Delphi debt, equity dip; Federal-Mogul surges; Calpine bonds boosted; Sea Containers up

By Stephanie N. Rotondo

Portland, Ore., April 23 - Distressed automotive parts suppliers were active in what one trader called "an unusually slow Monday," as Delphi Corp. saw a weaker day in both its equity and debt, while Federal-Mogul Corp. continued to surge ahead.

A trader said Delphi's current problem is one of timing: As one of its equity investors is looking to pull out, the time frame is pushed further back.

On the other hand, time is not an issue for Federal-Mogul, which is looking to exit bankruptcy in a few weeks. As the company inches closer to its May 8 confirmation hearing, the bonds are continually moving higher.

Meanwhile, Calpine Corp. is continuing to be a popular name among investors. The recent surge in popularity has seen the bonds gaining momentum, and its equity is "hot."

It may be - so far - a short story, but a trader believes the market is "coming around" on Sea Containers Ltd.'s story. He said the company's structure is doing better and better, but is still looking for bonds.

The market is buzzing about Fedders Corp., once again, but this time the rumors are not being taken seriously. Rumor has it the company is looking for a debt-for-equity swap, but players on both sides are not buying it.

In distressed airline paper, Delta Air Lines Inc. posted a narrower first-quarter loss, but that did little to help the No. 3 carrier's debt. In fact, the notes, which were seen gaining altitude last week, lost ground on Monday, slipping as much as 2 points.

Delphi debt, equity dip

Delphi's bonds and equity were called weaker by one distressed trader, which he attributed, in part, to Cerberus Capital Management LP's potential pullout.

He said the 8¼% notes due 2033 were moving in the 117 to 120 levels just four days ago, but come Monday were seen at 113 bid, 116 offered.

The company's equity, which the trader said was really "taking the hit," came in 9 cents, or 3.60%, to close at $2.41.

Another trader, however, called Delphi's bonds unchanged, pegging the 6.55% notes due 2006 at 110.

According to the first trader, as Cerberus pulls out of the financing deal, that could "push out the timing" of the company's emergence from bankruptcy.

"It all has to do with timing," he said.

The trader said timing was the real issue at hand, as even without Cerberus, there is still an investment group in place, as well as another investor - Highland Capital Management LP - which is interested in taking part in the deal.

In other Delphi news, the Troy, Mich.-based company announced that Delphi Technologies Inc., a unit of Delphi, has formed a new antenna company called Monarch Antenna Inc. in union with Michigan State University.

Delphi said the company, expected to target the high-growth wireless market, was created to commercialize self-structuring antenna technology, which was jointly developed by the two sides.

Federal-Mogul drives up

Elsewhere in the autosphere, Federal-Mogul's bonds were seen higher in what a trader called a "continued rebound." He pegged the notes - which trade about even - at 97.5 bid, 98 offered, which he said was up 1.5 points.

When asked why the distressed automotive parts maker's bonds were performing so well, he attributed the gains to "equity funds coming in" buying up the notes, as the company is gearing up to exit bankruptcy. A confirmation hearing on the company's reorganization plan is scheduled for May 8.

The Southfield, Mich.-based manufacturer posted its first-quarter earnings on Friday, which showed a net income of $5 million for the period ended March 31, compared with a net loss of $68 million for the same period the previous year. The results were the best the company has posted since filing for bankruptcy in 2001.

Calpine hot, hot, hot

A trader said that market players "continue asking about Calpine," which has seen decent volume and price movement over the last week.

He saw the 7¾% notes due 2015 at 122.75 bid, 123.25 offered, which he called up 1.25 points. He also quoted the 8½% notes due 2011 at 121.

"Some say that the bonds are trading above accrued, but that doesn't make sense," he said.

Elsewhere, another trader, who calls Calpine an "interesting play," saw the 8½% notes at 120.5 bid, 121.5 offered.

The first trader also mentioned that the power company's equity is "so hot... it's just nuts." At market close, the stock was up 49 cents, or 15.03%, to $3.75.

The trader noted that the company has potential to perform even better, "but no one's coming up with a rights offering saying that someone is going to take the whole company out," he said. "But that's what needs to happen."

Sea Containers up

Investors may be coming around to the Sea Containers story - at least that is what one trader said may be contributing to the Bermuda-based company's recent performance.

The trader said that the company's equity was boosted by at least 20% during the trading day and the bonds have "continually moved higher."

The stock moved up 25 cents, or 23.15%, to $1.33. According to the trader, the 10¾% notes due 2006 edged a point higher to 89.

At another desk, a trader saw the 7 7/8% notes due 2008 at 85 bid but noted, "they trade in such odd lots."

Odd lot trades in the bonds, which have gained about 5 points in the last week, would be because the notes are hard to find.

"I've been looking for bonds," the first trader said, "and I can't find any."

Still, the trader said that market participants are starting to have more faith in the distressed company.

"We've been saying these are par recovery for a long time," he said. "I think more people are coming around to the same belief."

Market buzzes on Fedders

Rumor alert: Market buzz is that Fedders is looking at a debt-for-equity swap.

One trader, however, said the speculation was "very tenuous."

"I don't think it is happening, and I don't think it's believable either," he said.

Another trader was not buying it either but did think it was a good idea.

"It would really help turn this company around," he said.

Still, another source doesn't see the need for such things at the present time.

"The wolf is not at the door yet," he said. "It makes sense, but not yet."

The first trader quoted the Liberty Corner, N.J.-based company's 9 7/8% notes due 2014 unchanged at 46, while the second trader saw a market at 47 bid, 49 offered, which he called at least a point higher. He added that the market had been around since lunchtime.

Delta notes lose altitude

Despite a narrower first-quarter loss, Delta's bonds were seen weaker, according to one trader.

The trader placed the 8.3% notes due 2029 down 2 points from the Friday close, coming in at 59.75 bid, 60.25 offered.

Just a week away from exiting bankruptcy, the Atlanta-based airline showed a loss of $130 million for the period ended March 31, compared with a loss of $2.07 billion for the same time frame a year previous. The company also said it had an 11.4% rise in sales during the period.

Excluding reorganization and special items, Delta said it lost $6 million in the latest quarter.

Once it emerges from bankruptcy, all existing Delta stock will be canceled. New shares will be issued to pay creditors and generate new investors. The new stock is expected to begin trading in early May.

A confirmation hearing on the company's reorganization plan - which received overwhelming support from its creditors - is scheduled for Wednesday.

Primus Telecom notes mixed

A trader said Primus Telecommunications Group Inc.'s 3¾% notes due 2012 were firmer, coming in at 64 bid, 65 offered.

The trader said the word is that holders of the 3¾ notes are looking to exchange with the recently issued 14¼% second-lien notes due 2011.

However, "If I'm the company, I don't want to do that trade," he said.

The trader also saw the 8% notes due 2014 "about where they were," closing at 73 bid, 74 offered. The 12¾% notes due 2009 were seen at 95 bid, 96 offered, though he noted the bonds "don't trade much."

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