Trader points to 'bad management' for Fedders' failings; Hayes Lemmerz bonds boosted

By Stephanie N. Rotondo

Portland, Ore., April 9 - A long Easter weekend and the final two days of Passover caused many market participants to be away from their desks on Monday, which in turn prompted a quiet day in the distressed bond market.

One trader was keen to dish on Fedders Corp., which has seen lighter activity and dropping value in its bonds over the last two weeks. The trader attributed the bonds' poor value to bad management.

The trader was also interested in the turnaround Hayes Lemmerz International Inc. has made recently. The automotive parts maker will hold a vote next month on a proposed rights offering, which the trader thinks will go off without a hitch.

In other distressed automotive components paper, Remy International Inc.'s bonds are continuing to weaken, though activity has slowed in the company's bonds. The company recently announced it was looking into a recapitalization plan, but so far there has been no word on the progress of those efforts.

Meanwhile, Hollywood, Fla.-based Technical Olympic USA Inc. posted modest gains on the day, despite yet another negative outlook by a ratings agency.

Fedders unchanged

A trader is blaming management for Fedders' failure to turn itself around, noting that, "management is not doing a good job."

The company's bonds, which have seen slowed trading activity since a March 26 bondholders' conference call, has dipped about 10 points in the last two weeks. On Monday, the 9 7/8% notes due 2014 were seen unchanged from Friday trading at 49 bid, 51 offered, though the paper barely traded. The notes were trading in the low-60s at the time of the conference call with decent volume.

The trader said the air quality solutions producer had the opportunity to turn around, much like Movie Gallery Inc. That company's management was "proactive," he said, in trying to find ways to avoid bankruptcy and improve its outlook.

"I don't think [Fedders] is trying to do that right now," he said. However, he did say he believed bankruptcy to be avoidable if the company was managed better.

He added that "they've been terrible difficult management to get a hold of," and the lack of information flowing from the company was minuscule if not nonexistent. The inability to sell its indoor air quality business - something the company has attempted to do since July 2006 - also points to bad business.

"It's not getting better, it's getting worse," he said.

Hayes Lemmerz gains

A trader was impressed at the gains automotive parts maker Hayes Lemmerz has made in recent weeks.

He said the 10½% notes due 2010 were previously trading in the 80s but are now seen in the 105 level. The gains, he added, were "not overnight."

The trader mentioned that the proposed rights offering "should go through successfully." The company announced on March 30 that it would hold a special stockholders meeting on May 4 to vote on the offering, which proposes to offer shares of common stock at a price of $3.25 per share, as well as to increase the maximum number of authorized shares to 200 million shares from 100 million shares.

Remy weakens

Elsewhere in the autosphere, Remy International Inc. is still weak, according to a trader. The 8 5/8% notes due 2007 were pegged by a market source around 84, though on small trades. The notes closed the previous week around 86. The company said last week that it will post its 2006 fiscal-year results on its web site no later than April 30.

"Discontinuing the SEC reporting will provide Remy with additional time and resources to allocate to the two key objectives required to strengthen our company - successfully completing a recapitalization effort and renegotiating certain key commercial agreements," said John Weber, president and chief executive officer, in a press release. "Achieving these objectives will improve both our balance sheet and margins, creating a platform for a sustainable and profitable business."

In the same press release, the company said it was in talks with its noteholders on a recapitalization plan aimed to de-lever the struggling company's balance sheet.

Calls to the company regarding the talks were not returned Monday.

Technical Olympic firms

Technical Olympic bonds were slightly firmer on the day, though a trader is still calling the paper junk.

A market source saw the 7½% notes due 2015 losing ground early in the day, but the notes gained back their losses to close unchanged around 71. The 10 3/8% notes due 2012 were pegged at 71, while the 9% bonds due 2010 came in at 94.

Standard & Poor's placed the struggling homebuilder on CreditWatch with negative implications. The potential downgrade follows negative ratings by Fitch Ratings and Moody's Investors Service reported last week.

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