American Home preferreds fall; Delphi, Remy up on GM news; Hines Horticulture better

By Stephanie N. Rotondo

Portland, Ore., July 31 - More subprime mortgage worries hit the market Tuesday as American Home Mortgage Investment Inc. said cash flow was low and liquidation was possible.

The news helped fuel a broader decline in equity markets, including a nearly 150-point loss in the Dow Jones Industrial Average, which had previously been up on the day.

A trader said that the mortgage lender's preferred issues were down drastically on the announcement, while its stock plunged 90%.

But while traders said the bond market followed the path set by the stock market, most notable names in the distressed arena were up.

Delphi Corp. and Remy International Inc., for example, were both boosted by news that automaker General Motors Corp. - former parent of Delphi - had posted its second-quarter results, showing an amount that was more than double the figure that was expected.

Remy's bonds were also helped by news that the company had inked a new supply agreement with GM, as well as the fact that the bankrupt automotive parts supplier had found debtor-in-possession financing.

Meanwhile, market players waiting to see Hines Horticulture Inc.'s first-quarter financials might have a considerable wait ahead of them. According to a trader, the company said it will not release the numbers - which had been expected to be released Tuesday - until later this year.

Still, the postponement did little to hurt the bonds, which were deemed a little stronger compared to the previous day's session.

With the month coming to a close, many traders were busy with month-end pricing and other administrative tasks.

"This is a tough market to do month-end pricing," quipped one trader. "It's a little like 52 pick-up."

American Home preferreds fall

The story of the day seemed to be news that American Home Mortgage was losing cash fast, as many of its financial backers have demanded repayment.

A trader said the mortgage lender has a couple of $25 par preferred issues. After the news broke, however, that paper dipped to around $3, or 12 cents on the dollar.

"It is more mortgage meltdown," the trader said.

The company said it is considering its options, and liquidation seems likely. Around $750 million in mortgages will be lost due to the company's plight.

Backlash on the news spread throughout the market quickly. RAIT Financial Trust said the lender had not paid its trust securities payment on Monday, leaving the real-estate investment trust exposed for about $95 million.

A trader said shares of the trust "lost a third of its value today," with more-than-usual volume in the shares. The stock traded down $5.72, or 35.57%, to $10.36.

"It's enough to sink that ship," the trader said of the trust's position in American Home.

Earnings are expected from the trust on Friday. The trader said he did not expect the numbers to be good.

Delphi gains

Delphi's bonds were seen better as the broader market fell all around them. The bonds were propelled by a better-than-expected second-quarter profit from Delphi's former parent company, General Motors.

A trader saw the 6.55% notes due 2006 open the day with a 110 bid and close the day up with a 114.5 bid. He said that, while the notes were not all that active, they were up at least 3 points on the day, plus at least 5 points from the previous session.

GM, the largest American automaker, posted a net income of $891 million in the second quarter of 2007, compared to a net loss of $3.4 billion the previous year. The figure was more than double what many analysts were expecting.

Remy up

Also up on news related to GM was Remy, which a trader called better by about a point.

The automotive parts supplier's floating-rate notes due 2009 - deemed the most active of Remy's issues - were seen at 99.75 bid, 100.75 offered after closing the previous session at 98.75 bid, 99.25 offered.

The Anderson, Ind.-based company announced Tuesday that it had reached an agreement with GM in relation to its supply arrangement.

In another key step in its financial restructuring, Remy also said it had entered into a binding commitment with Barclays Capital to provide DIP financing of up to $225 million, as well as $330 million in long-term exit financing.

Hines Horticulture better

On Monday, a trader said first-quarter results were expected from nursery supplier Hines Horticulture on Tuesday, though he noted he was not holding his breath.

Come Tuesday, the company said it would not be releasing results until later in the year. According to the trader, the company said its financials would be released "prior to Christmas 2007."

That news was not altogether unexpected - the company twice postponed releasing its results earlier this year, and its 2006 numbers were just recently posted.

Still, the news did little to deter investors. The trader said the 10¼% notes due 2011 were "a little stronger" at 73.5, though mostly small pieces trade in that name.

Broad market firms

Movie Gallery Inc.'s 11% notes due 2012 were seen settling in around 20, a trader said.

"They went up too fast and came back too fast," the trader said of the roller-coaster name.

At another desk, a trader saw Blockbuster Inc.'s 9% notes due 2012 up at 83 bid, 84 offered.

The trader also said Technical Olympic USA Inc.'s 9% senior notes due 2010 were up at 79 bid, 80 offered.

Also better were James River Coal Co.'s 9 3/8% notes due 2012. The trader quoted the bonds at 82.5 bid, 82.75 offered.

Elsewhere, Transmeridian Exploration Inc.'s 12% notes due 2010 were seen "trading a bit" at 93 bid, 93.5 offered. The trader called that "up a little."

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