Fedders better; Milacron steady despite poor earnings; Sea Containers up

By Stephanie N. Rotondo

Portland, Ore., Feb. 23 - Rumors of a sooner-than-later asset sale helped Fedders Corp. bonds gain on Friday.

The company has been looking to sell some of its assets and property since July 2006. The company sold off some unused property in Maryland in early January and has been in talks to sell its indoor air quality businesses.

Fedders denied any pending sale, but one trader isn't buying it.

Meanwhile, traders were also talking about poor fourth-quarter earnings from Milacron Inc. The name has been bandied about several times this week, despite a lack of activity in its bonds.

And Sea Containers Ltd. gained slightly despite news that a new operator may emerge to take over GNER's East Coast Main Line that connects London and Scotland.

Overall, traders reported a quiet day as many market participants were off for the week, or simply left early Friday.

Rumor spurs Fedders

Asset sale rumors spurred Fedders notes to gain 2 more points this week, according to one trader. He said the company's 9 7/8% notes due 2014 were very strong in the last hours of the day, closing around 63.

On Thursday, traders were speculating that Fedders had sold its indoor air quality business or perhaps had unloaded some of its property. On Friday, traders were even more confident.

"I think they've made a sale," one trader said. "It seems that there will probably be news over the weekend."

However, the Liberty Corner, N.J.-based company denied that a sale had taken place, adding, "We continue to own and operate that business."

Despite the denial, the trader said he remained steadfast in his belief.

Milacron earnings 'terrible'

Traders saw no markets Friday in struggling Milacron but could not get over the company's poor fourth-quarter report.

"They were terrible results, just terrible," a trader said.

The Cincinnati-based company posted a 2006 fourth-quarter net loss of $8.6 million, compared with earnings of $1.8 million in the fourth quarter of 2005. The loss included $5.1 million in restructuring costs and $1.8 million in refinancing charges.

For the 2006 fiscal year, Milacron reported a net loss of $39.7 million, including $17.4 million in restructuring costs.

The company also announced Friday a proposal for a 1-for-10 reverse split of its common stock. The goal of the split is to comply with minimum share price standards for listing on the New York Stock Exchange. At the close of the week, Milacron's stock was down 8 cents, or 9.30%, to 78 cents.

Sea Containers up

A trader saw Sea Containers' bonds "up a couple of points" Friday, quoting the Bermuda-based maritime and railroad transportation operator's 10¾% notes that were to have come due last year at 91 bid, 93 offered, up 2 points on the session.

The bonds rose even as the company's British railroad unit, GNER, said it was in talks with several of the four parties whom the U.K. government selected to submit bids to take over the running of GNER's lucrative and prestigious East Coast Main Line that connects London and Scotland, in hopes of still keeping a piece of the action.

GNER had the franchise taken away late last year when it defaulted on its £1.3 billion 10-year contract to run the rail line, which still had about eight years to go. The Sea Containers' subsidiary blamed its inability to hang onto the contract on the strains on its finances from high energy costs and the downturn in the British rail industry in the aftermath of the July 7, 2005 terrorist bombings. Observers also noted the role that its corporate parent's slide into bankruptcy doubtless played.

Although it lost the franchise, GNER is still running the railroad on a management contract basis until a new operator emerges - and it says it may yet have a hand in it even after that. GNER said this week that it is in talks with several of the four potential would-be operators - British transportation operators First Group, National Express and Arriva and a joint venture between transportation operator StageCoach and billionaire airline entrepreneur Richard Branson's Virgin Group.

GNER did not say exactly how many of the potential buyers who made the government's short list it has been talking to - though several of them have explicitly declined holding talks with GNER. The latter said that it would be prepared to take as much as a 29.9% stake in the new franchise, and to transfer its brand, which it called "distinctive and well-regarded," to the new franchisee. The government would have to approve GNER's participation as a junior partner in any new franchise arrangement.

Tembec tumbles

Tembec's bonds continued to tumble, with a trader seeing the Canadian forest products company's 8 5/8% notes due 2009 dipping 2 points to 84 bid, 86 offered, its 8½% notes due 2011 also 2 points lower at 74 bid, 76 offered, and its 7¾% notes due 2012 likewise down a deuce at 70 bid, 72 offered.

