Fedders 9 7/8% notes sink 9 points; Remy active; Delta up, but few trades

By Stephanie N. Rotondo

Portland, Ore., Feb. 14 - Fedders Corp. and Remy International Inc. competed Wednesday as the most active in trading among distressed markets.

"Out the door Remy's was most active; then Fedders took over," one market participant said.

Fedders' bonds sank as the rumor mill continues to buzz about a possible default. At mid-afternoon, a trader pegged the company's bonds down as much as 9 points.

Investors are still reacting, almost a week later, to Remy's announcement that it had drawn down its revolving credit facility. Traders saw the distressed automotive parts maker's bonds softer yet again this week.

A wide fourth-quarter loss did little to prompt activity in Delta Air Lines Inc.'s notes. One trader said the notes gained almost a point, but saw few trades take place. Overall, the trader noted a "pretty lackluster day" in bankrupt airline debt.

Meanwhile, Technical Olympic USA Inc. gained slightly, seeing its 9% notes due 2010 trading at 99.5. Werner Holding Co. Inc., however, lost almost a point on its 10% notes due 2007, trading at 8.

Other companies seeing movement, but no news, include Movie Gallery Inc. The movie rental chain's 11% notes due 2012 were steady at 82 bid, 84 offered.

After several weeks of attempting to reach Ziff Davis Holding Inc., Prospect News finally made contact with the company.

Mark Moyer, chief financial officer for the media company, said he had no comment on a potential asset sale. He did, however, report that the company's coupon payment - due Thursday - will be fully funded.

As one trader noted, it was an overall "frosty market." Frosty weather in New York caused many market participants to leave early or head out just after the closing bell.

Fedders sinks

Fedders "went on a ride," in the words of one bond trader, falling as much as 9 points during the trading day, with one trader placing the company's 9 7/8% notes due 2014 as low as 57 in the afternoon. Another trader placed the notes at 60 bid, 62 offered.

The rumor of default on the company's term loan and coupon payment due March 1 continue to brew, and now a new rumor has entered the equation. According to the trader, several hedge funds may be putting out term sheets to rebid the company's loan.

"That's never a good sign," he said, adding it can help in the short term but is not a long-term fix.

At another desk, a trader said that some people "were thinking that all of the bankers were going to pull out of the facility, and then Fedders wouldn't have enough money to get by - which is kind of nonsensical."

For one thing, he said, "the bank facility isn't even that big; secondly, the one bank that pulled out was providing only $10 million second-lien [money], and a hedge fund came in with a term sheet to put in $10 million."

The company declined to comment on the rumor.

The company did, however, comment on the sale of its indoor air quality (IAQ) business, reporting that they are in talks with several interested parties. The identity of the interested buyers was not released.

The Liberty Corner, N.J.-based manufacturer of air quality systems announced in July 2006 that it had hired The Blackstone Group to explore the possible sale of the IAQ business. The sale of this non-core asset would include the North American IAQ production facility located in North Carolina, two factories in Suzhou, China, and sales offices located in the United States, the United Kingdom, Germany, China, Malaysia and India.

Remy active

Remy International saw a day of busy trading and was a little bit more stable price-wise.

A trader saw the 8 5/8% notes slated to come due later this year hanging in at 78 bid, 79.5 offered, its floating-rate notes at 96.25 bid, 97.25 offered, and its two series of junior bonds up "maybe a point or two," its 9 3/8% notes due 2012 at 26 bid, 29 offered and its 11% notes due 2009 at 28 bid, 31 offered.

The Anderson, Ind.-based automotive electrical systems manufacturer has racked up a series of losses since Friday, when the company announced it had drawn down its revolver more than anticipated.

Elsewhere among the auto names, he saw Dana Corp.'s bonds "a little weaker, but not much different" than where the bankrupt Toledo, Ohio-based components maker's paper had finished on Tuesday.

He saw Dana's 6½% notes due 2008 at 76 bid, 77 offered, its 5.85% notes due 2015 at 73 bid, 74 offered and its 7% notes due 2029 at 74 bid, 75 offered, "within one point of where they had been trading previously."

Delta up, few trades

Despite news that Delta had widened its fourth-quarter loss by 60%, traders saw very little activity in the bankrupt airline's debt.

The Atlanta-based carrier's 8.3% notes due 2029 gained about a point, closing the day at 62 bid, 63 offered. A trader noted there were not a lot of trades in the company's bonds.

"No one seemed to really care," he said of the company's fourth-quarter results.

According to its press release, Delta reported a full-year operating profit of $58 million, a $2.1 billion improvement over 2005, and the company's first annual operating profit since 2000.

Delta's fourth quarter net loss was $2 billion. Excluding reorganization and special items, the fourth-quarter net loss was $179 million, a $603 million improvement over the 2005 fourth quarter.

The company also reached its goal of $3 billion in annual financial improvements, one year ahead of the originally targeted completion date.

The airline posted $3.5 billion in cash and cash equivalents, of which $2.6 billion was unrestricted as of Dec. 31.

"By executing on all aspects of our restructuring plan - increasing liquidity, improving unit revenues and reducing unit costs, while simultaneously investing in our network and product - we exceeded our goals for 2006 and positioned Delta to become a fierce competitor in this industry," said Edward H. Bastian, Delta's executive vice president and chief financial officer, in a news release. "Because of the strength and determination of the entire Delta team, we expect this momentum to continue into 2007 and beyond."

