Fremont General up on subprime loan sale; Airlines flying higher

By Stephanie N. Rotondo

Portland, Ore., March 21 - Fremont General Corp. is attempting to turn its subprime mortgage woes into wows, announcing Wednesday the sale of $4 billion of its subprime loans.

The financial institution's bonds jumped on the news, gaining as much as 3 points.

Meanwhile, distressed airline paper also posted gains in its bonds, though there was no clear indication as to why. A trader said Delta Air Lines Inc., which had lighter-than-usual trades on Tuesday, saw much more activity during the trading day.

Northwest Airlines Corp. was also active as an ad hoc equity committee voiced its opposition to a proposed rights offering.

Air quality solutions producer Fedders Corp. got an expected boost in its bonds a day after announcing it had closed on its new credit facility. The bonds had been down Tuesday, even after the news, due to uncertainty, a trader said. He predicted that Wednesday would bring better numbers.

The numbers were better, but a trader said the trades were very small.

Movie Gallery Inc. and Remy International Inc. both saw increases in prices for their bonds. Traders did not know why Movie Gallery gained but attributed Remy's boost to the "buy-in notices."

Fremont General gains

News that Fremont General will sell $4 billion of its subprime mortgage loans boosted the company's bonds as much as 3 points, according to one trader.

The trader placed the 7 7/8% notes due 2009 as trading at 97. Two other traders also saw the notes trading at 97. Another trader said the notes had traded around 94 on Tuesday.

The sale is a step toward exiting the subprime business, which has seen a tumultuous past few weeks.

Fremont did not disclose the name of the buyer of the loans, which are being sold at a discount.

But, "the discount probably wasn't as bad as some people were expecting," a trader said.

"It looks like they sold it at a 3% to 4% discount," he estimated.

"It's a good sign that they were able to make a sale," he added.

The question now, according to the trader, is whether the remaining portion of loans owned by Fremont is the undesirable loans and how much of a discount they will have to be sold at.

Delta rises

Trading in Delta bonds increased from Tuesday's levels, according to one trader. The Atlanta-based airline saw its 8.30% bonds due 2029 gain to close at 56.75 bid, 57 offered.

At another desk, a trader said he saw the notes at 56.5 bid, 57 offered, up from their morning levels of 55.

The first trader said he did not know why the bonds moved up but did mention problems in the sector. JetBlue Airways Corp. cut its yearly earnings forecast, due to winter storms that have disrupted 1,600 flights in the past two months. The company also said rising oil costs had hurt the company.

In other Delta news, the airline has set March 29 for the launch of its $2.5 billion exit facility. The company has said it expects to emerge from Chapter 11 protection by spring 2007.

Northwest flies

Northwest Airlines got a boost in its bonds, despite a drop on the equity side due to the ad hoc equity committee opposing a $750 million rights offering.

A trader saw the Eagan, Minn.-based airline's 10% notes due 2009 at 87.5 bid, 88.5 offered, up from Tuesday's levels of 85.75 bid, 86 offered.

The equity committee asked a bankruptcy judge to delay ruling on the rights offering because the group believes the offering does not reflect fair market value since the airline did not offer legacy carrier or "strategic investors" the right to purchase the stock.

This is just one of several fights the airline has engaged in with its equity holders. The committee has also opposed the company's reorganization plan, stating the company could be worth more post-bankruptcy if it merged with another carrier. A merger could also mean a distribution to stockholders, which will not occur under the current reorganization plan.

Fedders up on small trades

Fedders got an as-expected boost in its bonds after announcing Tuesday that it had completed its $90 million senior secured financing.

A trader saw the Liberty Corner, N.J.-based company's 9 7/8% notes due 2014 at 58 bid, 60 offered, up from the previous day's levels of 55 bid, 56 offered. However, he added the trades were small.

Fedders missed a coupon payment earlier this month, leaving many investors wondering if the company would default. The refinancing effort came in the nick of time, as the coupon's grace period ends the end of this month. Proceeds from the new financing deal are expected to go toward paying down its bonds.

Movie Gallery, Remy up

Movie Gallery's bonds were "definitely better," according to one trader, who placed the 11% notes due 2012 up 1.5 points to 92 bid, 93 offered. He could not, however, explain the gain.

"Lots of people are trying to figure it out," he said.

The company posted its fourth-quarter and annual earnings on Friday. The Dothan, Ala.-based movie rental chain showed a 1.9% decrease in revenue for the fourth quarter of 2006, compared to the same quarter the previous year.

In distressed auto parts maker names, Remy saw its 8 5/8% notes due 2007 up at 76.5. A trader attributed the movement to "buy-in notices going around." He said there is "no more borrow available."

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