Ply Gem hammered on poor earnings; R.H. Donnelley retreats from Thursday's gains; Delphi loan lower

By Paul Deckelman and Sara Rosenberg

New York, May 9 - Ply Gem Holdings Inc.'s bonds fell sharply on Friday after the Kearney, Mo.-based building products company reported disappointing numbers, including a doubling of its net loss from year-ago levels, against a backdrop of it having to ask its lenders for covenant relief.

R.H. Donnelley Corp., whose bonds had firmed smartly on Thursday after the company reported relatively positive quarterly results and announced a debt-for-debt exchange offer for some of its bonds, was seen having given back some of those gains in Friday's dealings.

WCI Communities Inc., bedeviled by bankruptcy buzz, continued its downhill slide for a third consecutive session.

In the bank debt market, Delphi Corp.'s term loan was seen lower after the bankrupt Troy, Mich.-based automotive electronics manufacturer reported a wider first-quarter loss from a year ago. However, bond traders saw virtually no movement in the company's notes.

Ply Gem gets pounded

A trader said Ply Gem's 9% notes due 2012 fell to 67 bid from Thursday's finish around 76 bid, before coming off that low to trade at around 70 later on, after the company announced "worse-than-expected quarterly numbers" and said that it had asked its lenders for amendments to its credit facilities so it can remain in compliance with its covenants. "They were down a lot, but off the bottom," he said.

Another trader likewise saw the bonds fall as low as 67 - which he said was an 8 point drop from the mid-70s level at which the bonds had traded Thursday - but said they managed to rise off their lows to finish around 70.

"Everyone expects these guys' [building products companies] numbers to be down, but Ply Gem was down a fair amount more than people expected." He said that the fall in adjusted EBITDA to $4.9 million from $18 million a year ago "got some guys upset."

Ply Gem said that sales had fallen 10.1% from the year-earlier period to $256.4 million from $285.3 million for the 2007 first quarter. The net loss for the first quarter of 2008 was $21.8 million, twice as much as the year-earlier red ink of $10.9 million.

The company's president and chief executive officer Gary E. Robinette said: "Ply Gem's first quarter sales and EBITDA performance reflects the challenging market conditions that exist in the housing markets today. Our first quarter 2008 financial performance was negatively impacted by lower sales volume due to market demand and increasing raw material and freight costs, partially offset by the cost savings that were realized as a result of our siding and window groups' acquisitions integration and our expense reduction efforts that have been undertaken in all areas of our business in response to what is expected to be a prolonged downturn in the housing market."

Robinette warned that factors such as the continued declines in both the residential new construction and repair/remodeling markets, as well as market-wide increases in raw material prices and fuel costs mean that the company expects adjusted EBITDA will likely be below the level necessary to comply with the leverage ratio in its credit agreement for fiscal quarters after the first in 2008. Ply Gem said it has started talks with its banks about an amendment.

R.H. Donnelley in retreat

Traders saw R.H. Donnelley's bonds, and those of its Dex Media Inc. unit, off about a point or two from the levels that those bonds reached on Thursday after Cary, N.C.-based telephone directory publisher Donnelley reported generally better-than-expected first quarter earnings and announced an exchange offer for some of its outstanding bonds.

One saw the parent company's 6 7/8% notes due 2013 trading at 66 bid, down from Thursday's high around 68 and its close at 67, "so I would say they are down a point or two on the day." He also saw the company's 8 7/8% notes due 2016 trading in round lots around 67.5, down from Thursday's high around 70 and its closing levels that session around 69.5.

Donnelley "backed off today" another trader said, although he observed that the whole of the distressed-bond market, as well as the larger high-yield arena, was "on the weak side." He saw Donnelley's 8 7/8s down about 2 points to the 68 area and the 6 7/8s at 66 bid, 68 offered, also down a deuce

The bonds of Donnelley's Englewood, Colo.-based Dex Media unit were following the same pattern; its 9 7/8% Dex Media West LLC notes due 2013 "looked about unchanged" at 96.5, a trader said, "so no great shakes there," while the Dex 8% notes due 2013 were around 81, down from Thursday's high of 82 and its close at 81.5, "so it seems pretty consistent - [the Donnelley and Dex bonds were ] down a point or so."

WCI walloped, again

A trader said that WCI's bonds "have been getting hit" over the past several sessions, "on the talk of [possible] bankruptcy" for the troubled Bonita Springs, Fla.-based builder of luxury condominiums.

Those bonds started the week above the 50 level, got knocked down to around the 47-48 range on Wednesday, when the company released its quarterly numbers, showing a wider loss, and then continued to slide several more points on Thursday after Raymond James said in a research note that the company might have to file for Chapter 11 protection from its junk bond holders and other creditors.

On Friday, the trader said, "they did not trade today, and bonds closed at 44, so that's now the offered side - if a seller came in to hit the bid, they'd be down."

He saw the company's 6 5/8% notes due 2015 offered at 39 and the 7 7/8% notes due 2013 offered at 52, both without a bid, "so they continue to weaken."

The bonds "got whacked pretty good [Thursday], down from the high 40s to the mid 40s, and was down another point today." He quoted the company's 9 1/8% notes due 2012 around the 43 mark. Compared to the brisk activity level in the credit seen Thursday, "there wasn't a lot of trading in it today."

Delphi loan lower, but bonds quiet

In the bank debt market, autos as a whole continued to get beaten up more than the rest of the market, with the sector plagued by high oil prices and negative earnings, and Friday brought about more of the same with Delphi Corp.'s first quarter results failing to impress, according to a trader.

Delphi saw its second-lien DIP term loan quoted at 98¼ bid, 99¼ offered, down from 99 bid, 99½ offered, the trader said.