Another trader called the company's bonds down 3 points at 73.25 bid, 74.25 offered for the 81/2s. He blamed the continued slide on the effects of the strengthening Canadian dollar and the ongoing strike by 2,800 conductors and yard workers against Canadian National Railway Co., which has disrupted operations at Canada's biggest railway operator and North America's fifth-largest since Feb. 10. The strike has interrupted Montreal-based Tembec's lumber shipments.

Besides the railroad strike, the rise in the Canadian dollar has been blamed, since it makes Tembec's exports of lumber and other forest products to the United States and other export markets more expensive. In Friday's currency dealings, the Canadian dollar shot up to a closing level of US$0.8627 - the loonie's highest level in about two months - from US$0.8611 on Thursday. One U.S. dollar now buys C$1.1591, down from C$1.1613 Thursday.

But another trader - while seeing the Tembec 8 5/8s off another point, to 84.5 bid - now well below the 87.5 level that they had held "for the longest time," was skeptical about the stronger Canadian currency being the primary factor behind Tembec's retreat over the last few sessions. He noted that "we're still about four cents away" from the psychologically important US$0.90 mark that he said would be the point at which the higher Canadian dollar would really begin to cut into exports and hurt the company's bottom line.

He noted that there has been no corresponding slide in the bonds of larger Canadian forest products operator Abitibi-Consolidated Inc.

"There's been no Abitibi follow-through - even though the rising [Canadian] dollar should affect Abitibi as much if not more because of its larger export volume," he said.

Instead, he said that investors were "bored" with Tembec - having bought it at lower levels, and seen it rise to the upper 80s on a combination of the settlement last year of a long-running U.S.-Canada softwood tariff dispute and earlier weakness in the Canadian dollar when oil prices were lower. With that upside ride now having apparently stalled, for whatever reason, "now they want to take some profits. They don't want to just sit there - the fast money wants to be in and out, and then go on to something else."

Le-Nature's steady

A trader saw Le-Nature's 9% notes due 2013 holding at the same 32 bid, 34 offered level to which they eased on Thursday. Those bonds are still well up from their levels in the lower 20s at the beginning of the year - pushed higher by the prospects that the bankrupt Latrobe, Pa.-based soft drink company's bottling plant will soon be sold.

According to news reports, the bonds are also up on investor hopes that Wachovia Corp., which in the not-too-distant past had helped to arrange a bond sale and a bank loan for the company, might be forced to compensate them if it can be proven that the banking giant did not exercise enough care in scrutinizing the company's financials before acting as a debt underwriter.

A Wachovia spokesperson on Friday declined comment on such speculation, the news reports said.

Le-Nature's slid into bankruptcy last fall amid allegations of massive fraud by its since-ousted senior management.

Northwest Airlines loan paper down

Northwest Airlines Corp.'s term loan fell by about a quarter of a point in trading on Friday as the company's recently launched repricing proposal became more widespread news, according to a trader.

The term loan ended the session at par ½ bid, par 7/8 offered, down from Thursday's trading levels of par ¾ bid, 101¼ offered, the trader said.

Under the repricing, the company is looking to lower the spread on its term loan as well as on its revolving credit facility to Libor plus 200 bps from Libor plus 250 bps.

The loans being repriced are under the company's debtor-in-possession financing credit facility, but when the DIP converts into an exit facility, the new pricing will carry over.

Citigroup, JP Morgan and Deutsche Bank are the lead banks on the deal.

The repricing was launched via Intralinks late Thursday. There are no plans for a conference call at this time.

Northwest is an Eagan, Minn.-based airline company.

Broad market mixed

In other issues, a trader saw MagnaChip Semiconductor Ltd. up "a little," with the Korean computer-chip manufacturer's 8% notes due 2014 at 74 bid, 75 offered. He also saw Remy International Inc.'s bonds likewise "up a little," with the Anderson, Ind.-based automotive electrical systems manufacturer's 8 5/8% notes coming due later this year at 82.5 bid, 83.5 offered, up a point.

Another trader saw Movie Gallery Inc.'s bonds continuing to gain, extending the momentum they've garnered from news earlier in the week of a credit facility refinancing and a Standard & Poor's ratings upgrade. The Dothan, Ala.-based No. 2 domestic video rental store chain operator's 11% notes due 2012 were up another point on the day at 91 bid, 93 offered.

He saw Refco Inc.'s 9% notes due 2012 at 63 bid, 64 offered - down from recent levels, a week or so ago, around 70 bid, 72 offered, but had no explanation for the retreat in the bonds of the bankrupt New York-based financial services company.

Sara Rosenberg and Paul Deckelman contributed to this article.

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