwest's long-time partner in coordinating transatlantic flights, now also owns KLM, Delta's long-time partner, bringing the whole arrangement in for closer federal scrutiny, since Northwest and Delta are fierce rivals domestically. Both airlines profit handsomely from their deals with the foreign carriers and hope that DOT will give its blessing.

Calpine lower

A trader saw Calpine Corp. "looking a little weaker," but he saw no fresh news out on the San Jose, Calif.-based power generating company. He saw its 8½% notes due 2011 "off a couple [of points]" to 62 bid, 63 offered, while its 8½% notes due 2008 were half a point lower at 68 bid, 69 offered. The company's 10½% notes due 2006 "didn't move" from 93 bid, 94 offered, he said.

Salton steady as exchange ends

A trader saw no real movement in Salton's bonds, even as the troubled maker of small appliances like the George Foreman brand electric hotdog and hamburger grills announced that its previously announced exchange offer aimed at taking some of those bonds out had concluded.

He saw the Salton 10¾% notes scheduled to come due on Dec. 15 at 64 bid, 66 offered for the tendered bonds and "at least 10 point higher for the untendered ones," while its 12¼% notes due 2008 were last seen at 52 bid, 54 offered. There was "nothing at all" going on in the name on Tuesday, he said.

Salton said that - after several deadline extensions - its exchange offer for the outstanding bonds expired as scheduled at midnight ET on Monday. As of that deadline, noteholders had tendered $75.3 million of the 10¾% notes, or 60.2% of the $125 million of the bonds that were outstanding when the offer began in mid-June.

The offer - primarily intended to take out those Dec. 15 bonds or, at least, most of them - was conditioned on the participation of holders of at least $75 million of the notes, and the offer was extended a number of times until that threshold was reached. Holders also tendered $90.1 million of the 12¼% notes, or 60.1% of the $175 million of outstanding bonds.

The tendered notes are to be exchanged - at a sizable discount to their face value - for new floating rate notes due 2008 issued via a second-lien credit facility, under a previously announced exchange ratio, as well as new preferred stock and common stock. Salton is issuing a maximum total face amount of the new notes of $110 million (see related story elsewhere in this issue for full terms).

The trader called Salton's exchange offer "a disaster," - since the cash-strapped company had hoped to ideally take out the whole $125 million of the Dec. 15 bonds, but is still stuck with a sizable chunk of them to be redeemed, just slightly under $50 million.

"That's going to be a real problem," he said. "People are trading tendered and untendered bonds, and people that took themselves out of the tender. That should be interesting to watch this thing unfold. They just barely made it [the minimum tender threshold for the 103/4s] by a couple of hundred bonds over the $75 million level. They [Salton] have got their work cut out for them."

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