Remy skyrockets; Federal-Mogul firms; Bally bonds boosted; Trump notes dip

By Stephanie N. Rotondo

Portland, Ore., June 18 - It was all about the autos Monday, as investors continued to react to Remy International Inc.'s pre-packaged bankruptcy plan and waited to hear the outcome in Federal-Mogul Corp.'s confirmation hearing.

Remy's reorganization plan, which aims to cut about $360 million in debt, was announced late Friday and sparked heavy movement in the notes. Monday was no different, with the senior bonds soaring as much as 25 points higher.

As Remy joins many other struggling automotive parts makers in bankruptcy, Federal-Mogul is hoping to get out of it. Traders reported that the bonds were stronger as investors waited for approval on the company's plan, but by 6 p.m. ET, there was no indication of an outcome.

Chicago-based Bally Total Fitness Holding Co. saw its bonds firm as the company announced it had received majority approval from its bondholders on its pre-packaged bankruptcy plan.

"The bondholders must be nicely compensated," a trader said of the debt's gains on the day.

In the northeastern region of the country, Trump Entertainment Resorts Inc. announced the retirement of its chief executive officer, which caused some investors to lose all good feelings in the debt.

Last week, on the back on the news that Penn National Gaming Inc. had been sold, Trump's bonds - as well as its equity and options - blew up, as many thought that signaled a deal in Trump's future sooner than later.

However, as the CEO retires, the feelings that a deal could be inked soon have soured.

Meanwhile, Sea Containers Ltd. is continuing to see strength in its bonds, a trader said, though explaining why was difficult.

Remy skyrockets

Remy's bonds continued to "soar higher" in reaction to its pre-packaged bankruptcy plan, a trader said, pegging the 11% subordinated notes due 2009 around the 95.5 mark, up 25 points from Friday.

At another desk, a trader quoted the junior debt at 94 bid, 95 offered, while the 8 5/8% senior notes due 2007 also climbed higher to 103 bid, 104 offered. The trader also saw the floating-rate notes due 2009 at par bid, 101 offered.

Another trader said the senior debt was moving around 103 bid, 103.5 offered.

Under the pre-packaged plan, announced late Friday, bondholders would receive holdings in the equity in return for its debt, a move that would allow the company to cut $360 million in debt. Current shareholders would see their paper wiped out and replaced by the bondholders' new shares.

The plan also includes a reorganization expected to be completed in the fall.

The company has stated that most of its debtholders have agreed to support the plan and it has plans to move forward with a creditor vote once it has completed negotiations with some of its key customers.

Federal-Mogul gains

While one distressed automotive parts maker enters bankruptcy, another is looking to exit.

Federal-Mogul's bonds - the issues tend to move in line with each other - were seen at 103 bid, 104 offered by one trader while another quoted the notes at 103 bid, 103.5 offered.

The Southfield, Mich.-based company sought approval of its reorganization plan on Monday in a Wilmington, Del., court. As of press time, there had been no word on the outcome of the confirmation hearing.

The company was forced into bankruptcy due to millions of dollars in asbestos claims, unlike its fellow bankrupt parts makers. According to the company plan, the company hopes to emerge from underneath the awesome debt by establishing a trust for asbestos claims as well as by becoming one of billionaire investor Carl Icahn's many newly acquired parts manufacturers.

Auto sector stronger

The overall automotive sector felt free of the market's general heaviness of late, traders reported.

One trader said he "did not understand why the bonds trade where they do," in relation to Tower Automotive Inc.'s junior debt. He said the 12% notes due 2013 - a so-called "crappy credit" that has not moved in about a week - was at 7.55.

"They should be at 2 cents on the dollar," he said.

Meanwhile, a trader saw Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 up about 4 points from last week at 66 bid, 67 offered.

When asked why the bonds had gained, the trader said, "They have got some deal going on with them too."

Bally's bonds spike up

In other pre-packaged bankruptcy news, fitness operator Bally Total Fitness announced that it had received majority approval from the holders of its two issues of debt on its reorganization plan, which sent the company's bonds higher.

A trader said the 10½% notes due 2011 were up 5 points since Friday at 110 bid, 111 offered. He added that, as the news was "better than the market expected," the bonds could be worth up to 115.

Another trader saw the notes "flying" at 109.5 bid, looking for an offer. He also saw the 9 7/8% notes due 2007 at par bid.

"[The plan] is great for bondholders," the first trader said.

