Delphi dips on GM payment; Thornburg bonds steady; Solo Cup notes firm on asset sale

By Stephanie N. Rotondo

Portland, Ore., Sept. 10 - Delphi Corp.'s bonds continued to move downward Monday, this time prompted by the details of its settlement with General Motors Corp.

The Troy, Mich.-based parts supplier saw its bonds start to weaken last week, as some traders were cautious of the company's newly filed reorganization plan. Investors took the weekend to think about it and apparently became more perturbed by the settlement agreement with Delphi's former parent.

The at least $100 million settlement, however, clears one more hurdle in Delphi's quest to exit bankruptcy.

Meanwhile, trading in Thornburg Mortgage Corp.'s bonds was small despite the news that the company was looking to purchase nearly $4 billion in discount mortgage bonds - a move that the mortgage lender's president claimed would pay off in the future.

Solo Cup Co.'s bonds gave a "muted" response to the news of an asset sale, a trader said. Other market players said the bonds were slightly firmer on the day. According to a company-issued press release, funds from the sale will be used to repay debt.

"Things are soft," a trader said of the overall market. Another said there was not a lot of news out to spur activity. But, as names like a Thornburg and Solo Cup prove, even fresh news did little to move the junk sector.

"It was definitely a little more slow," another trader said, calling the market "spotty" - weak in some places, firmer in others.

Delphi dips on GM payment

Distressed automotive parts supplier Delphi continued to see losses in its corporate debt, spurred by news that the company would pay at least $100 million in a settlement to former parent General Motors.

A trader called the 7 1/8% notes due 2029 weaker at 87.5 bid, 89.5 offered. Another trader said the bonds had fallen 5 points, pegging the 6½% notes due 2006 at 87.5 bid, 88.5 offered. He added that the company's various issues were all moving in the high-80s.

Delphi's bonds started weakening Friday on concerns associated with the company's reorganization plan, which was filed late Thursday. An edited version of the settlement between Delphi and GM was also announced late Thursday.

GM has alleged that most of its warranty claims are due to shoddy parts provided by Delphi. The settlement, which also includes the replacement of 1.1 million electronics parts - estimated to total around $80 million - clears one of the last hurdles for Delphi to exit bankruptcy.

"It is ugly," a trader said of the settlement terms.

Elsewhere in the distressed automotive realm, a trader said most names were weaker on the day. He said names like Federal-Mogul Corp. and Dura Automotive Systems Inc. - companies which still need to secure exit financing, like Delphi - are feeling outside pressure as recession worries infiltrate the market.

"It doesn't bode well for the sector," the trader said.

The trader said Federal-Mogul's bonds, which tend to trade in line with one another, were around 77, while Dura's 8 5/8% senior notes due 2012 were "48-ish."

Thornburg debt unchanged

A trader said Thornburg Mortgage's bonds "didn't react" to the announcement that the company was looking to purchase as much as $4 billion in discounted mortgage bonds.

The trader called the 8% notes due 2013 unchanged at "86 again." Another trader, however, said the bonds were lower "relative to last week," with an 86 handle.

The jumbo-mortgage lender could make the purchases over the next couple of months, the president of the company, Larry Goldstone, said. He added that, in order for the purchases to occur, the mortgage market needs to stabilize.

Just last month, Thornburg sold $20.5 billion in mortgage bonds at a loss to avoid a cash crunch. Since then, the company has also sold millions of dollars in preferred stock and only recently began funding new loans.

Meanwhile, Residential Capital LLC, a fellow distressed mortgage lender, saw its bonds weaker, a trader said. He quoted the 7 3/8% notes due 2010 at around 78.

Though not a mortgage lender, Technical Olympic USA Inc.'s bonds have been suffering of late, partly due to mortgage woes spilling into the nearest sector: housing.

A trader said the Hollywood, Fla.-based homebuilder's 10 3/8% notes due 2012 were active but unchanged at 29 bid, 30 offered.

Solo Cup bonds 'muted' on asset sale

Highland Park, Ill.-based Solo Cup announced it would sell one of its non-core assets Monday, but traders saw little response in the bonds.

One trader said the 8½% notes due 2014 moved up right after the news but settled back down to 86 bid, 88 offered.

Another trader called the bonds "a little firmer," though on a "very muted response" to the news. He placed the bonds up half a point to 87.5 bid, 88 offered.

At another desk, a trader said he saw "a little bit of activity" in the debt, quoting the notes at 87 bid, 88 offered.

The maker of disposable foodservice products said it would sell its Hoffmaster business for $170 million to a private equity group led by Kohlberg & Co. The sale is in line with the company's plan to divest itself of non-core assets and proceeds from the transaction will be used to pay down debt.

Earnings not enough for Neff

Neff Corp.'s second-lien term loan was once again weaker during Monday's trading session on the heels of the company's recent disappointing earnings announcement, according to a trader.

The second-lien term loan ended the day at 85.5 bid, 86.5 offered, down from Friday's closing levels of 86.5 bid, 87 offered, the trader said.

Volatility in the name has been apparent since late last week as the loan traded on Friday morning at 85, down from Thursday's levels of 87 bid, 88 offered. After the loan hit its low on Friday, some buyers stepped in causing the paper to trade as high as 87.5 before settling in at the closing levels.

All of this action was started by a recent earnings conference call that the company held with lenders, which showed EBITDA coming in 10% below expectations.

Also, during the call, the company "couldn't really crystallize guidance going forward," the trader remarked.

"Fewer and fewer people are outright buying the second liens and more people are doing the second liens on a hedge basis. As you have guys that are hedging with the bonds, the bid sort of suffered as the bonds weakened up," the trader added about the loan's performance on Monday.

"It has taken the spotlight. [I] have [had] a lot of calls on it," the trader added.

Neff is a Miami-based construction equipment rental company.

Trump bonds better

Trump Entertainment Resorts Inc.'s bonds moved up slightly toward the end of the trading day, a trader said.

He said the 8½% notes due 2015 closed up 1 point to the 82 area, after trading most of the day at 80.5 bid, 81.5 offered. He attributed the gain to a stock spike that occurred mid-afternoon. The equity closed up 37 cents, or 5.55%, to $7.04.

The jump in the equity came after it was released that Atlantic City casinos were winning more than the gamblers were, at least in August. Wins were down 5.9%, compared to the same month last year, which equaled $465.2 million in losses for gamblers. The 11 casinos on the New Jersey shore won a combined $323.5 million at slot machines and $141.7 million from table games.

Sara Rosenberg contributed to this article.

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