Remy default rumor sparks losses; Solutia bonds boosted; MedQuest drops

By Stephanie N. Rotondo

Portland, Ore., April 12 - The distressed bond market was buzzing that Remy International Inc. might default on an upcoming coupon payment Thursday. The rumor sparked losses of at least 2.5 points in its bonds.

The floating-rate notes were the issue at hand, but the company also has another payment due next month. A company spokesperson was vague when asked about whether the payment would be made but did say that, in the case of a default, she could not comment, as certain filings would have to be made first.

The rumor follows the company's recent announcement that is was looking to recapitalize and that it was no longer going to file reports with the Securities and Exchange Commission. A market player previously told Prospect News that the latter was "not a good sign."

Meanwhile, Solutia Inc.'s bonds were seen as better as a bankruptcy judge approved an agreement for the chemical company to buy its joint venture partner's stake. The judge also approved the sale of one of the company's water treatment phosphonates businesses.

A trader said a "negative conference call" was the reason for MedQuest Products Inc.'s lag on its bonds. Its parent company recently filed its 10-KSB, and the company's auditors are growing concerned.

But leading the pack on a more eventful trading day was Calpine Corp. The bonds surged on news that several equity groups were interested in getting their hands on the struggling power company.

With Calpine leading the way, a trader said, "distressed was well-bid for."

Remy tanks on default rumor

Is a default in Remy's future? There was some speculation in the distressed bond market that an upcoming coupon payment on the company's floating-rate note due 2009 might not be paid. The default buzz prompted an at least 2.5-point loss in the company's other bond issues, a trader said.

The 9 3/8% notes due 2012 closed around 24, down from the previous day's close at 29. The 11% bonds due 2009 - which as a payment scheduled for next month - were pegged at 25.5, down from 28. The floating-rate notes see little activity and were last seen in the 99 context.

One source told Prospect News that all previous coupon payments had been made and she saw no reason why the upcoming payment would not.

Leah Campbell, a spokesperson at Remy, told Prospect News that she had no comment on whether the coupon will be paid, but did say a press release is expected to be issued next week on the issue.

The Anderson, Ind.-based automotive electrical systems maker recently announced that it was seeking to recapitalize and had entered into discussions with a majority of its noteholders. The company also said that it was no longer obligated to file reports under the Exchange Act, stating it would not file periodic reports or its 10-K with the SEC. The earnings report for the fiscal year 2006 are expected to be completed by April 30 and will be available on the company's web site.

Solutia bonds boosted

Solutia's bonds surged 2 points, a trader said, as the 7 3/8% notes due 2027 closed at 97 bid, 97.5 offered.

The St. Louis-based chemical company received approval Wednesday to buy out Dutch chemical firm Akzo Nobel NV's holdings in Flexsys, a Belgian 50/50 rubber chemicals firm. The agreement is valued at $212.5 million. Dan Jenkins, a spokesman for Solutia, told Prospect News that the company is "moving forward to complete the transaction as soon as possible."

The bankruptcy court overseeing Solutia's case also approved a plan to sell the company's Dequest business, a water treatment phosphonates company. The sale to Thermphos Trading GmbH is valued at $67 million in cash.

MedQuest drops

A not-so-good conference all was the catalyst for a 2-point drop in MedQuest's bonds, a trader said, pegging the 11 7/8% notes at 88 bid, 89 offered.

Calpine surges higher

Calpine's bonds were being quoted higher, apparently helped by news reports that nearly a dozen major private-equity companies have been invited to submit bids to take equity stakes in the bankrupt San Jose, Calif.-based power generating company.

Calpine's 8½% notes due 2011 were seen up 2.25 points at 114.5 bid, 115.5 offered, a trader said - this on top of a gain of several points in the credit on Wednesday.

"It's unbelievable, huh?" he quipped, adding that "it keeps on going to the moon."

He linked the rise to the recent announcement that the company, which files monthly operating reports with the bankruptcy court overseeing its restructuring, would file its next report by the deadline, and "eliminate some claims. Everyone just started jumping on the bandwagon" on Wednesday, and it continued Thursday.

He also noted that the company's shares "were skyrocketing" up more than 20%, which he termed "something crazy," reacting to the news that heavyweight private-equity players like Kohlberg Kravis Roberts, The Carlyle Group and the Blackstone Group had been asked to bid on either buying the company outright or taking equity stakes in it.

At another desk, Calpine's 8¾% notes due 2007 were seen up a point, at 115, on top of a similar-sized rise on Wednesday, while its Calpine Canada Energy Finance II 8½% notes due 2008 were seen up more than 3 points, at 114.5.

Broad market mixed

A trader saw Fedders Corp.'s 9 7/98% notes due 2014 down about 2 points, at 43 bid, 45 offered, on "no news," while another source pegged the bonds at 42.5 bid, down 3 points on the day.

Primus Telecommunications Group's 8% notes due 2014 were up 2 points, at 65.5 bid, 66.5 offered, while the McLean, Va.-based telecom company's stock was "up pretty big," a trader said, though he saw "nothing exciting on the news front."

Paul Deckelman contributed to this article.

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