In other bankrupt airline paper, a trader said Northwest Airlines Corp. gained a point in its 9 7/8% notes due 2007, to trade at par.

Le-Nature's steady

Le-Nature's Inc.'s 9% notes came in at 34.5 bid, 36.5 offered "with not much activity," according to one trader. The bankrupt Latrobe, Pa.-based juice drink bottling company's bank debt was steady at 60 bid, 62 offered.

According to documents filed this week with the bankruptcy court, supermarket chain Giant Eagle Inc. and beverage manufacturer Cadbury Schweppes plc are two potential buyers of the Le-Nature's bottling plant in Latrobe. Another potential buyer named in the documents is a joint venture between Premier Manufacturing LLC and Greenwood 361 of Chicago.

Bankruptcy trustee R. Todd Nielson wants to sell the company's bottling plant to someone who will reopen it, because he believes that will benefit Le-Nature's creditors more than if it remains closed and is sold piece by piece. Nielson has hired Gordon Brothers Industrial LLC and Harry Davis & Co. to sell the plant, about 45 miles east of Pittsburgh, in a turnkey sale or auction.

A sale to a "turnkey buyer who will operate a bottling plant will also avoid the substantial risks involved in dismantling, transporting and reinstalling the machinery and equipment to a new location," Nielson said in documents filed Monday.

"In addition, a successful sale to a turnkey buyer will provide an opportunity for employment of Le-Nature's former employees," Nielson's said in the filing. More than 230 people worked at the plant before it closed in November.

Nielson wants U.S. Bankruptcy judge M. Bruce McCullough to schedule a hearing by Feb. 27 so any buyer would be able to restart production for the summer, when the demand for bottled water and soft drinks is highest.

Performance Transportation begins loan trading

Performance Transportation Services, Inc. exit financing credit facility freed for trading on Wednesday, according to a trader.

The company's $130 million strip of institutional first-lien bank debt was quoted at par ¼ bid, par ¾ offered, and its $35 million second-lien term loan was quoted at 101 bid, 101½ offered, the trader said.

The first-lien institutional bank debt - comprised of a $50 million term loan and an $80 million synthetic letter-of-credit facility - is priced at Libor plus 325 bps, and the second-lien term loan is priced at Libor plus 750 bps with call protection of 102 in year one and 101 in year two. During syndication, pricing on the second-lien loan was flexed up from original talk of Libor plus 700 bps.

The company's $185 million credit facility also includes a $20 million revolver priced at Libor plus 325 bps.

Goldman Sachs acted as the lead bank on the deal.

Performance Transportation, a Wayne, Mich., transporter of motor vehicles, emerged from Chapter 11 protection on Jan. 29.

Iridium activity on court developments

Elsewhere, a trader said that Iridium LLC's bonds jumped to 34 bid, 35 offered - but then retreated back down to around 28-30, "because of what was being said in the courtroom," where holders of the satellite telecommunications company's defaulted debt are suing electronics giant Motorola Inc. for more than $3 billion, contending that Motorola's actions and omissions contributed to Iridium's eventual slide into bankruptcy in the late 1990s.

"They did drop a good amount" from the day's peaks, the trader said.

Another trader said the bonds - its 10 7/8% notes, 11 1/8% notes, 13% notes and 14% notes, which all "trade on top of one another" - got as good as 35, before ending at 28.5 bid, 29.5 offered, down about 3 points on the day. "The statements [made in court] moved the bonds," the trader said, though there was no immediate word on what went on in court.

Iridium separately announced late Wednesday that announces that it had 175,000 subscribers worldwide as of Dec. 31, 2006. The new figure represents a 23.2% increase over last year's subscriber total of 142,000. Revenue for the full year 2006 was $212.4 million and EBITDA was $53.9 million. Fourth quarter 2006 revenue was $53.2 million and EBITDA was $14 million.

InSight in some trouble

Elsewhere, a trader saw Insight Health Services Holdings Corp.'s bonds down 5 points on "quarterly numbers that were not so hot," including a net loss of $55.7 million for the six months ended Dec. 31.

Its 9 7/8% notes due 2011 slid to a wide 24 bid, 28 offered on the development.

The Lake Forest, Calif.-based provider of diagnostic imaging services also said in a regulatory filing Wednesday that it has hired Lazard Frères & Co. LLC as its financial adviser to explore a refinancing or restructuring of its debt.

The company also warned in its 10-Q filing with the Securities and Exchange Commission about its ability to continue as a going concern.

It warned that if its net cash provided by operating activities declines further than anticipated, InSight may be unable to maintain a sufficient level of liquidity, which could cause it to default on its debt.

The company further said that it was evaluating a number of options, including a restructuring of some, or even all of its debt in a Chapter 11 scenario (see related story elsewhere in this issue).

MagnaChip recovers after downgrade

Traders saw MagnaChip Semiconductor Ltd's 8% notes due 2014 gyrating between 69 and 75 in brisk trading on Wednesday, before going home at 71 bid, off the peak levels but still up 2 points on the session. That pretty much made up for the ground lost on Tuesday, when the bonds retreated a point or so in heavy trading after Standard & Poor's downgraded the Korean computer chip manufacturer's senior unsecured ratings a notch to B and lowered its senior subordinated notes one level to CCC+.

Sara Rosenberg and Paul Deckelman contributed to this article.

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