"It certainly seems to be good for the creditors," said the second trader.

Elsewhere, a trader said the senior notes jumped as much as 9 points to the 109 area, while the subordinated debt climbed 3 points to 98.

According to the terms of the plan, holders of the senior 10½% notes will receive an interest increase to 12 3/8%. Holders of the subordinated debt will receive new debt in exchange for the 9 7/8% notes, as well as the right to participate in a $90 million rights offering.

Trump notes dip

Casino operator Trump Entertainment announced the retirement of its chief executive officer, which prompted some investors to be concerned.

A trader said the 8½% notes due 2015 were active on the news, dipping about a point to 102 bid, 103 offered.

The stock also got heavy, dropping $1.30, or 8.17%, to $14.61.

While a press release issued on the topic of the CEO's retirement declared that the move was in keeping with James B. Perry's "desire to return to his family in California," the trader did not seem swayed.

"It is not clear how or why," he said.

And, he added, if a buyout deal does not go through - as it had been thought imminent last week when the bonds saw decent gains - then the company would be operating without a CEO. Not to mention, he continued, the bonds could dip to sub par.

Sea Containers strong

A trader said Sea Containers' bonds were continuing to be strong, despite a possible court order for the company to pay into its under-funded pensions.

The trader said the 10¾% notes due 2006 were at 93 bid, 94 offered, while the 7 7/8% notes due 2008 were up a couple points from last week at 89 bid, 91 offered. He said the 10½% notes due 2012 were moving at 91.25 bid, 93.25 offered.

But as for the strength of the bonds, the trader said "trying to figure out why [the notes were performing] is impossible," adding that the credit is "hard to follow."

According to the trader, the flow of information between the company and the investors is less than perfect, as the company tends to not give accurate information. In fact, the trader said, it is not uncommon for the company to say one thing and then issue a press release that says the exact opposite.

Friendly's up on buyout

As ice cream chain Friendly's Ice Cream Corp. announced it was being sold, the bonds were seen moving higher.

A trader pegged the 8 3/8% notes due 2012 around 103.25, up from last week's numbers at 96.25 bid, 97 offered.

According to a press release, the chain signed a definitive agreement with Freeze Operations Holding Corp, an affiliate of Sun Capital Partners, Inc., to be acquired in an all-cash transaction for $337.2 million, or $15.50 per share.

Sirva loan down

Sirva Inc.'s term loan traded actively at lower levels during Monday's market hours as the company held a conference call for the current lenders under its senior secured credit facility at 10 a.m. ET to discuss amending the facility and to update the lenders on its financials, according to a trader.

The term loan ended the day at 96 bid, 96¾ offered, down about a point from previous levels, the trader said.

However, the paper was most actively traded in the 95½ to 96½ context, the trader added.

On Monday, Sirva told its lenders that as a result of the weaker-than-expected domestic real estate market, it is requesting covenant relief through 2008.

The weakness in the domestic real estate market resulted in higher-than-anticipated levels of home inventory for the company, increased losses on homes sold out of inventory, lower-than-expected moving volumes, increased reserves for loss on home sales and home sale expenses during the second half of 2006 and higher-than-expected gross investment in inventory homes.

Both the company's Global Relocation and Moving Services North America businesses saw EBITDA negatively impacted by these events.

At fiscal year ended 2006, Global Relocation's EBITDA was $24.6 million, down from $33.1 million at the end of the previous year, and Moving Services North America's EBITDA was $27.6 million, down from $28 million at the end of the previous year.

Sirva's consolidated EBITDA at the end of 2006 was $34 million, down from $42.2 million at the end of 2005.

The company went on to say that the covenant relief is driven by a need for more flexibility because of this market weakness and is also necessary for it to be able to present auditors with an acceptable covenant outlook for 10-K's and 10-Q's.

The credit facility consists of a $320 million term loan and a $175 million revolver, of which $48 million was drawn at the end of the first quarter.

JPMorgan is the lead bank on the amendment.

Lenders were also updated on Sirva's progress to bring its filings with the Securities and Exchange Commission up to date.

The company filed its restated 2004 10-K and 2005 10-K in January, 2006 10-Q's for the first three quarters in May, and it expects to file its 2006 10-K in June.

The company anticipates being current with its second-quarter 2007 10-Q.

Sirva is a Westmont, Ill.-based relocation services provider.

Sara Rosenberg contributed to this article.

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