On Friday, Delphi announced first-quarter financial results that included revenues of $5.3 billion, down from $5.7 billion in the same period last year, and a net loss of $589 million, or $1.04 per share, versus a net loss of $533 million, or 95 cents per share, last year.

Included in the net loss was $79 million of reorganization expenses for previously capitalized equity purchase and commitment agreement fees expensed and increased workforce transition program charges of $42 million.

Cash flow used in operating activities was $290 million, as compared to $414 million in the first quarter of 2007. The year-over-year improvement was due to a net reduction in U.S. employee workforce transition program payments of $146 million.

Also on Friday, Delphi said that former corporate parent General Motors Corp. has agreed to advance amounts anticipated to be paid to Delphi upon the effectiveness of the GM settlement and restructuring agreements.

This action, plus the amended and restated $4.35 billion DIP the company recently negotiated, provide sufficient liquidity to support the ongoing implementation of Delphi's transformation plan.

While Delphi's bank debt was lower, bond traders saw little or no activity in the company's junk issues, such as its 6.55% notes that were to have come due in 2006. A trader said that he had seen neither round-lot trades on the Trace bond-tracking system nor any smaller over-the-counter trades that wouldn't show up on Trace.

At another shop, a trader characterized Delphi's bonds as "quiet around the high 30s, where they've been lately."

"There was no activity in Delphi at all," a third bond trader said, "despite what they announced, there was nothing going on."

Among other parts companies, a market source saw Visteon Corp.'s 7% notes due 2014 lwoer by ½ point around 70 bid.

Elsewhere in the automotive realm, bank-debt traders saw a few other sector names take a noticeable drop in trading during the session, including Ford Motor Co., GM and Accuride Corp.

Dearborn, Mich.-based automotive giant Ford saw its term loan quoted at 89¼ bid, 90¼ offered, down from 90¾ bid, 91¼ offered on Thursday and 92½ bid, 93 offered on Wednesday, a trader said.

Its larger rival, Detroit-based industry leader GM, saw its term loan quoted at 90½ bid, 91½ offered, down from 92 bid, 93 offered on Thursday and 93¼ bid, 94¼ offered on Wednesday, the trader continued.

And, Accuride, an Evansville, Ind.-based manufacturer and supplier of commercial vehicle components, saw its term loan quoted at 95 bid, 96 offered, down from 96¼ bid, 97¼ offered on Thursday and 97¾ bid, 98¾ offered on Wednesday, the trader added.

ResCap off despite support by owners

Back among the bonds, a trader saw Residential Capital LLC's bonds "a little lower on the day," not getting much of a boost from the announcement by owner GMAC LLC that the Minneapolis-based mortgage lender's indirect corporate parents - Cerberus Capital and GM, which together own GMAC - might guarantee $750 million of the $3.5 billion of new funding that ResCap its seeking from GMAC.

He saw the company's 2011 notes and its 2015s as "somewhat active" in the 48-49 area versus levels around 49 at which the bonds had been left on Thursday. "It was a smidge weaker - most of the trades were sort of at where it closed [Thursday] night, to down anywhere from a ½ [point] to a point." He said that the company's bonds "traded off first thing this morning and kind of came back a little bit," but still ended up trading around the high 40s.

Another market source saw ResCap's 8 7/8% notes due 2015 off ½ point at 48.5 bid. GMAC's 8% bonds due 2031 were seen up nearly a point at 77, although its 6 7/8% notes due 2012 were off a point around the 80 level.

GMAC - 51% owned by Cerberus and 49% by GM - said Thursday that its two parents may back part of the $3.5 billion secured credit facility that GMAC is negotiating with its troubled unit.

According to a regulatory filing, Cerberus and GM are in discussions with GMAC and ResCap to take an total $750 million "first loss participation" in the proposed facility, meaning that they would be responsible for that $750 million portion of the facility in the event of a default - a signal to investors of their support for the problem-plagued company.

A GM spokesperson said that the auto giant "is supportive of the steps being taken to strengthen the liquidity position of GMAC and ResCap, and we'll continue to work with GMAC in their efforts to strengthen the company."

However, Moody's Investors Service does not believe that GMAC and its corporate parents will continue to give ResCap whatever financing it needs on an indefinite basis. The ratings agency said Friday that ResCap faces the likelihood of losing any financial support from GMAC, GM and Cerberus.

While GMAC and its parents have stepped in several times over the troubled past year to support ResCap - they loaned it $3 billion last year - Moody's said it expects that lifeline may sooner or later be withdrawn. "Moody's has come to believe that ResCap will no longer receive direct, permanent equity support from its parents," the agency said.

It also said that even if a recently announced ResCap plan to redeem some of its existing bonds at less than face value succeeds, "ResCap has not proven it has the business model that can produce the required operating cash flow to service and ultimately repay these reduced obligations," Moody's said.

Distressed bonds generally lower

In other distressed names, a bond trader saw Linens 'n Things Inc.'s floating-rate notes due 2014 "pretty quiet" at 34 bid, 34.5 offered, while fellow struggling retailer Bon-Ton Department Stores Inc.'s 10¼% notes due 2014 were down 1 point at 75.5 bid.

In the gaming sector, a trader saw Trump Entertainment Resorts Inc.'s 8½% notes due 2015 - which on Thursday had gyrated around at mostly lower levels in response to disappointing earnings before bouncing off their lows and going home quoted around 62 bid, unchanged to down slightly on the day - ending Friday's session "a little bit lower at the end of the day," finishing the session at 61 bid, 61.5 offered.

But another market source saw the Atlantic City, N.J.-based casino operator's notes having taken a tumble late in the session, going out nearly 4 points lower on the day at around 58, in busy trading.

Harrah's Operating's 5¾% notes due 2017 were seen slightly lower, around the 57 bid mark.

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