MagnaChip edges higher; Fremont General steady; Delta gains; Fedders firms

By Stephanie N. Rotondo

Portland, Ore., April 26 - MagnaChip Semiconductor LLC posted a wider quarterly net loss Thursday, though the figures came as no surprise. But despite the wider loss, the chip maker's bonds edged up slightly, gaining almost a point during the trading day.

Meanwhile, Fremont General Corp.'s bonds were "trying to trade up," according to one trader. Still the notes closed relatively unchanged, but on decent volume.

Only two business days from exiting bankruptcy, Delta Air Lines Inc.'s bonds were seen slightly firmer. The airline's new equity, trading on a when-issued basis, traded as high as $23.35 during the day, but closed a bit lower. One trader who is moving the stock said he expects the paper to gain altitude once it hits regular trading.

Fedders Corp. is slowly moving up, which one trader attributes to "somebody buying these [bonds] up." The trader speculates that warmer weather could "change the perception" investors have on the distressed air quality solutions producer.

Post-liquidation plan news, Le-Nature's Inc. saw its bonds fall a bit from Wednesday's highs, but the notes are still well up from their pre-news levels. A trader also noted that the bottling company's bank debt firmed on the day.

MagnaChip bonds edge up

"Ah, troubled MagnaChip," was the response a trader gave Prospect News when asked how the semiconductor manufacturer's debt fared after posting its first-quarter results Thursday.

Though the trader said he did not actively trade the name - according to NASD's Trace system, the bonds saw a fair amount of volume. He pegged the 8% notes due 2014 at 63 bid, 65 offered, while he called the 6 7/8% notes due 2011 unchanged. He added that though the 8% junior notes were up about a quarter of a point, "that's just somebody marking them up."

At another desk, a trader saw the 8% - "That's the fun one," he said - open the day at 62 bid, 63 offered, then close at 65 bid, 66 offered.

In its quarterly filing with the Securities and Exchange Commission, MagnaChip posted a net loss for the three months ended April 1 of $67 million, compared with a net loss of $3.9 million in the first quarter of 2006. Revenue in the first quarter dipped to $151.8 million from $213.1 million in same quarter in the previous year.

"Our financial results for the quarter were disappointing vs. our historical performance, but we remain optimistic about our ability to achieve success and market share gains in all of our businesses," said Robert Krakauer, president and chief financial officer, in a press release. "Our cash balance as of April 1, 2007 was $59.3 million, and we are continuing our cost containment efforts while at the same time making strategic investments in core growth areas."

"Overall, the first quarter came in as expected with no real surprises,' said Sang Park, chairman and chief executive officer of the company, in a news release. The company had predicted the first quarter of 2007 would not be remarkable when its 10-K was filed earlier this year.

Also in the press release, the company said it expected revenue for the second quarter ending July 1 to increase 10% to 12% compared with the first quarter of 2007.

Fremont General notes steady

A trader went back and forth on Fremont General, first saying that the 7 7/8% notes due 2009 were off a point, then calling the notes unchanged at 94 bid, 94.25 offered.

Either way, he said the bonds were "trying to trade up."

The subprime lender announced Wednesday that it had hired Squar, Milnar, Peterson, Miranda & Williamson LLP as its new auditor less than a month after its former auditor, Grant Thornton LLP, resigned.

The accounting group is expected to finish the audit of its 2006 financial statements, which are overdue.

Grant Thornton resigned in late March as auditor for the Santa Monica, Calif.-based company, saying that the lender "no longer meets our requirements for client acceptance," and that Fremont "did not provide certain requested information ... on dates previously agreed upon with management."

In a press release dated April 2, Fremont denied that claim.

"At no time did the company either fail to provide to Grant Thornton any requested information on a timely basis or communicate to Grant Thornton that it was opposed to any additional procedures or testing or to Grant Thornton's request to expand the audit scope," the release said. "The company has repeatedly requested that Grant Thornton complete its audit and did not at any time seek to place any limitations on Grant Thornton in connection with the audit. The company remains willing to provide Grant Thornton with the information it needs to complete its audit."

Fremont has been hit with problems due to rising defaults along with other subprime lenders, such as New Century Financial Corp. and Accredited Home Lenders Holding Co. The financial institution stopped making residential loans last month after it was told to halt "unsatisfactory" loan practices by the Federal Deposit Insurance Corp. Last week, the lender said it was in exclusive talks to sell its residential lending business to an unnamed party that also agreed to acquire about $2.9 billion of subprime mortgages.

Delta gains altitude

Delta's bonds firmed slightly, with one trader saying the 8.3% notes due 2029 were trading "around 60," while another source placed the notes up half a point at 59.5.

The airline is expected to emerge from bankruptcy on Monday, and its new shares, trading on a when-issued basis, closed their first day of trading at $22.80, after moving as high as $23.25.

A trader said the shares are considered to be trading at a premium of about half a point to the bonds, and still holders were not selling much into the bids.

The trader said there was an overall feeling in the market that the stock will land on higher ground, especially once it hits regular trading on the New York Stock Exchange.

Fedders firms

"Our favorite Fedders," a trader said, saw its 9 7/8% notes due 2014 close the day firmer at 48 bid, 49 offered, adding, "I think somebody's trying to buy these up."

But, "I think Fedders is done," he said.

Still, despite he seemingly negative feeling toward the company, he points out that the brand name is well-known. New York, he said, has already seen "one hot day," and just walking down the street, he saw Fedders name everywhere - sticking out the windows of apartments, in the form of air conditioners.

It could be, he continued, that a hot summer "could change the perception" on the Liberty Corner, N.J.-based company.

"We've seen the intermediate-term lows on this," he said.

Elsewhere, another trader offered a different perspective on the company.

"I think they can turn it around," he said of the distressed name. Now that there is some liquidity on hand, he said the company can go forward with selling off non-core businesses at a "more favorable price, instead of like in a fire sale."

"Management knows the business very well," he added.

However, the first trader does not expect to hear anything new from the company until the next earnings release.

"I think it's radio silence until next earnings," he said. "And, again, they'll say as little as possible."

Le-Nature's mixed

A trader said Le-Nature's bank debt firmed to 67 bid, 69 offered from its Wednesday levels of 64 bid, 68 offered. However, the 9% notes due 2013 dropped back to 44.5 bid, 47.5 offered from the previous day's close of 48 bid, 50 offered - still up from the 35 bid, 38 offered context in which the bonds had traded before Wednesday's news of the liquidation plan filing.

The Latrobe, Pa.-based manufacturer of flavored bottled water and other beverages reported a $551,845 net loss before other income and expenses for March on $196,342 in revenues, according to its monthly operating report filed Thursday with the U.S. Bankruptcy Court for the Western District of Pennsylvania.

The figures compare to a $253,615 net loss before other income and expenses for February on $78,925 in revenues. The company showed a net loss for March of $1.03 million, up from a $266,787 February net loss.

Ronda Fears and Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.