Doral Financial drops; Primus falls; Delta Air Lines dips; Fedders grace period eyed

By Stephanie N. Rotondo

Portland, Ore., March 5 - As subprime mortgage lenders took a beating Monday, Doral Financial Corp. was unable to escape the melee, seeing its entire structure tumble down.

According to traders, the bank's equity took the biggest hit, but the preferred and bond paper also fell.

Doral reported Friday it would post a loss for 2006 and that, without refinancing and outside capital injections, it would see liquidity issues in 2007.

A term loan amendment and bond concessions did little to help Primus Telecommunications Group Inc. The company's bonds declined from last week's closing numbers.

Meanwhile, Delta Air Lines Inc. took a dip, losing about a point from the market's previous close. The air passenger carrier is looking to extend its exclusivity deadline, a move some call a way to block competing plans.

Though unconfirmed, traders said Fedders Corp. had in fact failed to make the coupon payment that came due last week and is now in the grace period. The company has not made any formal announcement, and calls have gone unreturned. Amid the buzz, the air quality solutions supplier saw its bonds drop 5 points during the trading day.

Separately, an appeals court has overruled a lower court ruling in favor of Iridium LLC. The satellite service provider previously won the right to sue its former parent company, Motorola Inc., but the appeals court reversed the decision, remanding the case to the lower court. Traders said Iridium's bonds saw some activity on Monday.

Doral bonds drop

Puerto Rico-based Doral took a hit throughout its structure as subprime lenders fell sharply.

According to one trader familiar with the name, Doral's 9 1/8% preferred, with a $25 face, came in 9.9 points, the equivalent of 39.6 bond points, to close around $8. The drop equaled a 23% drop in the paper.

"That's huge," the trader said.

Doral's equity dropped 54 cents, or 25.59%, to close at $1.57.

On the bond side, the bank saw a more modest dip in its floating-rate notes, falling just 3% on the day.

"I don't know why they aren't down harder," the trader said.

The trader added that "market players" have resisted investing in the financial institution's bonds but are intrigued with the preferred side.

"People think there is decent play in the preferreds," he said. "Not so much in the bonds."

On Friday, Doral announced it would post a loss for fiscal 2006 and warned that 2007 could bring a shortage of cash. To that end, the company said it is looking to refinance $625 million in debt that matures in July.

Primus falls

Primus Telecommunications saw its 8% notes due 2014 trading "into the bid," according to a market insider, who placed the notes at 53. The insider also saw the company's 12¾% bonds due 2009 at 85 bid, 86.5 offered.

Last week, the integrated communication services provider announced it had received unanimous consent to amend its $100 million term loan facility due 2011. The amendment, as explained in the press release, would allow a subsidiary of Primus "to issue up to $200 million of existing authorized indebtedness in the form of newly authorized secured notes with a second lien security position."

The amendment also allowed the subsidiary to privately issue $33 million in 14¼% second-lien notes due 2011 in exchange for $41 million of outstanding 12¾% senior notes. Holders of the senior notes also consented to eliminate restrictive covenants and certain default provisions.

Delta declines

Delta lost altitude in its bonds, responding to similar moves in the equity market. One market insider placed the company's 8.30% notes due 2029 at 57.5 bid, 58 7/8 offered at midday. At market close, a trader said the notes traded as low as 55.5 and as high as 58, finally settling in at 57.

"It was lower for cover, then weaker at close," he said.

Delta, which posted a narrower loss for January than the previous year, followed in Northwest Airlines Corp.'s footsteps, asking the bankruptcy court overseeing its case for an exclusivity extension.

Atlanta-based Delta is looking to push back the deadline to June 1 from April 16. The company said the extension is necessary because the confirmation hearing on its reorganization plan is scheduled for April 25, after the current deadline.

Delta, which estimates it will be worth $9.4 billion to $12 billion post-bankruptcy, said its request for the extension has the support of its official committee of unsecured creditors.

Fedders falls

Though no official word has been received, it seems that Fedders has entered into the grace period on its coupon payment that came due last week.

Traders were speculating last week that the company had defaulted on the 9 7/8% notes due 2014. Calls made to the company were not returned.

But, according to several market sources, the company met with investors Friday to say that the company had entered the grace period.

Prospect News called the Liberty Corner, N.J.-based company on Monday to confirm the reports but did not reach anyone.

At midday, a market insider placed the notes with a wide spread at 50 bid, 56 offered. At market close, a trader said the bonds came in at 55, which he called down 5 points.

Iridium bonds sink

Bankrupt satellite communications provider Iridium's 14% bonds due 2005 dipped as low as 18.5 as a federal appeals court reversed a lower court ruling approving a 2001 settlement between the company's unsecured creditors and its lenders, resulting in a victory for former parent company Motorola.

Iridium filed for bankruptcy in August 1999. Almost six years ago - to the day - a bankruptcy judge approved a $135 million settlement between Iridium's lenders, including JPMorgan Chase & Co., and its unsecured creditors. The settlement created an entity that could sue Motorola for billions of dollars, which Motorola objected to. A federal judge approved the settlement in April 2005.

A trader placed the company's notes at 21.5 bid, 22 offered, while another market participant saw them at 19 bid, 21 offered.

I haven't seen [the bonds] two-sided in a while," he said.

Broad market weak

A market insider said he saw Ply Gem Industries Inc.'s 9% bonds due 2012 "in a little bit" at 88 bid. He said the notes traded earlier in the day at 88.5 bid and were off a point from Friday, where the notes came in at 89.5 bid.

Elsewhere, Seoul, Korea-based MagnaChip Semiconductor Ltd.'s 8% notes due 2014 were pegged at 69.5, about a point lower than the close of trading Friday. A trader attributed the loss to an "overall unhealthy high-yield market."

In the autosphere, Remy International Inc. dropped 1 to 1.5 points in its bonds, according to a trader. He quoted the 8 5/8% notes due 2007 weaker at 82.

"But everything was weak," he said.

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