Delphi bonds boosted by GM news; Federal-Mogul rallies, slips; Fremont notes lower

By Stephanie N. Rotondo

Portland, Ore., Sept. 26 - Automotive parts suppliers rallied Wednesday as General Motors Corp. reached an accord with its unions.

The big winner in that sector was Delphi Corp., which traders said gained as much as 4.5 points on the day. Of all the parts suppliers, Delphi would likely be hurt worse in a strike, as GM has control of its union's retiree health care benefits - not to mention GM is its biggest customer.

Meanwhile, Federal-Mogul Corp.'s bonds were caught up in the sector's rally but came back down on negative news. A bankruptcy court told the company in a hearing Wednesday that its goal to emerge from bankruptcy by the end of the year was an "impossibility," which could put its exit financing in jeopardy.

Elsewhere, Fremont General Corp.'s bonds grew weaker as the company announced that its investor group was having second thoughts about an agreement signed in June. The bonds were called down as much as 6 points on the day.

While Sea Containers Ltd.'s bonds slipped slightly ahead of a Thursday court hearing, Transmeridian Exploration Inc.'s debt continued to edge higher on rumors of a pending sale.

Delphi up on GM news

Delphi bonds were boosted as former parent General Motors came to terms with the United Auto Workers union.

A trader said the bonds were up as much as 4.5 points on the day, pegging the 6½% notes due 2013 at 91.5 bid, 92.5 offered.

Another trader quoted the 6.55% notes due 2006 and the 6½% notes due 2009 at 94.

At another desk, a trader saw the 6.55% notes up 3.5 points at 93 bid, 95 offered and said its other paper was up a like amount - the notes due 2009 to 93.5 bid, 95.5 offered, the notes due 2013 at 91.5 bid, 93.5 offered and the 7 1/8% notes due 2029 at 94 bid, 96 offered.

Another trader saw Delphi's 2013 issue at 91.5 bid, 92.5 offered, up 4.5 points, and the 2009 paper likewise up 4.5 points, "across the board" to end at 93.5 bid, 94.5 offered.

Delphi, which in the previous session had announced temporary layoffs in the face of the union strike, gave control of its unions' retiree health care benefits to GM in June as part of a settlement with the unions. That issue became a sticking point between GM and the union, which resulted in the strike.

But just two days into the strike, the parties came to terms. Under the agreement, which still requires union ratification, a union-run trust fund will be created to pay for retiree health benefits. The four-year contract takes $50 billion in liability from GM's coffers.

Other distressed automotive parts suppliers were also boosted by the news, a trader said.

Federal-Mogul rallies, closes unchanged

Federal-Mogul's bonds experienced a rally on the news but came back in when "negatively perceived news" was released.

A trader said the bonds, which trade on top of one another, moved as high as 85 before settling back in to 83 bid, 84 offered.

Federal-Mogul has been attempting to wrap up its six-year long bankruptcy case and has said it is looking to exit Chapter 11 by the end of the year. However, it seems that is not likely to happen.

According to the trader, news came out that said that the bankruptcy court called a Dec. 31 deadline an "impossibility." The trader said he believes the company's current exit financing agreement with Citigroup Global Markets Inc. and JPMorgan Chase Bank NA require bankruptcy emergence by Dec. 31.

"Otherwise, I think the bank debt can walk," he said.

In a hearing Wednesday, the company said it came to terms with PepsiAmericas Inc., which was a lone objector a pivotal part of the company's reorganization plan. However, Federal-Mogul still has other objections to resolve before it can exit bankruptcy.

In the rest of the autosphere, a trader said Dura Automotive Systems Inc.'s 9% subordinated notes due 2009 were "crushed."

"[The bonds] were 3 bid, 3.5 offered yesterday," he said. "Today, 1.5 bid, 2.5 offered."

Still, the trader does not believe this is the end of the road for subordinated debt holders.

"[The] discount plan was confirmed but that doesn't mean subs are out," he said. "They will now have an indenture fight for the new equity."

Another trader said the subordinated bonds dropped a point to 1.25 bid, 2.25 offered.

