Visteon up despite weak earnings; Movie Gallery gains; Delta rise continues

By Stephanie N. Rotondo

Portland, Ore., Feb. 16 - Visteon Corp. saw a gain of about 2 points in its bonds as its fourth-quarter results came out Friday, even though the release showed a $39 million loss.

The company, one of many automotive parts suppliers slammed by rising production costs and loss of market share to overseas competitors, also indicated that it expects similar lackluster results for 2007.

Movie Gallery Inc. was another gainer, as its notes gained 1½ to 3 points during trading. Traders noted the bonds traded heavily. There is speculation that the company's refinancing deal will go into effect as early as the Feb. 20 week - and the bank meeting for the new credit facility is scheduled for Tuesday.

Standard & Poor's recently upgraded the outlook for the company to positive from negative. The upgrade was due to the refinancing deal. The overall rating of the company was affirmed at CCC+.

Meanwhile, Delta Air Lines Inc. also saw its bonds post more positive numbers. Traders seem more upbeat about the company since it received approval of its disclosure statement on Feb. 7.

Market participants noted there was a lot of activity in the distressed bond market, but it was still relatively quiet as many left early or took the half-day of trading off to enjoy a long weekend. The market will be closed Monday in honor of President's Day.

Visteon up

Automotive parts producer Visteon gained in Friday's half-day trading as the company released its fourth-quarter results.

The Van Buren Township, Mich.-based company's 8¼% notes due 2010 finished the day at 104, according to one trader.

For the fourth quarter, Visteon posted a loss of $39 million in contrast to a profit of $1.34 billion a year ago. Total revenue slipped 0.8% to $2.84 billion, with product sales edging up just 0.3% and services revenue falling 20%. Non-Ford product sales rose 13% to $1.62 billion.

The company said it expects a tough 2007, estimating results for the full year before interest, taxes and restructuring costs in the range of break-even to a loss of $100 million on anticipated product sales of $11.1 billion.

Visteon has been hurt by a lack of market share and increasing production costs, joining a group of several other automotive parts suppliers, such as Delphi Corp. and Remy International Inc. The company was also hurt by the poor performance of former parent Ford Motor Co.

News stories have indicated there is interest in parts of the struggling manufacturer. It was previously reported that French company Valeo SA is looking at buying parts of Visteon, though that company's executive chairman was quoted as saying: "We are not interested in buying one of the U.S. rivals in its entirety. But Visteon or Delphi could put assets on the market and we will look at that."

In other distressed automotive parts supplier paper, Federal-Mogul Corp. looked better, trading at 84.25 bid, 84.5 offered.

Movie Gallery gains

Dothan, Ala.-based Movie Gallery got a boost in its bonds amid heavy trading. Traders were not sure why activity surged in the notes, but speculated it could be due to the company's upcoming bank refinancing.

The company's 11% notes due 2012 were slotted at 85 bid, 86 offered, 1½ points up from the previous day, according to one trader. One market insider said the notes closed Thursday at 83 and started Friday morning trading at 84.

"Wow, they're really moving up," he said.

The movie rental chain announced on Feb. 6 it had secured a refinancing commitment for its existing senior secured credit facility. The deal, underwritten by Goldman Sachs Credit Partners LP, is expected to close in the first quarter.

Delta better

Delta is slowly seeing better numbers since the airline received approval to solicit votes on its reorganization plan.

The bankrupt Atlanta, Ga.-based company has seen slight gains and losses since the Feb. 7 approval, but traders seem optimistic on the company's debt.

"They just keep getting better," one trader remarked.

The 8.30% notes due 2029 were up about a point at 64 bid, 65 offered. On Thursday, traders were mixed in their assessment of the company's notes. Some said the bonds were unchanged, while others put the bonds up about a point at 63 bid, 64 offered.

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