MagnaChip gains on sector rise; Tembec up: Salton higher; earnings boost Exide

By Stephanie N. Rotondo

Portland, Ore., Feb. 8 - MagnaChip Semiconductor Ltd. continued to see gains in Thursday trading as good earnings in the chip sector bolstered activity.

The semiconductor manufacturer had fallen in previous weeks due to less-than-stellar fourth-quarter results. Traders said the debt is making a comeback this week.

Traders are also saying that interest in Tembec Inc. could be a delayed reaction to merger news in that sector. In late January, Abitibi Consolidated Inc and Bowater Inc announced they would combine, though the company has said it does not intend to follow suit.

In other merger news, Salton Inc. announced it will acquire Applica Inc as one of its subsidiaries. The combined company will become one of the largest U.S. producers of small household appliances.

In other earnings news, traders said "healthy earnings" helped push distressed battery maker Exide Technologies Inc. up. Both its debt and equity saw significant increases during the trading day.

But it was rumor that was keeping traders buzzing Thursday as the possibility of a takeover was on everyone's mind.

One trader said he heard a European grocer was looking to take over Winn-Dixie Stores Inc. The company, which has already emerged from bankruptcy, saw its equity gain 18 cents, or 1.05%, to close at $17.35.

Several sources indicated a "faint buzz" or "churning" that Level 3 Communications Inc. might also be in line for a takeover. One insider said it was "going long on equity," and his equity sources were discussing the takeover rumor. One source, he said, was "usually right."

Still, other traders say the rumor is "old news."

"I would be surprised, given what happened to the stock today," said one stock trader. "It's down 7%. The earnings were not good. They burned some more cash and there had been some concern they would have to come back to the capital markets."

Still, from the stock standpoint, he said it has had a "nice run so it was not a surprise that it was sold off."

Level 3 was unavailable for comment on the rumor.

Also proving unavailable was Ziff Davis Media Inc. It was reported last week that the company might default on its coupon payment due next week. The rumor mill is still speculating that it will happen. Calls made to the company last week and this week have gone unreturned.

MagnaChip gains

MagnaChip notes pushed up another point amid a positive earnings report from Amkor Technology Inc.

The Seoul, Korea-based company's 8% notes due 2014 came in at 68 bid, 70 offered, according to one market participant. At another desk, a trader pegged the notes at 69 bid, 70 offered. The notes traded around 64 earlier in the week.

"Amkor earnings pushed all in the chip sector higher," one traded said. He noted that ASAT Holdings Ltd., a global provider of semiconductor assembly, test and package design services, also gained, moving 1.5 points up to 94.

Amkor is an example of how companies such as MagnaChip can turn around.

"They were on the verge of bankruptcy a year ago," a trader said. An equity infusion placed the company on more solid ground. On Wednesday, Amkor reported a 10% climb in its fourth-quarter earnings.

Another trader attributed the increase to "good earnings" at LG Electronics. The telecommunications company showed a $222 million net profit for 2006.

Tembec up

There was "definitely some interest" in Tembec debt during the trading day, continuing the Montreal-based company's surge upward, a trader said.

A trader said the company's 8½% notes due 2011 moved at 77.5 bid, 78.5 offered. By the end of the day, he noted the bonds were "more like 78 bid, 79 offered."

The trader said the bond has come up from the 50s and is now trading "near its high." He added the interest "may be coming off the recent merger of Abitibi Consolidated Inc. and Bowater Inc., announced Jan. 26.

"It made major moves in early January," he said. "It could be a late bloomer."

Merger moves Salton up

Salton, the maker of the George Foreman Grill, raced higher as the company reported its had entered into a merger agreement with APN Holding Co., Inc., the parent of Applica Inc.

One trader said the news sparked a 3-point increase in the company's debt. He said the notes were at 93.5 bid, looking for an offer.

"If an offer came, it would have traded higher," he said.

Under the merger, the existing stockholders of APN Holding Co. - Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, LP - will receive about 83% of the outstanding common stock of Salton. Pre-merger, Harbinger is holder of about 15.5% of Salton's stock.

Earnings push Exide forward

Lead-acid battery maker Exide reported "healthy earnings" for the fiscal 2007 third quarter, a trader said.

The company posted a net loss of $11.2 million for the third quarter of fiscal 2007, including $9.2 million in after-tax impairment charges relating to a former manufacturing facility held for sale. This compared with a net loss of $27.7 million for the fiscal 2006 third quarter.

On the earnings report, the Alpharetta, Ga.-based company saw its 10½% notes due 2013 jump 3 points to 102 bid, 103 offered. On the equity side, shares in Exide climbed almost 20%, earning $1.38 on the day to close at $8.68.

Overall, the company reported liquidity of $126.3 million, up from $63.6 million nine months earlier at March 31, 2006. The company also posted debt of $685.4 million at Dec. 31, compared to $701.0 million at March 31, 2006.

Level 3 calls notes

Level 3 announced it will call its 12 7/8% senior discount notes due 2010.

The call is believed to be due to the cost of the debt.

"It's expensive debt," said one distressed trader.

The company announced Thursday that it plans to offer $500 million principal amount of senior notes in two tranches - one tranche that will mature in 2015 and will bear interest at a floating rate and a second tranche that will mature in 2017 and will bear interest at a fixed rate.

In other Level 3 news, the company posted its fourth-quarter earnings, which showed a net loss of $237 million, or $0.20 per share, compared with a net loss of $138 million, or $0.12 per share, for the previous quarter.

Mixed bag of distressed names

Elsewhere in the distressed-debt arena, a trader saw Delta Air Lines Inc. down a point, its 8.30% notes due 2029 at 62 bid, 62.5 offered, while bankrupt rival Northwest Airlines Corp. was unchanged.

Among the auto names, he saw no change in Delphi Corp., while Dana Corp. was up a little, its 6½% notes due 2008 going from 76 bid, 77 offered to 77.75 bid, 78.75 offered, a gain of nearly 2 points.

Remy International Inc.'s bonds were unchanged, the senior bonds at 86 bid. 87 offered, the juniors at 37 bid, 38 offered. The trader saw Federal Mogul Corp. - recently given a likely end date to its bankruptcy restructuring - continuing to firm, moving up from 83 bid, 85 offered to 84.75 bid, 85.75 offered.

Apart from the autos, he said that Le-Nature's Inc.'s bonds, which had climbed explosively over the previous few sessions - as much as 10 points - seemed to have stabilized at the 35 bid, 40 offered level.

Also unchanged after several sessions of gains, the trader said was Canadian forest products producer Tembec Inc., whose 8½% notes were at 77 bid, 79 offered, its 8 5/8% notes at 87 bid, 89 offered, and its 7¾% notes at 74 bid, 76 offered.

The trader saw no changes in Calpine Corp.'s bonds, which had firmed during Wednesday's dealings.

He saw Movie Gallery Inc.'s 11% notes due 2012 dipping to 83 bid, 84 offered from 85 bid, 87 offered previously.

Paul Deckelman and Ronda Rears contributed to this article.

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