Fremont General drops on investment issues

Discussions regarding investment terms brought Fremont General's bond down as much as 6 points during the session.

One trader said the 7 7/8% notes due 2009 fell 6 points to the 87 area on the news - which he said was "still too high" - while another called the bonds down "3 points or so" to 87.

"It hasn't been trading much lately," the trader said. "I would have called it lower. I thought I had seen a bid around 89 recently."

Still, the trader noted there was "not a ton of volume" in the debt.

Another trader saw the bonds fall to 86 bid from 89.5 previously.

Another market source called them down as much as 6 points on the day at 87 bid.

According to a press release, Gerald J. Ford told the company "he is not prepared to consummate the transactions contemplated by the investment agreement," which was inked earlier this year. Under the agreement, Ford will lead an investor group that will infuse about $80 million into the mortgage company.

Fremont said it does not agree with Ford's position but has entered into discussions to revise the terms of the agreement.

Also, the company said it expects to file its 10-K for the fiscal year ended Dec. 31, 2006, as well as its quarterly reports for fiscal 2007, in mid-October.

Elsewhere in the mortgage sector, Thornburg Mortgage Inc.'s 8% notes due 2014 were down a point at 88 bid, 90 offered.

Sea Containers dips

A trader said Sea Containers' bonds dipped half a point ahead of Thursday's court hearing on its arbitration case.

The trader placed the 10½% notes due 2012 at 71.5, adding that the bonds saw "a little bit of action this morning."

At the hearing, a motion by GE SeaCo Entities and Genstar will seek relief from the automatic stay to proceed with arbitration of claims.

Transmeridian moves up

A sale might be getting closer, a trader speculated, as Transmeridian Exploration's bonds continue to move higher.

The trader quoted the 12% notes due 2010 at 97.25 bid, 97.5 offered.

In July, the company said it had scheduled several presentations in Europe with interested buyers. The company did not name the interested parties, but the trader believes a "Chinese customer" could be the high bidder.

The trader also called it "interesting" that the company's stock was down on the session. The stock closed down 13 cents, or 5.80%, to $2.11.

The trader said it was possible investors are seeing recovery in the bonds but not in the equity.

Tousa weaker

Homebuilders, specifically Technical Olympic USA Inc., were deemed weaker, continuing a slide spurred by housing numbers from the previous session.

A trader called Tousa's 10 3/8% notes due 2012 down a point to 33.5. He said the 9% notes due 2010 were around 68.

"They didn't trade, they just kept walking down," he said of the senior issue.

Another trader said the bonds saw light activity, with "real small trades." He also saw the 9% notes at 68.

The National Association of Realtors released figures Tuesday, which showed that existing home sales fell 4.3% to 5.5 million units per year. Sales were down 13% compared to the same time period a year ago.

Broad market mixed

Hines Horticulture Inc.'s 10¼% notes due 2011 traded at 70.75 bid, 71.25 offered.

Blockbuster Inc.'s 9% notes due 2011 were called unchanged at 91.5. Movie Gallery Inc.'s bonds did not trade, a trader said.

Another trader, however, called Movie Gallery's 11% notes due 2012 up 1.5 points to 36 bid, 38 offered.

Also unchanged were Linens n'Things floating-rate notes, which closed at 69 bid, 69.5 offered.

Another trader said Calpine Corp.'s 8½% notes due 2011 went out 112 bid, 113 offered. He added they traded as high as 113, then back down to 111.5 before coming up slightly to the closing levels.

Fedders Corp.'s 9 7/8% notes due 2014 were placed at 16.25 bid, 17.25 offered, with "no real bid change," a trader said.

Tembec Inc.'s 8 5/8% notes due 2009 rose to 44 bid, 46 offered, up 3 points. A source at another desk saw its 8½% notes due 2011 up a point at 41.

Solutia Inc.'s 6.72% notes due 2037 were at 88 bid, 90 offered and its 7 3/8% notes due 2027 at 89 bid 91 offered, each up 1 point.

Paul Deckelman contributed to this article.

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